This　paper　examines　firm-level　performance　implications　of　strategic　alliances　by　employing　knowledge　management　practices　as　intermediaries.　Unlike　previous　research　which　focuses　on　partner　firm　factors,　this　study　investigates　how　alliance　characteristics　(i.e.,　alliance　scope　and　governance)　affect　interfirm　knowledge　sharing　and　creation,　and　how　these　two　practices　and　their　interaction　in　turn　affect　innovative　performance.　These　questions　are　examined　in　a　sample　of　127　German　partnering　firms.　Results　show　that　joint　ventures　as　opposed　to　contractual　alliances　are　more　effective　and　influential　in　facilitating　knowledge　sharing　and　creation.　In　contrast,　the　scope　of　alliance　activities,　while　positively　associated　with　knowledge　sharing,　has　no　direct　relationship　with　knowledge　creation.　In　addition　to　these　results,　the　study　also　finds　that　knowledge　sharing,　knowledge　creation　and　their　interaction　significantly　contribute　to　partner　firms＇　innovative　performance.　(C)　2008　Elsevier　B.V.　All　rights　reserved.