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Organizing for knowledge generation: internal knowledge networks and the contingent effect of external knowledge sourcing

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TLDR
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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Big data as an exploration trigger or problem-solving patch: Design and integration of AI-embedded systems in the automotive industry

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References
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Journal ArticleDOI

Absorptive capacity: a new perspective on learning and innovation

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.
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Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology

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).
Journal ArticleDOI

The myopia of learning

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.

Myopia of learning

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.
Journal ArticleDOI

Technological Discontinuities and Organizational Environments

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.
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