Does separation hurt? The impact of premature termination of R&D alliances on knowledge acquisition and innovation

While there is vast research on alliance formation linked to knowledge acquisition and innovation, research is limited on the impact of alliance termination on these same dimensions. Addressing this gap and building on the knowledge-based view of the firm, we analyze the impact of premature alliance termination on knowledge acquisition and innovation outcomes. We apply a difference-in-differences and matching-based estimation to a sample of terminated and non-terminated R&D alliances in the life sciences. Our analysis suggests that alliance termination reduces innovation performance and that innovation output becomes less technologically diverse, while knowledge acquisition becomes less externally oriented. However, we find no relevant drop in acquisition of knowledge from alliance partners post alliance termination. Our exploration of conditional effects shows that firm-level factors, particularly a firm's alliance portfolio, moderate termination effects, while alliance-specific conditions have little impact.