Knowledge Leakage and Institutional Legitimacy in Competitive Dynamics

Interorganizational ties are ubiquitous and connect businesses to other organizations within their field as well as up- or downstream organizations such as patent prosecutors. In interacting with such parties, companies often must provide knowledge that lies at the core of their competitive advantage to receive the best service possible. Organizations might, thus, be inclined to avoid working with service providers via which indirect links to competitors are created, out of fear of knowledge leakage. However, we argue that forces of legitimation by association with reputable service providers, or even competitors, can counteract fear of knowledge leakage. At higher levels of connectedness to competitors, the selecting organization's fear of knowledge leakage starts taking over and attenuates the probability of choice again. We test our theory studying patent prosecution in the field of computer technologies and find initial support for our proposition