Firms operating in knowledge-based industries conduct extensive R&D activities, in the process creating a huge knowledge base. The important question is how to optimally utilise this knowledge base. Snehal Awate, Assistant Professor of Strategy at ISB, and her co-author developed a framework that helps managers break the deadlock of “who should access” the knowledge base and how to optimally utilise it.
Firms develop their own knowledge base through innovation in order to gain competitive advantage and sustain it in the long term. In the process of development, inventors often source knowledge in-house. Their search for knowledge tends to be local, falling within organisational boundaries. But if they only build on this internal knowledge (which is also known as local search), it can lead to lock-in or less-exciting exploitative innovations. Path-breaking exploratory innovations are difficult to achieve but have higher overall returns. Innovations resulting through local search often tend to be closer to what is already known by the firm and exploit the organisation’s knowledge. While it may seem that such innovations are disadvantageous to a firm’s innovation performance, they also have a plus point in that innovations based on internal search contribute to an idiosyncratic and path-dependent knowledge base. Such a knowledge base could be difficult for competitors to replicate and may be a source of sustained competitive advantage for the firm. Since large amounts of knowledge reside within the firm’s boundaries, the utilisation of this knowledge base by its knowledge workers is an important issue for managers.
Given this scenario, managers need to make a strategic decision: Do I want internal search and hence idiosyncrasy at the cost of exploratory innovations, or do I want exploratory innovations? In addition, managers also need to decide who should access the local knowledge. If managers provide access to everyone, inventors will search locally, and, as a result, experimentation will suffer. If they restrict access to only a chosen few decision makers, they favour experimentation but limit exploitation. The question of who should have access to these knowledge platforms is especially important for managers of large firms with a strong research and development (R&D) focus. Using patent data on 14,575 inventors from four large semiconductor firms, the researchers at ISB developed a framework to understand this question. By identifying the inventors in key positions within the organisational network that lead to local search, the framework helps managers better utilise the organisational knowledge. Mapping the knowledge base helps organisations and has implications for research on organisational knowledge, knowledge networks and micro-foundations of firm R&D.
Dimensions of Local Search Behaviour
Inventors in the firm look for sources of knowledge within the firm due to their easy accessibility, familiarity, cost advantage, privacy, etc. While looking for knowledge, inventors draw from existing organisational knowledge (depth of knowledge) or from different technological domains/ geographical areas of the organisation (breadth of knowledge). Though the final knowledge produced belongs to the firm, the production of knowledge happens through inventors. In the process of producing new knowledge, these inventors collaborate with each other to become part of an intra-organisational network.
Firms operating in knowledge-based industries conduct extensive R&D activities, in the process creating a huge knowledge base. The important question is how to optimally utilise this knowledge base.
Considering each inventor as a node in the network and the collaboration between two inventors as a tie between them, such intra-firm inventor networks play an important role in shaping the use of organisational knowledge in innovation activities. Despite being in the same network, not all inventors are able to make a similar contribution to the organisation, as not everyone in the network would have the same access to the entire body of organisational knowledge. As a result, the structural position of inventors in the network determines their awareness of the organisational knowledge that is available, and in turn motivates them to utilise it.
The unique position of an inventor (i.e., her structural position) to access the knowledge and utilise it to produce new knowledge is associated with the inventor’s network reach and span of structural holes in the intra-firm network. Here, network reach refers to the shortest path lengths to other actors in a network. Compared with a low reach inventor, an inventor with a high network reach has the shortest path lengths to others in the network, which provides the inventor with greater awareness of and access to the organisational knowledge distributed in the intra-organisational network. The span of structural holes refers to the number of unconnected groups bridged by the focal inventor. Compared to inventors who span fewer structural holes, inventors spanning many structural holes have awareness of and access to the organisational knowledge distributed in diverse pockets of the intra-organisational network. This awareness and access will positively influence both the depth and breadth of local search.
Earlier research focused on individual-level attributes such as drivers of or ways to overcome local search or firm-level attributes, such as absorptive capacity, organisational slack and organisational structure, to gain an understanding of local search activity. But focusing on intra-organisational networks and, in particular, on individuals occupying different positions in the intra-organisational networks provides rich insights into the local search behaviour of inventors.
Research Context and Methodology
The research context for the study is the semiconductor industry, as it involves extensive R&D activity and new knowledge is created using existing knowledge, which can be tracked. This existing knowledge is termed “prior art”— a section in the patent application that lists all the relevant prior knowledge that forms the basis of the new innovation. Further, firms operating in this industry patent every patentable innovation to safeguard their intellectual property, which forms the basis for their future profits.
The researchers examined patent data pertaining to four large semiconductor firms, Advanced Micro Devices (AMD) Inc., Micron Technology Inc., Koninklijke Philips N.V. and Texas Instruments (TI) Inc., from 1985 to 2010. In total, patents filed by 14,575 unique inventors from these four firms formed the sample for the study. Examining the prior art section of the patents, the authors uncovered the knowledge flows.
Results and Discussion
Inventors who have high network reach are likely to perform more local search than inventors with low network reach. Similarly, inventors who span more structural holes are likely to perform more local search than inventors who span fewer structural holes. However, interestingly, the impact of reach reduces as the span of structural holes increases. That is, the positive effect of higher network reach on organisational local search will be lower for inventors spanning many structural holes than for inventors spanning few structural holes in the network. As increased reach provides inventors with broader and quicker access to knowledge that is less distorted, spanning many structural holes generates a redundant benefit as they receive knowledge which they already possessed.
Similarly, in terms of motivation, for inventors who span few structural holes, an increase in their network reach will considerably increase the recognition they receive from the organisation. In contrast, inventors who span many structural holes already have high impact, and an increase in their network reach still leads them to the same inventors, which will limit the amount of additional recognition they receive. Hence, the effects of network reach on organisational local search are more pronounced for inventors spanning few structural holes than those who span many structural holes, reflecting in the amount of organisational knowledge, the breadth of organisational technological domains, and the breadth of organisational geographic locations from which firm knowledge is drawn.
Hence, this framework helps managers devise their search strategy/ R&D strategy by perhaps giving access to core knowledge of the firm or special knowledge platforms to those identified inventors. Another key implication from the research relates to knowledge management (KM) system streams. The research on KM systems has been gaining traction lately. While these systems provide a knowledge sharing platform, it is the inventors or knowledge workers that use these platforms. Managers (depending on the strategy selected) can decide on which inventors to focus when it comes to encouraging them to share their knowledge because different inventors will have different motivations and abilities to share their firm-specific knowledge depending on their network position.
Finally, it is important for managers to identify individuals who drive local search behaviour in knowledge creation activities as this provides them with a lever to steer local search behaviour in the desired direction. Thus, managers can decide strategically: Do I want internal search and hence idiosyncrasy at the cost of exploratory innovations or do I want exploratory innovations? Additionally, while developing platforms to share knowledge among employees, the tricky question of “to whom should I provide access?” can be answered by using the inventors’ network positions in the intraorganisational network as a way to decide. As these positions are distinct from formal organisational roles, they allow managers to identify inventors who would enable them to achieve their desired level of local search. This also breaks the deadlock over “who should access” as providing access to everyone will limit inventors’ ability to explore outside the organisation and experimentation will suffer, and restricting access to only a chosen few decision makers will favour experimentation but limit exploitation. Using these research insights, managers can escape the “either/ or” situation to optimally utilise organisational knowledge.
ABOUT THE RESEARCHERS
Srikanth Paruchuri, Associate Professor at Smeal College of Business at Pennsylvania State University.
Snehal Awate, Assistant Professor of Strategy, at the Indian School of Business (ISB).
ABOUT THE RESEARCH
Paruchuri, S. and Awate, S., 2016. Organisational knowledge networks and local search: The role of intra–Organisational inventor networks. Strategic Management Journal.
ABOUT THE WRITER
Rama Krishna Kompella is a freelance writer with the Centre for Learning and Management Practice at the Indian School of Business (ISB). He is a Doctoral Researcher from University of Rhode Island (URI), pursuing research on sustainable consumption in the Indian context, with a focus on understanding various institutional and cultural aspects contributing to sustainable consumption.