Role of search for domain knowledge and architectural knowledge in alliance partner selection

Research Summary: The literature on technological alliances emphasizes that search for knowledge drives alliance formation. However, in conceptualizing technological knowledge, prior work on alliances has not made a distinction between domain knowledge—knowledge that firms possess in distinct technological domains—and architectural knowledge—knowledge that firms possess about how to combine elements from different technological domains. We argue that firms seek partners that are similar in domain knowledge to deepen their knowledge, and partners that are dissimilar in architectural knowledge to broaden their knowledge. Our results indicate that the likelihood of alliance formation increases when two firms are similar in domain knowledge and dissimilar in architectural knowledge. Further, our results show that these effects are positively moderated by the degree of decomposability of a firm's knowledge base. Managerial Summary: In dynamic environments, companies need to continually deepen and broaden their technological knowledge, and they often look for alliance partners who can provide them that knowledge. For knowledge deepening, companies are more likely to form alliances with those companies that have expertise in similar technological fields. For knowledge broadening, they are more likely to form alliances with those companies that have expertise in the same technological fields, but have different recipes for combining knowledge from those fields. Furthermore, a company with a modular knowledge base is more likely to seek a partner that has expertise in similar technological fields or whose recipes for combining knowledge from different technological fields are different from the recipes it has.     

The Roles of Knowledge Providers,Knowledge Recipients,and Knowledge Usage in Bridging Structural Holes

Studies have suggested that firms can benefit from bridging two or more otherwise disconnected firms in their ego networks (i.e., structural holes) as a potentially useful source of external knowledge for innovation. However, past research also noted that the relationship between bridging structural holes and firm innovation varies significantly. Building on the earlier research that has examined the industrial, structural, and institutional dimensions of this relationship, the purpose of this research is to study how the different characteristics of the external knowledge provided by bridging structural holes in a focal firm’s ego network might moderate the relationship between bridging structural holes and firm innovation. Using longitudinal data from the U.S. computer industry, this study showed that focal firms that bridged otherwise disconnected firms in their ego networks enjoyed higher levels of innovation. In addition, it showed that this relationship was particularly stronger when the focal firms and the disconnected firms that they bridged operated in similar rather than different markets but when the focal firms and the disconnected firms worked on different rather than similar technological domains. The results also revealed that the relationship was stronger when the focal firms’ knowledge specialization was low rather than high and when the focal firms emphasized incremental rather than breakthrough innovation. These findings show companies how they can benefit from bridging otherwise disconnected firms in their ego networks and help them make more informed decisions pertaining to such bridging activities.     

An inquiry on dimensions of external technology search and their influence on technological innovations: evidence from Chinese firms

A central part of technological innovation for industrial firms involves search for new external knowledge. A well‐established stream of literature on firms' external knowledge search has demonstrated that firms investing in broader search may have a great ability to innovate. In this paper, we explore the influences of technology search on firms' technological innovation performance along three distinctive dimensions: technical, geographic, and temporal dimensions, using a unique panel data set containing information on Chinese firms that were active in technology in‐licensing and patenting during the period 2000–2009. Our findings reveal that Chinese firms' technological innovation performances are related to external technology search in quite different ways from the ones suggested in the extant literature using evidence from developed countries. We find that Chinese firms searching ‘locally’ along the technical dimension have better technological innovation performance than those searching ‘distantly’. However, when a Chinese firm in‐license relatively old (mature) technologies or those from geographically nearby areas, it will be less bounded to searching familiar technical knowledge.     

Firm heterogeneity in complex problem solving: A knowledge‐based look at invention

Research summary : The knowledge‐based view suggests that complex problems are best solved under hierarchical (within‐firm) governance. We examined why firms assumed to be in general alignment with this theory might nonetheless produce solutions of varying usefulness. We theorize that a firm's internal knowledge variety (IKV) is associated with its capacity to support cross‐domain knowledge flows during search, and its ability to identify and explore promising areas on the solution landscape. We further theorize that partner knowledge in familiar (unfamiliar) domains can offset specific weaknesses in searching rugged landscapes, inherent with low or high (moderate) IKV. We find support for these ideas in the context of drug discovery, extending KBV's focus on governance alignment to explain variation in problem‐solving effectiveness within hierarchy. Managerial summary : Firms that concentrate their inventive efforts in a few technological domains, but also dabble in several others, have problem‐solving advantages: they can better support knowledge transfer and recombination across domains. Firms that focus too narrowly or spread their inventive efforts thinly across many domains lose these advantages, but might compensate through alliance partnerships. Our study of drug discovery shows that while firms with very low or high knowledge variety tend to produce weaker solutions than firms in the moderate range, their inventive performance improves when alliance partners afford them access to additional knowledge in familiar domains. We explain how the combination of firm and partner knowledge enables firms to better identify, evaluate, and implement alternative solutions to complex problems. Copyright © 2016 John Wiley & Sons, Ltd.     

Knowledge management and innovation in knowledge-based and high-tech industrial markets: The role of openness and absorptive capacity

Knowledge, as resource, and technological innovation, as a dynamic capability, are key sources for firm's sustained competitive advantage and survival in knowledge-based and high-tech industries. Under this rationale has emerged a research stream where knowledge management, organizational learning, or intellectual capital, help to understand and constitute the key pieces of one of the most complex business phenomena; the ‘firm's technological advantage’. This being so, it is also true that in knowledge-based and high-tech industrial markets, competitive success comes directly from continuous technological innovations, where a single organization cannot successfully innovate in isolation; therefore, firms should rely on external relationships and networks in order to complement its knowledge domains, and then, develop better and faster innovations. In this sense, I would like to highlight the cross-fertilizing role of three constructs that are nurtured by different research traditions: ‘collaborative/open innovation’, from Strategy and Innovation Management research; ‘absorptive capacity’, from ‘A Knowledge-Based View’; and ‘market orientation’, from Marketing research.     

From Which Source Do Small Firms Derive Their Innovative Inputs? Some Evidence from Italian Industry

This paper relies upon the hypothesis that the “knowledge production function” – defined in the geographical sense – is characterized by coefficient estimates which vary with firm size. In particular, large firms depend for their innovative output on direct and indirect R&D inputs, whereas small firms more extensively exploit the spillovers from research activities carried out by universities and by other firms. This hypothesis is tested against two different sets of data: the first based on patent statistics and dealing with 20 Italian regions over the period 1978–86; the second consisting of a selected number of product innovations identified by a literature-based counting procedure and dealing with 46 Italian provinces in year 1989. The results of regression analysis support the hypothesis that firms belonging to different size classes resort to different sources for the knowledge relevant to their innovative output. In particular, industry R&D prove to play a relatively more important function than do spillovers from university research in generating innovative output in large firms, whereas the opposite is true in the case of small firms.     

The impact of innovation intensity,scope, and spillovers on sales growth in Chinese firms

We investigate the relationship between innovation and sales growth of firms in China. Innovation theories suggest firms create the technological knowledge needed to have market impact with their products and drive sales growth in different ways. These include: (1) through firms’ overall innovation intensity, (2) through decisions on innovation scope (depth vs. diversity), and (3) through knowledge spillovers from technological neighbors. Little research exists on how effective these approaches are for emerging market firms in pursuit of growth. To address this, we integrate and test the effects of these different knowledge creation mechanisms using data from Chinese firms over a five-year period. Findings show that innovation intensity and knowledge spillovers positively impact sales growth. We also develop and test a model capturing the non-linear impact of innovation scope. As predicted, we find a U-shaped relationship for depth of innovation and an inverted U-shaped relationship for diversity of innovation.     

Exploring the role of spatial relationships to transform knowledge in a business idea — Beyond a geographic proximity

The “space” dimension has characterized the aggregation of firms, ranging from industrial districts to clusters. Within a local system, as emphasized by the Triple Helix model (Etzkowitz & Leydesdorff, 2000), universities, firms, and public institutions generate synergies by producing and exploiting technological knowledge. From this perspective, local relationships become synonymous with spatial relationships characterized by geographic proximity. However, is it possible to find different dimensions of proximity influencing spatial relationships in order to support innovation? This paper demonstrates that different proximity dimensions influence firms' boundaries and the development of spatial relationships through which actors interact to develop resource combinations identified in innovation. After a review of the these topics, the paper provides findings related to the spatial relationships developed by Petroceramics as a hosted spin-off of the Italian Technological Pole (POINT) as well as its subsequent relocation to the Kilometro Rosso Science Park. As such, this paper deals with how technological knowledge is transformed into a business idea through spatial relationships based on different dimensions of proximity.     

The role of institutional arbitrage in the search for product innovation: Firm level evidence from Norway

Evolutionary theorizing conceptualizes the discovery of new products as a successful outcome from searching for innovation in which firms combine new and old knowledge and resources. Prior research has shown that the propensity for discovering new products is greatest when firms cross a technological and/or organizational boundary in the search for new knowledge. In this paper, we add a new dimension to this literature: we examine whether, and to what extent, crossing a national boundary, as when firms use knowledge from network partners in foreign countries, influences the likelihood that firms will introduce new products into the market. Drawing on theorizing on institutional arbitrage in the literature on national innovation systems (NIS) and varieties of capitalism (VOC), we propose that companies that cross a national boundary in searching for innovation are significantly more likely to introduce new products. Detailed survey data on firms; data on their network partners, including their location; and regression analysis show that the use of knowledge from actors in foreign NIS has a positive influence on product innovation.     

Licensing Foreign Technology and the Moderating Role of Local R&D Collaboration: Extending the Relational View

The relational resource‐based view posits that performance differences among firms can be explained not only by the possession of internal resources but also by maintaining and developing relationships with external partners. However, studies in the extant literature usually address the separated roles of various external relationships of focal firms, but the literature has not addressed how relationships with different sets of knowledge partners are related to each other and influence focal firms' performance. Therefore, to fill this research gap, this study focuses on how technological resources acquired from one set of partners (licensing foreign technologies) may generate subsequent internal and relational rents in terms of technological innovation in the context of collaboration with an entirely different set of knowledge partners (local R&D partners). Specifically, we propose that local R&D collaborations need to be large in scale and broad in scope. The empirics are based on the analysis of a sample of 160 high‐tech Chinese firms observed from 2000 to 2011. Consistent with our predictions, our findings contribute to extending the relational view by addressing the relations among the relationships of focal firms.     

Firm Adaptation,Preadaptation, and Sequential Ambidexterity in Firm Boundaries During an Era of Ferment and an Era of Incremental Change

We explore the relation between firms’ internal skills and knowledge from past applications and the mechanism they use to adapt during an era of ferment and then to an era of incremental change in a new technological domain. We extend current research on incumbent firms’ success at facing radical technological change by studying dynamic firm boundaries of incumbents within the industry along a new technological trajectory. We use the concepts of problem, search, and solution from the knowledge‐based view and foundational view of knowledge recombination to develop our theoretical framework. We propose that preadapted firms—the ones with accumulated internal skills and knowledge from past applications that prove relevant by chance to the new technological domain—are more likely to choose internal technology sourcing during an era of ferment (than nonpreadapted firms). Subsequently, firms that choose internal sourcing during an era of ferment are more likely (than firms that source externally) to choose external sourcing during an era of incremental change leading to greater market acceptance for their innovation. Analysis of a longitudinal data set of 161 U.S. banks provides support for our hypotheses. The findings of this study indicate an important temporal dependency between internal and external sourcing, thus contributing to the sequential ambidexterity literature. Our theoretical framework provides support to the foundational view of knowledge recombination and contributes to the knowledge‐based view of the firm.     

Appropriability and the retrieval of knowledge after spillovers

Research summary: Firms create and capture value through innovation. In technology‐driven firms, there has been an explicit emphasis on appropriability through imitation deterrence and cumulative inventions that build on prior firm innovation. We introduce systematic empirical evidence for a third mechanism of appropriability namely, knowledge retrieval, which is defined as the re‐absorption of previously spilled knowledge. We extend previous studies which consider technological complexity and organizational coupling as predictors of appropriability by examining their impact on knowledge retrieval. We find that technological complexity has a curvilinear relationship with retrieval while organizational coupling has a negative relationship. We discuss the implications of these findings for theories of absorptive capacity, organizational design and appropriability of innovation. Managerial summary: It is a widely held assumption that knowledge should be protected and held tightly within the firm to ensure value creation and value capture. The implicit recognition is that knowledge spillovers, or knowledge leakage, is detrimental to performance. By examining the patterns of citations among patents of 142 semiconductor firms, we study how organizational structure and technological complexity play a role. We find that moderate technological complexity improves appropriability. If imitation deterrence is paramount, then the optimal structure would be a tightly‐coupled organization. In other instances, loosely‐coupled organizations may be superior because they foster internal cumulative innovations and, if spillovers were to occur, they also maximize knowledge retrieval. Our findings suggest that all is not lost when spillovers occur and that firms can continue to benefit in downstream innovations. Copyright © 2015 John Wiley & Sons, Ltd.     

The critical role of the institution-led market in the technological catch-up of emerging market enterprises: evidence from Chinese enterprises

Innovation scholars have, in the past, applied the concept of ‘windows of opportunity’ to study latecomer firms’ catch-up. Previous research treats this concept as three separate aspects, i.e., technological, institutional and market. The role of government was seen as being concerned only with institutional windows of opportunity. However, governments in emerging markets exert influence not only through traditional means of institutional support but, also, via market-driven mechanisms. The former refers to state procurement, resource provision, legislation, and administrative control, whereas the latter is concerned with demand creation, resource allocation, and the regulation of market orders. This multifaceted nature of government in promoting economic growth, guiding technological development, and influencing enterprise behavior remains under-researched. Yet, it plays a crucial role in the catch-up of emerging market enterprises. Therefore, based on innovation studies literature and an institution-based view of international business, the present research proposes a new construct, termed the institution-led market, with the aim to encapsulate the complex role of government in the catch-up of emerging market enterprises. The institution-led market is defined as a unique type of market that is well-timed and strategically created by the government and supported by institutional policies and resources. A large database of 259 Chinese firms in 37 industries was created and analyzed using a hierarchical logistic model to empirically test the relationship between the institution-led market and technological catch-up of emerging market enterprises. We demonstrate that the institution-led market positively affects the catch-up of emerging market enterprises; furthermore, it significantly moderates the effect of technological discontinuity on the catch-up. Finally, the theoretical contributions and managerial implications of the present research are discussed.     

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

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‐à‐vis its commensurate costs as the benefits of external sourcing may be overstated . Copyright © 2015 John Wiley & Sons, Ltd.     

Competing capitalisms: capital investment in American,German, and Japanese firms

This study explains one way the home country institutional environment causes strategy differences across firms from different countries. It contrasts the investment conduct of American, German, and Japanese firms in the 10 largest manufacturing industries. We find profound national differences among these firms that are stable across industries. These differing conducts are tied to the institutional environments of the home market. The shareholder firms of the United States make investments primarily in response to expected investment returns, measured by Tobin’s Q ratio. The coalitional firms of Germany and Japan make investments primarily in response to the availability of internal finance, measured by operating cash flow. Copyright © 1999 John Wiley & Sons, Ltd.     

CEO career horizon,corporate governance,and real options: The role of economic short‐termism

Research Summary: Combining studies on real options theory and economic short‐termism, we propose that, depending on CEOs’ career horizons, CEOs have heterogeneous interests in strategic flexibility, and thus, have different incentives to make real options investments. We argue that compared to CEOs with longer career horizons, CEOs with shorter career horizons will be less inclined to make real options investments because they may not fully reap the rewards during their tenure. In addition, we argue that long‐term incentives and institutional ownership will mitigate the relationship between CEOs’ career horizons and real options investments. U.S. public firms as an empirical setting produced consistent evidence for our predictions. Our study is the first to theoretically explain and empirically show that a CEO's self‐seeking behavior will impact real options investments. Managerial Summary: This article helps to explain how a CEO's self seeking‐behavior may shape a firm's real option investment, which could result in different level of strategic flexibility. We argue that CEOs with short career horizons have less time to exercise their firms’ real options, which should lower the investments in the firms’ real options portfolios relative to CEOs with long career horizons. We study a sample of U.S. public firms and find strong evidence that a CEO's expected tenure in the firm is positively related to the real options investments at the firm level. We find that this agency issue can be mitigated by adopting appropriate corporate governance mechanisms such as long‐term incentives and institutional investors.     

Near and dear? The role of location in CSR engagement

Research summary : Building on economic geography and institutional theory, we develop and test theory relating geographic variables to the strength of corporate social responsibility (CSR) engagement and the cost of equity capital. For a large sample of U.S. firms over the period 1998–2009, we find strong and robust evidence that firms located in areas characterized by high levels of local CSR density score higher in CSR engagement. In addition, firms located close to major cities and financial centers exhibit higher CSR engagement compared to firms located in more remote areas. Moreover, the effect of CSR engagement on reducing equity financing costs is even greater for firms in high CSR density areas than for firms in low CSR density areas. Managerial summary : Does the location of CSR engagement by firms affect the strength of CSR engagement by their neighbors? Does the geography of engagement have an impact on financial performance? Our findings show that a firm's CSR engagement increases in areas where there is dense CSR engagement and when it is located near large cities. In these areas, norms, values, and knowledge related to CSR are transmitted to firms through face‐to‐face meetings and frequent social interactions with groups such as peers, labor unions, news media, universities, and community organizations, which tend to be concentrated in large cities. Our findings further highlight that CSR engagement reduces equity financing costs for firms in areas where CSR is widely practiced. Copyright © 2015 John Wiley & Sons, Ltd.     

Incubation of an industry: Heterogeneous knowledge bases and modes of value capture

Research summary : We examine firms' technological investments during an industry's incubation stage—the period between a technological breakthrough and the first instance of its commercialization. Using the agricultural biotechnology context, we develop stylized findings regarding the understudied knowledge evolution preceding product evolution in an industry's life cycle, the trend and diversity of firms undertaking technological investments in anticipation of industry emergence, their leverage of markets for technology and corporate control, and their use of alternative modes of value capture. We juxtapose these stylized findings with existing literature to identify new theoretical insights, and set the stage for future scholarly work to develop and test new theories for the incubation period, examine its existence in other industries, and study its impact on subsequent firm and industry evolution. M anagerial summary : New technological breakthroughs present managers of existing firms and aspiring entrepreneurs with opportunities to create altogether new industries. During the vibrant incubation period, we find that multiple firms capitalize on diverse knowledge bases to shape the industry's knowledge evolution and also capture economic value in diverse ways. Existing firms in the obsolescing industry are more likely to become targets in acquisitions given their complementary knowledge. Science‐based start‐ups are more likely to engage in acquisitions and collaborations with established firms. Diversifying firms are more likely to commercialize products after leveraging of internal development, acquisitions, and alliances. Our study highlights the importance for managers to think about “success” and “failure” across multiple yardsticks of performance, rather than only as product commercialization as the sole goal. Copyright © 2016 John Wiley & Sons, Ltd.     

Leaders,laggards, and the pursuit of foreign knowledge

This paper analyzes how firms in different technological and market share positions use foreign R&D to augment their technological capabilities. Technology transfer issues and absorptive capacity arguments are examined to analyze the different technological capabilities of leading and lagging firms. In addition, a new strategic rationale (in terms of non‐dominant market share firms) that has not been considered in prior studies analyzing knowledge‐seeking FDI is offered. From a panel dataset which includes information on all foreign R&D investments made by publicly traded Japanese manufacturing firms (from 1974 to 1994), I show that Japanese firms investing in foreign R&D tend to be the non‐dominant market share firms, but also the technologically leading firms across fairly diverse industries. By considering both the technological and market share positions of firms, this study reveals important characteristics that influence when firms use foreign R&D as part of a strategy to augment their technological capabilities. Copyright © 2005 John Wiley & Sons, Ltd.     

Stimulating 'hot technologies': interorganizational networks in Dutch ceramic research

The role of interorganizational R&D networks between firms and universities in knowledge transfer of advanced technologies is analyzed. The starting assumption (coinciding with reasons of government bodies to support technological cooperation) is that a national knowledge and technology system exists. From this assumption a number of questions that exist about knowledge and technology transfer can be discussed. Notably whether the knowledge push model of technological innovation is valid. This is done through the analysis of the differences in the pattern of external contacts that exists between the scientific, industrial and policy organizations.
Empirical results of a case study of the stimulation of advanced ceramic technology by the Dutch government form the basis. Advanced ceramics is considered to be an emergent technology within the larger framework of generic technologies. However, the Dutch university and industry structure in this area is weak which raises a number of important questions about the possibility to built a technological infrastructure through government support. The paper concentrates on the role of resource and information flows, which characterize the position of specific organizations in the R&D network. The three main positions in this case are occupied by government bodies, various firms and the university and government laboratories.
Two conclusions on knowledge transfer in university-industry cooperation may be drawn. (a) Institutional (government and university) and industrial research networks are different in character and in fact they consist of different network elements. (b) Government policies, in this case, affect the outlook of scientists but not of firms.