Research on the mechanisms of knowledge-based innovation: Focusing on the endogenous and exogenous factors

Abstract

Over the last 20 decades, knowledge has emerged as a key factor in ensuring that firms stay competitive and can realize financial and innovative growth. Many firms have achieved this by relying on external knowledge and on technologies beyond internal R&D as an innovative strategy because the increasing technology obsolescence and technological uncertainty has increased the importance of securing valuable external knowledge. With the concept of open innovation spreading, research on firms internal innovation strategy based on external knowledge has emerged in the knowledge management field. Recently, the increased importance of knowledge-based innovation resulted in more research focusing on this issue. In particular, within the research focusing on knowledge-based innovation, increasing attention is placed investigating the effects of external knowledge sources on the performance of firms. However, previous literature has left gaps in the understanding of the mechanisms of knowledge-based innovation. While prior literature focused on the effects of external knowledge sources, most research treated the mechanisms of knowledge-based innovation as a given fact and did not investigate possible determinants. Recent research investigated the mechanisms of knowledge-based innovation using only endogenous or exogenous factors, and so far no studies have performed a comprehensive investigation it in the context of various perspectives. This dissertation aims at increasing the understanding of the mechanisms of knowledge-based innovation by investigating two key questions: What are determinants of external knowledge search strategy? and Which factors moderate the relationship between unrelated technological diversification and innovation performance?. Specifically, Chapter 3 investigates the factors that determine the firms external knowledge search strategy. Considering that the external knowledge search strategy is affected by both internal and external forces, Chapter 3 examines the effects of both endogenous and exogenous factors. As an endogenous factor, Chapter 3 focuses on the potential absorptive capacity, i.e., the firms ability related to the identification and acquisition of external knowledge sources. In addition, previous literature has linked external knowledge search strategy and the appropriability regime, which is known as an exogenous factor related to flows and volumes of external knowledge sources. The hypotheses of Chapter 3 are tested on a panel dataset containing patent and financial information of 170 international firms from various industries. The findings of Chapter 3 reveal that a firms potential absorptive capacity has a curvilinear relationship with external knowledge search strategy. It also finds that the appropriability regime partially moderates the relationship between potential absorptive capacity and external knowledge search strategy. These results highlight the role of the endogenous and exogenous factors in determining the firms use of external knowledge in the innovation process. Chapter 4 focuses on the endogenous and exogenous factors that can moderate the relationship between unrelated technological diversification and innovation performance. In particular, among the factors discussed in the prior literature, Chapter 4 investigates organizational slack, technological capability, and technological turbulence, which are related to the firms innovative activities and the nature of knowledge. The hypotheses of Chapter 4 are tested on a cross-sectional dataset comprised of 251 sample firms from various industries. Unrelated technological diversification is found to have a curvilinear relationship with the firms innovation performance. Through an analysis of the available data, Chapter 4 shows that organizational slack partially positively moderates the relationship between unrelated technological diversification and the firms innovation performance. However, technological capability and technological turbulence negatively moderate this relationship. These findings suggest that the maximum level of unrelated technological diversification which contributes to the firms innovation performance is limited. Firms, however, can take advantage of higher levels of organizational slack and lower both technological capability and technological turbulence in order to maximize their innovation performance. Overall, this dissertation aims at increasing the understanding of the mechanisms of knowledge-based innovation. First, by examining the mechanism of knowledge-based innovation, this dissertation expands the innovation management perspective. This thesis investigates the characteristics of the mechanisms of knowledge-based innovation not just through a singular perspective which is often done in individual research focusing on external knowledge search strategy and unrelated technological diversification. Rather, it identifies and comprehensive analyzes both endogenous and exogenous factors. Second, based on the recognition of the effects of the endogenous and exogenous factors on the external knowledge search strategy, this dissertation recommends considering the internal levels of the firms knowledge base and the volume and flows of external knowledge sources for appropriate searching of external knowledge. Third, this dissertation confirms that the interaction between endogenous and exogenous factors within unrelated technological diversification influences the firms innovation performance. Based on these findings, the dissertation proposes that firms need to take into account their endogenous and exogenous factors related to innovation activities as important contingent factors with respect to the research of unrelated technological diversification and development of innovation strategy.