Organizational knowledge networks and local search: The role of intra‐organizational inventor networks

Research summary : While firms tend to build on their own knowledge, we distinguish between depth and breadth of local search to investigate the drivers of these behaviors. Given that inventors in a firm carry out the knowledge creation activities, we strive to identify inventors responsible for these behaviors by employing the notion of an intra‐firm inventor network. A longitudinal examination of 14,575 inventors from four large semiconductor firms using patent data supports our hypotheses that the reach of inventors in the intra‐firm network and their span of structural holes have independent and interactive effects on these two types of local search behaviors. These findings have implications for research on exploitation and exploration, organizational knowledge, knowledge networks, and micro‐foundations. Managerial summary : Large amounts of knowledge may reside within firm boundaries, and managers are interested in understanding who may leverage this knowledge to generate novel ideas. We focus on collaborations among knowledge workers to address this question. Using the collaborations among all knowledge workers in a firm, we show that those who have higher reach to all others and those who form bridges to connect unconnected groups of workers tend to leverage not only more organizational knowledge, but also knowledge that is more dispersed in the organization. Managers could use these insights to shape the use of organizational knowledge by firm inventors, and also to make decisions about granting or withholding access to internal knowledge platforms for knowledge workers. Copyright © 2016 John Wiley & Sons, Ltd.     

Economic Properties of Statistical Indices: The Case of a Multidimensional Gini Index: A Correction and an Addition

Journal of Quantitative Economics - This note corrects an error in a paper published recently in this journal and also shows that the index proposed there satisfies an important additional property.     

Information, the Dual Economy, and Development

We examine the interactions between different institutional arrangements in a general equilibrium model of a modernizing economy. There is a modern sector, where productivity is high but information asymmetries are large, and a traditional sector where productivity is low but information asymmetries are small. Consequently, agency costs in the modern sector make consumption lending difficult, while such lending is readily done in the traditional sector. The resulting trade-off between credit availability and productivity implies that not everyone will move to the modern sector. In fact, the laissez-faire level of modernization may fail to maximize net social surplus.
This situation may also hold in the long run: in a dynamic version of the model, a "trickle-down" effect links the process of modernization with reduction in modern sector agency costs. This effect may be too weak and the economy may get stuck in a trap and never fully modernize. The two-sector structure also yields a natural theoretical testing ground for the Kuznets inverted-U hypothesis: we show that even within the "sectoral shifting" class of models, this phenomenon is not robust to small changes in model specification.     

The Role of Hybrid Organizations in Scaling Social Innovations in Bottom‐of‐the‐Pyramid Markets: Insights from Microfinance in India

While social innovations that solve financial exclusion have gained increasing attention as a means of helping the poor in developing markets, little research has empirically investigated the types of organizations that drive these innovations to achieve scale. Hybrids, a type of organization that exist in between traditional organizational forms, are said to have rapidly gained prevalence, especially in bottom‐of‐the‐pyramid markets. Some scholars claim that hybrids are largely responsible for the spread of established social innovations, yet hybrids do not constitute a homogenous group; instead each hybrid form exists on a spectrum between pure for‐profit and not‐for‐profit organizational forms. It is important that empirical research investigates the role that various hybrid forms play in scaling established social innovations, especially under various bottom‐of‐the‐pyramid market conditions. To this end, using two market‐level outcome measures of scale achieved (prevalence and usage), the authors pursue two research objectives: to study (1) the extent to which, alternative hybrid forms (not‐for‐profit, quasi‐profit, and for‐profit hybrids) drive social innovation; and (2) the relative propensity of these hybrid forms to drive social innovation under varying bottom‐of‐the‐pyramid market conditions, specifically varying levels of development and social diversity. By theorizing how different organizational forms act given their degree of hybridity, the authors develop and test six hypotheses using data sets on microfinance organizations in India. Accordingly, they find that (1) compared with not‐for‐profit and for‐profit hybrids, quasi‐profit hybrids have a propensity to become more prevalent and achieve greater usage in bottom‐of‐the‐pyramid markets overall. Yet, within the spectrum of hybrid forms, (2) not‐for‐profit hybrids are more likely to become more prevalent and achieve greater usage in markets with lower development levels, whereas (3) for‐profit hybrids are more likely to become more prevalent and achieve greater usage in markets with lower social diversity when compared with other hybrid forms.     

A question of (mis)alignment: innovation mandates and absorptive capacity routines

Research suggests that effective R&D requires the right combination of inward-looking and outward-looking absorptive capacity routines. However, we do not have an adequate understanding of how these routines influence innovative output in R&D units with different mandates. In this paper, we argue that adopting an absorptive capacity routine would positively or negatively influence the R&D subsidiary’s innovative output, depending on whether the routine is aligned or misaligned with the subsidiary’s innovation mandate to ‘exploit’ existing knowledge or ‘explore’ new knowledge. We test this using data collected from a global packaged-software firm with 14 international R&D subsidiaries that implemented six major absorptive capacity routines in the period 2000–2010. Our research provides new insights for both scholars and practitioners in R&D management, by showing that balancing of absorptive capacity routines should be considered in light of innovation mandates of subsidiaries as well as the firm. Our analysis also provides insights on why decision makers may still adopt misaligned routines.     

Pharmaceutical Regulation and Innovative Performance: A Decision‐theoretic Model

In this paper, we develop a model of the impact of the drug approval process on the terms of a contract between a pharmaceutical company that requires the services of a contract research organization (CRO) to carry out testing of new drug molecules. Results show that if the equilibrium contract includes a variable payment (royalty), the more effort the CRO gives to create a more accurate result, the more strict the Food and Drug Administration (FDA) approval process. We also find that given the royalty shares in the contract, if the FDA demands more accuracy in results as a condition of approval, then the CRO will generate more accurate results from late‐stage tests. However, greater FDA stringency in the approval process benefits pharmaceutical companies because the greater is FDA stringency, the less is the risk of a drug recall. We also find that in order to employ a CRO in the testing process, the pharmaceutical company's prior probability that the drug is of high quality must be very high. Copyright © 2014 John Wiley & Sons, Ltd.