Organizing for knowledge generation: internal knowledge networks and the contingent effect of external knowledge sourcing
TL;DR: It is found that external sourcing strategies are less effective when firms can already internally generate new knowledge or if they have high internal coordination costs, therefore, when considering external sourcing, managers must carefully weigh the benefits of it vis-a-vis its commensurate costs.
Abstract: Research summary: When faced with a new technological paradigm, incumbent firms can opt for internal development and/or external sourcing to obtain the necessary new knowledge. We explain how the effectiveness of external knowledge sourcing depends on the properties of internal knowledge production. We apply a social network lens to delineate interpersonal, intra-firm knowledge networks and capture the emergence of two important firm-level properties: the incumbent's internal potential for knowledge recombination and the level of knowledge coordination costs. We rely on firm-level internal knowledge networks to dynamically track the emergence of these properties across 106 global pharmaceutical companies over a 25-year time period. We find that a firm's success in developing knowledge in a new technological paradigm using external knowledge sourcing is contingent on these internal knowledge properties.
Managerial summary: Incumbent firms in high-tech industries often face competence-destroying technological change. In their effort to adapt and develop new knowledge in a novel paradigm, incumbent firms have several corporate strategy options available to them: internal knowledge development and a wide array of external knowledge sourcing strategies, including alliances and acquisitions. In this study, we make an effort to address a critical question: How effective is external knowledge sourcing under different internal knowledge generation regimes? We find that external sourcing strategies are less effective when firms can already internally generate new knowledge or if they have high internal coordination costs. Therefore, when considering external sourcing, managers must carefully weigh the benefits of it vis-a-vis its commensurate costs as the benefits of external sourcing may be overstated. Copyright © 2015 John Wiley & Sons, Ltd.
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TL;DR: In this article, the authors reconceptualize the firm-level construct absorptive capacity as a learning dyad-level measure, relative absorptive capacities, and test the model using a sample of pharmaceutical-biotechnology R&D alliances.
Abstract: Much of the prior research on interorganizational learning has focused on the role of absorptive capacity, a firm's ability to value, assimilate, and utilize new external knowledge. However, this definition of the construct suggests that a firm has an equal capacity to learn from all other organizations. We reconceptualize the firm-level construct absorptive capacity as a learning dyad-level construct, relative absorptive capacity. One firm's ability to learn from another firm is argued to depend on the similarity of both firms' (1) knowledge bases, (2) organizational structures and compensation policies, and (3) dominant logics. We then test the model using a sample of pharmaceutical–biotechnology R&D alliances. As predicted, the similarity of the partners' basic knowledge, lower management formalization, research centralization, compensation practices, and research communities were positively related to interorganizational learning. The relative absorptive capacity measures are also shown to have greater explanatory power than the established measure of absorptive capacity, R&D spending. © 1998 John Wiley & Sons, Ltd.
335 citations
TL;DR: In this article, the authors examine the key concepts related to business model digitalization and develop a conceptual matrix for portfolio considerations of firm business model transformation, and offer some recommendations for future research on the new working conditions and digital identities of firms.
Abstract: Today’s key challenge for firm growth relies in the integration of digital technologies and their use in new business models. Thus, firms increasingly engage in a digital transformation and in digitalizing their business model. Firms can apply digital technologies for improved or novel internal and external processes and integrate them in new business models. The digital transformation itself demands diverse knowledge from diverse origins in the firm. We examine the key concepts related to business model digitalization. We develop a conceptual matrix for portfolio considerations of firm business model digitalization. We introduce the seven contributions in this special issue on knowledge and innovation related to business and offer some recommendations for future research on the new working conditions and digital identities of firms.
159 citations
01 Dec 2018
TL;DR: In this paper, the authors investigated the major determinants of firm's open innovation performance in Malaysian small and median-sized enterprises and found that external knowledge, internal innovation, and R&D department were the major factors of SMEs' open innovation.
Abstract: The prime objective of the current study is to investigate the major determinants of firm’s open innovation performance in Malaysian small and median-sized enterprises (SMEs). Recently, Malaysian SMEs have suffered from low open innovation performance. These SMEs are still struggling to get success in open innovation adoption. Decline in open innovation practices hampered the overall SMEs performance. To address this issue the current study adopted quantitative research approach and cross-sectional research design. A 5-point Likert scale was used to collect the data through mail survey. Two hundred (200) questionnaires were distributed among the managerial staff of SMEs in Malaysia by using area cluster sampling. Smart PLS3 (SEM) was utilized as a statistical tool. It was found that external knowledge, internal innovation and R & D department were the major determinants of firm’s open innovation performance. Thus, the current study contributed in the body of knowledge by revealing the real determinants of open innovation performance and R & D department as a mediator. Therefore, the current study is beneficial for SMEs to boost up the overall performance by accelerating open innovation system.
134 citations
TL;DR: Wang et al. as mentioned in this paper investigated the influence of knowledge networks on firms' innovation performance and found that knowledge integration capability has a fully mediating effect on the relationship between knowledge cognition and innovation performance.
110 citations
Journal Article•
TL;DR: This article examined how the structure of communication networks among actors can affect system-level performance and found that an inefficient network maintains diversity in the system and is thus better for exploration than an efficient network, supporting a more thorough search for solutions in the long run.
Abstract: Whether as team members brainstorming or cultures experimenting with new technologies, problem solvers communicate and share ideas. This paper examines how the structure of communication networks among actors can affect system-level performance. We present an agent-based computer simulation model of information sharing in which the less successful emulate the more successful. Results suggest that when agents are dealing with a complex problem, the more efficient the network at disseminating information, the better the short-run but the lower the long-run performance of the system. The dynamic underlying this result is that an inefficient network maintains diversity in the system and is thus better for exploration than an efficient network, supporting a more thorough search for solutions in the long run. For intermediate time frames, there is an inverted-U relationship between connectedness and performance, in which both poorly and well-connected systems perform badly, and moderately connected systems perf...
94 citations
References
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TL;DR: In this paper, the authors argue that the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities.
Abstract: In this paper, we argue that the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities. We label this capability a firm's absorptive capacity and suggest that it is largely a function of the firm's level of prior related knowledge. The discussion focuses first on the cognitive basis for an individual's absorptive capacity including, in particular, prior related knowledge and diversity of background. We then characterize the factors that influence absorptive capacity at the organizational level, how an organization's absorptive capacity differs from that of its individual members, and the role of diversity of expertise within an organization. We argue that the development of absorptive capacity, and, in turn, innovative performance are history- or path-dependent and argue how lack of investment in an area of expertise early on may foreclose the future development of a technical capability in that area. We formulate a model of firm investment in research and development (R&D), in which R&D contributes to a firm's absorptive capacity, and test predictions relating a firm's investment in R&D to the knowledge underlying technical change within an industry. Discussion focuses on the implications of absorptive capacity for the analysis of other related innovative activities, including basic research, the adoption and diffusion of innovations, and decisions to participate in cooperative R&D ventures. **
31,623 citations
TL;DR: In this paper, the authors argue that what firms do better than markets is the sharing and transfer of the knowledge of individuals and groups within an organization, and that knowledge is held by individuals but is also expressed in regularities by which members cooperate in a social community (i.e., group, organization, or network).
Abstract: How should we understand why firms exist? A prevailing view has been that they serve to keep in check the transaction costs arising from the self-interested motivations of individuals. We develop in this article the argument that what firms do better than markets is the sharing and transfer of the knowledge of individuals and groups within an organization. This knowledge consists of information (e.g., who knows what) and of know-how (e.g., how to organize a research team). What is central to our argument is that knowledge is held by individuals, but is also expressed in regularities by which members cooperate in a social community (i.e., group, organization, or network). If knowledge is only held at the individual level, then firms could change simply by employee turnover. Because we know that hiring new workers is not equivalent to changing the skills of a firm, an analysis of what firms can do must understand knowledge as embedded in the organizing principles by which people cooperate within organizatio...
12,719 citations
"Organizing for knowledge generation..." refers background or result in this paper
...Our conceptual framework and results are consistent with related work suggesting that it is differences in internal knowledge bases that dictate boundary choices (Jacobides and Hitt, 2005; Jacobides and Winter, 2005; Kogut and Zander, 1992)....
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...The idea that it is differences in internal knowledge bases that essentially drive boundary choices has also been highlighted before (Jacobides and Hitt, 2005; Jacobides and Winter, 2005; Kogut and Zander, 1992)....
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...In this line of thought, differences in knowledge bases determine firm boundaries (Kogut and Zander, 1992)....
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TL;DR: The imperfections of learning are not so great as to require abandoning attempts to improve the learning capabilities of organizations, but that those imperfections suggest a certain conservatism in expectations.
Abstract: Organizational learning has many virtues, virtues which recent writings in strategic management have highlighted. Learning processes, however, are subject to some important limitations. As is well-known, learning has to cope with confusing experience and the complicated problem of balancing the competing goals of developing new knowledge (i.e., exploring) and exploiting current competencies in the face of dynamic tendencies to emphasize one or the other. We examine the ways organizations approach these problems through simplification and specialization and how those approaches contribute to three forms of learning myopia, the tendency to overlook distant times, distant places, and failures, and we identify some ways in which organizations sustain exploration in the face of a tendency to overinvest in exploitation. We conclude that the imperfections of learning are not so great as to require abandoning attempts to improve the learning capabilities of organizations, but that those imperfections suggest a certain conservatism in expectations.
6,071 citations
"Organizing for knowledge generation..." refers background in this paper
...Merely evaluating external knowledge is costly because it requires a commensurate level of absorptive capacity (Lane and Lubatkin, 1998; Levinthal and March, 1993)....
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...It is costly to recognize, evaluate, and appraise external knowledge (Levinthal and March, 1993)....
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01 Jan 1993
TL;DR: In this paper, the authors examine the ways organizations approach these problems through simplification and specialization and how those approaches contribute to three forms of learning myopia, the tendency to overlook distant times, distant places, and failures, and identify some ways in which organizations sustain exploration in the face of a tendency to overinvest in exploitation.
Abstract: Organizational learning has many virtues, virtues which recent writings in strategic management have highlighted. Learning processes, however, are subject to some important limitations. As is well-known, learning has to cope with confusing experience and the complicated problem of balancing the competing goals of developing new knowledge (i.e., exploring) and exploiting current competencies in the face of dynamic tendencies to emphasize one or the other. We examine the ways organizations approach these problems through simplification and specialization and how those approaches contribute to three forms of learning myopia, the tendency to overlook distant times, distant places, and failures, and we identify some ways in which organizations sustain exploration in the face of a tendency to overinvest in exploitation. We conclude that the imperfections of learning are not so great as to require abandoning attempts to improve the learning capabilities of organizations, but that those imperfections suggest a certain conservatism in expectations.
6,065 citations
TL;DR: In this article, the authors investigate the patterns of technological evolution and their impact on environmental conditions and find that technological change within a product class will be characterized by long periods of incremental change punctuated by discontinuities, and the locus of innovation will differ for competence destroying and competence-enhancing technological changes.
Abstract: Investigates the patterns of technological evolution and their impact on environmental conditions. Seven hypotheses are offered in order to demonstrate that technology is a central force in shaping the environments within which organizations operate. These hypotheses are: (1) technological change within a product class will be characterized by long periods of incremental change punctuated by discontinuities; (1a) technological discontinuities are either competence enhancing (build on existing skills and know-how) or competence destroying (require fundamentally new skills and competences); (2) the locus of innovation will differ for competence destroying and competence-enhancing technological changes. Competence-destroying discontinuities will be initiated by new entrants, while competence-enhancing discontinuities will be initiated by existing firms; (3) competitive uncertainty will be higher after a technological discontinuity than before discontinuity; (4) environmental munificence (i.e., resource availability and support for growth) will be higher after a technological discontinuity than before the discontinuity; (5) competence-enhancing discontinuities will be associated with decreased entry-to-exit ratios and decreased interfirm sales variability (thus strengthening product leaders and increasing barriers to entry). These patterns will be reversed for competence-destroying discontinuities; (6) successive competence-enhancing discontinuities will be associated with smaller increases in uncertainty and munificence; and (7) those organizations that initiate major technological innovations will have higher growth rates than other firms in the product class. Data were collected from U.S. firms in three product classes, domestic scheduled passenger airline transport, Portland cement manufacture, and minicomputer manufacture, from the year of the niche market's inception through 1980. Results indicate that after the three niche openings, there were six competence-enhancing technological discontinuities and two competence-destroying discontinuities in total. Each of these discontinuities had a far greater impact on a key measure of cost or performance than more incremental technological events. In addition, except for the period following the introduction of semiconductor memory in minicomputers, the ability of experienced industry observers to predict demand following technological disruptions was far worse than prior to the disruption. Demand growth following the discontinuity was significantly higher than it was immediately prior to the discontinuity, which had an enormous impact on product-class demand. Also, the ratio of entries to exits was higher in each of the five years before a competence-enhancing discontinuity than during the five subsequent years, though none of the differences is statistically significant. Though market variability in sales growth was expected, it was found that some firms' sales grew explosively while other firms experienced sales declines. It is also suggested that as technology matures, successive competence-enhancing discontinuities increase both uncertainty and munificence, but not as much as those discontinuities that preceded them in establishing the product class. Finally, early adopters of technology were found to experience more growth than other firms. Using three different product types, with a wide range of years from inception, it is shown that technology does evolve through long periods of incremental change punctuated by relatively rare innovations that radically improve the state of the art. Although these incidences of change are rare, they stand out clearly and have significantly altered competitive environments. (SFL)
5,839 citations
"Organizing for knowledge generation..." refers background in this paper
...The industry experienced a competence-destroying technological discontinuity with the emergence of biotechnology (Pisano, 1996; Tushman and Anderson, 1986)....
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...…networks; innovation strategies; complementarities; external knowledge sourcing *Correspondence to: Konstantinos Grigoriou, 11200 SW 8th Street, MANGO 443, Miami, FL, 33199, U.S.A. E-mail: kgrigori@fiu.edu Copyright © 2015 John Wiley & Sons, Ltd. incumbent firms (Tushman and Anderson, 1986)....
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