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This study presents an evolutionary model of capability development and examines the role of strategic alliance in the evolution of organiza- tional capabilities. In particular, this study begins with the observation that each alliance partner’s capability development co-evolves. This study contributes to the literature on capability development by showing the following: (1) a firm’s strategic alliance is ‘fitness-enhancing’ when its partners’ learning is ‘ineffective’; (2) without making additional efforts (i.e., in-house development), a firm is able to employ strategic alliances and to balance between exploitation and exploration to the extent that its (potential) partners are not effective learners; and (3) a firm is unlikely to balance between exploitation and exploration to the extent that its (potential) partners are effective learners.
