Exploration and firms' innovative performance-How does this relationship work?
| Autor | Moreira, Frederico G.P. |
| Cargo | Texto en ingl |
1 Introduction
This article investigates the relationship between a firm's strategy or activity to acquire new knowledge--exploration--and its innovative performance, while analyzing whether the firm's absorptive capacity moderates this relationship. Therefore, this study is expected to contribute to an open innovation approach, and to the firm's perspectives as to knowledge and learning.
The innovation process requires searching for new combinations of knowledge or technologies that harbor commercial potential (Laursen & Salter, 2014; Laursen, 2012; Nelson & Winter, 1982). Literature on innovation has shown the importance of searching for these new combinations beyond the organization's technological boundaries, a strategy that reflects the open innovation model (Chesbrough, 2003; 2006; Berchicci, 2013; Leeuw, Lokshin & Duysters, 2014; Laursen & Salter, 2014).
With regard to how knowledge and organizational learning is viewed, this article emphasizes that new combinations of knowledge and technology involve synchronicity between a firm's current knowledge and new knowledge. Both types of knowledge can be developed within or beyond the organization's physical boundary (Rosenkopf & Nerkar, 2001; Hoang & Rothaermel, 2010). Here, the focus will be on the exploration strategy, a term coined by March (1991), which refers to the following terms: variation, risk, flexibility, discovery and innovation. This strategy expresses the activity adopted by the firm that explores new knowledge, subject to risks and taking advantage of the benefits this strategy can provide (March, 1991).
Implementing the exploration strategy, when aligned with the business model, enables the firm to gain competitive advantage (Chebrough, 2003). In other words, the exploration strategy is an important activity through which the open innovation model materializes. The accumulation of and interaction with new knowledge positively influences the firm's technological development or innovative performance (Rosenkopf & Nerkar, 2001; Katila & Ahuja, 2002; Hoang & Rothaermel, 2010). Consequently, new opportunities may arise in new but uncertain markets (Kogut & Zander, 1992). High levels of search and sharing of knowledge can positively affect exploration activities, which in turn affect innovation performance (Aloini & Martini, 2013), by increasing the firm's positive R&D effect (Ritala, Olander, Michailova & Husted, 2015; Ren, Eisingerich &Tsai, 2015).
However, literature on innovation also acknowledges complexity in the knowledge search strategy. Aspects related to a firm's knowledge protection (Laursen & Salter, 2014; Ritala et ah, 2015), to processes and organizational structures (Benner & Tushman, 2001) to integrating new knowledge (Grant, 1996; Katila & Ahuja, 2002) are associated with rising costs that may cause the firm to "suffer the costs of experimentation without gaining many of its benefits" (March, 1991, p. 71). Accordingly, excessive accessing of new knowledge from outside sources must be carefully managed. Otherwise, it may not yield the expected positive returns after a certain point (Laursen & Salter, 2006).
Our study intends to broaden knowledge on how firms can deal with this paradox. Therefore, this paper suggests that the absorptive capacity (AC) of a firm can moderate the relationship between its exploration strategy and its innovative performance. This argument, based on the seminal concept of AC, was coined by Cohen & Levinthal (1990) as the firm's capacity to recognize the value of new, external information, assimilate it and apply it to commercial ends. The review of the concept proposed by Zahra & George (2002) reinforces the argument built herein, by proposing that AC has two different dimensions. Thus, the dimension that adds the capacity to transform and explore new knowledge would not be effective without the previous dimension, by which the firm acquires and assimilates new knowledge.
The connection between AC, the exploration strategy and the subsequent innovative performance is emphasized in that a firm can exploit the new knowledge in various technology fields. It is expected that this (AC) competence positively affects its capability to appropriate--or absorb--the technological innovation value, thereby stimulating subsequent innovations (Meyer & Subramaniam, 2014). Therefore, if the firm has a high capacity of absorbing knowledge or technologies (AC), it can identify and exploit them more efficiently (Zhou &Wu, 2010; Nambisan, 2013). In other words, with increasing levels of AC, the firm can explore a greater or more diverse level of new knowledge before experiencing less rewarding returns.
Here, the innovative performance will be measured based on the annual number of patents granted to a firm over a given period. Patents identify the inventions of products, processes or designs useful for the industry and unprecedented in the technological field to which they belong (Stuart & Podolny, 1996). They are recognized as rich data sources for the study of innovation and technological change (Hall, Jaffe & Trajtenberg, 2001), and represent the firm's history of technological knowledge (Stuart & Podolny, 1996; Lewin, Massini, & Peeters, 2011). Therefore, if this article studies the relationships between the search and absorption of new knowledge with innovative performance, it seems appropriate using patents as an indicator of performance. Furthermore, literature of innovation has added several studies that use patents as proxies for the innovative capacity of a firm (Owen-Smith & Powell, 2004; Rothaermel & Hess, 2007; Rothaermel & Thursby, 2007; Rothaermel & Alexandre, 2009).
Similarly, it also seems appropriate that the American and Canadian biopharmaceutical sectors choose to empirically test the arguments presented above. This segment is "characterized as oriented to technology-intensive R&D and technological knowledge is critical for development and sustainable competitive advantage" (Laursen, Moreira & Markus, 2015:15). Strong competition for patents in this sector encourages organizations by adding knowledge derived from various external sources. Moreover, the regime governing the protection of knowledge created in these countries is strong and therefore encouraging (Tzabbar, Aharonson & Amburgey, 2013).
2 THeory and Hypotheses
According to literature on open innovation, there are several factors that have contributed for this model to become a new paradigm. Information technology, globalization, increased mobility of skills and capabilities, the extensive availability of types of financing, among other factors, help to reduce uncertainty and costs involved with activities to explore fields that are beyond the firm's knowledge base (Chesbrough, 2003, 2006).
The assumptions used in this text are that the original closed model is no longer entirely satisfactory, given current market characteristics and demands (Chesbrough, 2003): the open model is more effective, particularly in sectors in which technological change comes about quickly (Katila & Ahuja, 2002; Hoang & Rothaermel, 2010). To produce successful innovations that result in competitive advantages, access to an array of knowledge is vital, even if the firm's current knowledge is fundamental in this process (Cohen & Levinthal, 1990; Laursen, 2012).
In this context, if technological change emerges more frequently and significantly in knowledge intensive environments (R & D) (Laursen et al., 2015);andif the exploration activity emphasizes utilizing new knowledge (March, 1991), then the exploration activity refers to the open innovation model, since the possibility of accessing new knowledge is significantly greater when the firm looks for it beyond its organizational boundaries (Cohen & Levinthal, 1990; Chesbrough, 2003; Rothaermel & Alexandre, 2009). In this line of reasoning, the exploration activity will also have important relationships with technological change, suggesting that this activity will likely have an effect on innovation performance.
A part of innovation literature attributes great importance to the number of new products launched as innovative performance indicators. The same applies to financial indicators, when they are associated to selling these products. However, in intensive research/knowledge sectors, without market exclusivity offered by a patent, the development of these products and their commercial viability may be substantially affected (Bawa, 2007; Funk, 2014). Therefore, although less visible to the market, the patenting stage can be a reliable way to measure innovative performance, specially in environments in which open innovation is a reality--for example, a patent not used by a firm can be exploited by another firm (Chesbrough, 2003; 2006). This practice is called "outbound open innovation" by Huizingh (2011), when internal knowledge is externally exploited.
Particularly in this article, three factors indicate that patents can effectively measure a firm's innovative performance. Firstly, to the extent that they represent an effective knowledge recombination (Laursen et ah, 2015), a central element of the main theoretical line addressed here. Secondly, the internalization of external knowledge through patents is a source of competitive advantage, especially in dynamic industries (Laursen et ah, 2015; Tzabbar et al., 2013), a strong characteristic of the industry studied here. Third, the scope of this study is limited by the phase in which new knowledge is generated internally or accessed through partnerships (recombination). In this phase, the firm identifies the potential and registers the new knowledge to protect it. Therefore, the product launch phase and the intermediate phases that precede it are excluded from analysis in this paper.
Innovation is in essence an uncertain process that involves learning, providing new combinations of knowledge and technology (Pavitt, 2005). The exploration of new knowledge...
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