Close cooperation with alliance partners can expose a firm's critical knowledge and capabilities to partner firms. This dissertation examines how firms isolate competitively sensitive knowledge to prevent its potential loss to alliance partners. Research questions include: (1) What are the critical dimensions of the perceived need for isolation, achieved isolation, and isolating mechanisms? (2) To what extent do strategic intents, ex ante competition, resource profiles, prior relationships and trust, and relative size influence the focal firm's perceived need for isolation in strategic alliances? (3) Is the realized isolation in a strategic alliance matched to the perceived need for isolation? These questions were examined using both qualitative and quantitative data.; While realized isolation was positively associated with the perceived need for isolation, the factors associated with the perceived need for isolation and with achieved isolation differed substantially. The perceived need for isolation was higher with lower trust, longer intended relationships, greater competitive overlap, and foreign partners. Higher achieved isolation, by contrast, increased when trust was lower, partners' learning intents were high, the focal firm was larger than its partner, the intended length of the relationship was longer, and the firm and its partner had engaged in prior alliances. Because the measures for trust and prior relationships are uncorrelated and because firms tend to achieve higher levels of isolation when they have had prior alliances with a partner, the results of this study suggest prior relationships may not always indicate higher trust.; Isolating mechanisms are structures, processes, and actions intended to prevent partners from observing and understanding a firm's critical capabilities. The most effective isolating mechanisms are those that: (1) identify knowledge and information needing protection; (2) educate firm personnel about what should and should not be shared with partners; and (3) wall off critical knowledge from partners. The least effective mechanisms are those that: (1) unduly restrict integration with a partner (e.g., limiting information flows to a gatekeeper) and (2) involve after-the-fact personnel actions (e.g., reporting contact with partner employees). Contractual clauses are most effective as educational tools rather than as tools to punish partners for violating agreements.
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