Our results contribute to the innovation management literature in two important ways. First, this study supports the argument that knowledge sharing is beneficial for firms׳ innovation outcomes – firms that share more knowledge externally also benefit through improved relative innovation performance. This effect may take place through the principles of positive reciprocity; the more a firm shares knowledge, the more knowledge the firm is likely to receive in return. This is important because firms that collaborate, typically tend to possess different/complementary stocks and types of knowledge. Much of the specialized knowledge exists in a tacit (i.e. non-tradable) form, and thus, the value of external knowledge sharing often remains ambiguous for a long time.