Alliances between firms are an increasingly important aspect of strategic management and play a major role in knowledge management activities. Whereas most of the literature on knowledge management has focused on the creation, acquisition, and transfer associated with knowledge within firms, comparatively little work has been done to understand management of knowledge across firms. The rapid pace of technological change, the high uncertainty associated with emerging technologies, and increasing level of competition, forces firms, especially small and medium enterprises (SMEs) with their limited technological, human, and financial resources, to leverage their strategic alliances to face the challenge of creating and managing new knowledge. Though firms can form strategic alliances with a wide variety of organizations, including suppliers, customers, complementors, competitors, or others, downstream alliances with customers are especially useful for firms in enhancing market performance and creating new value. In this study we examine new knowledge creation associated with a downstream customer alliance of SMEs in high-technology industries. Specifically, we present a model of how organizational learning influences entrepreneurial orientation under different conditions of environmental munificence and how entrepreneurial orientation interacts with alliance orientation to affect new knowledge creation.