R&D partnerships and innovation performance: Can there be too much of a good thing?

R&D collaboration facilitates pooling of complementary skills, learning from the partner as well as sharing risks and costs. Research therefore repeatedly stressed the positive relationship between collaborative R&D and innovation performance. Collaboration, however, involves transaction costs in form of coordination and monitoring efforts and requires knowledge disclosure. This study explicitly considers a firm's collaboration intensity, that is, the share of collaborative R&D projects in a firms' total R&D projects in a sample of mostly small and medium-sized firms (SMEs). We can confirm previous findings in terms of gains for innovation performance, but also show that collaboration has decreasing and even negative returns on product innovation if its intensity increases above a certain threshold. In particular, costs start outweighing benefits if a firm pursues more than about two thirds of its R&D projects in collaboration.