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With the expansion of technical knowledge domain it has become necessary for firms to collaborate with external sources to keep themselves abreast at the frontiers of technical development. In that regard, firms would be interested to develop long lasting and fruitful collaborative relationships with external sources.Organizations with possibilities of organizing their collaborative relationships with external sources according to the nature of innovation sought to be developed so that the outcome is more fruitful. The existing literature had looked at the issue of collaboration in technology as options between vertical integration or alliances based on concerns of appropriability. However, in the present context with increasing likelihood of technological obsolescence firms may be dissuaded from vertical integration (Balakrishnan & Wernerfelt, 1986), and thus the issue of technology collaboration becomes a necessity rather than a choice. In such situation the question is which type of alliance would be better to protect appropriability. The discussion in this paper provides the theoretical perspective to address this issue more effectively. The discussion of the paper may also help to explain why there are industry specific practices to protect technological appropriability e.g. use of patents widespread in pharmaceutical industry but not so in other industries, which could be explained by the way innovation is created in different industries. Being a conceptual study, the findings are in the nature of propositions that provide a basis for future researchers to direct further research to test the various hypotheses regarding governance mechanisms and the nature of technology creation process.
