This paper investigates the effects on knowledge creation of network size and partner diversity formed through alliance relationships. These effects are tested empirically in the biotech industry setting, which is representative of industries that emphasize external collaboration. Using patent count as a proxy of knowledge creation, Poisson regression was employed to test our predictions empirically. The statistical results show an inverted U-shaped relationship between network size and knowledge creation. In addition, a negative relationship was observed between partner diversity and knowledge creation. This research suggests that small biotech firms should strive to achieve a balanced network size. Knowledge creation is better promoted in these firms through alliances with firms of similar organizational type. The value of this research lies in the fact that it provides new insight into properties of alliance networks by highlighting potentially negative consequences of having an oversized alliance network and partner diversity.
