New products provide increased sales, profits, and competitive strength for most organizations. However, nearly 50% of the new products that are introduced each year fail. Organizations thus find themselves in a double bind. On the one hand they must innovate consistently to remain competitive, but on the other hand innovation is risky and expensive. Many organizations are forming business alliances to quicken the pace of and reduce risks associated with innovation. Yet by some estimates, 70% of these alliances fail. Many of the prescriptions for successful alliance management clash with recommendations for effective innovation management. The authors develop testable hypotheses by integrating the new products and alliance literature. A construct—cooperative competency—derived from related concepts of mutual adjustment, absorptive capacity, and relational capability is posited as the key factor affecting new product development success, regardless of whether it is an intra- or interfirm endeavor. The authors test the model with data from a sample survey in the semiconductor manufacturing context and replicate it in the health care sector. The antecedents of cooperative competency—formalized and clannish administration, mutual dependence, and institutional support—are revealed empirically and substantiated. The authors identify the importance and means of developing interfirm cooperation.
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