The Use of Knowledge for Technological Innovation Within Diversified Firms

Abstract

We propose that searching for and transferring knowledge across divisions in a diversified firm can cultivate innovation. Using a sample of 211,636 patents from 1,644 companies during the period 1985-96, we find that the use of interdivisional knowledge positively affects the impact of an invention on subsequent technological developments. Furthermore, the positive effect of the use of interdivisional knowledge on the impact of an invention is stronger than the effect of using knowledge from within divisional boundaries or from outside firm boundaries. Our empirical findings have significant implications for the management of knowledge in diversified firms.

Redirecting Research Efforts on the Diversification–Performance Linkage: The Search for Synergy

“…Mirroring the inverted U relationship between diversification and financial performance, but for different reasons, Ahuja and Katila (2001) find that moderate degrees of technological overlap between acquiring and acquired firms are associated with the greatest post-merger innovative productivity. The use of interdivisional knowledge tends to be associated with a greater positive impact of invention on subsequent technological developments than the impact of knowledge originated either inside the division or outside the boundaries of the firm (Miller, Fern & Cardinal, 2007). In other words inventions spawned by knowledge recombination across divisions tend to be most impactful in determining the trajectory of subsequent technical changes.…”

“…From the innovative productivity perspective, research emphasizes the opportunity for resource sharing and cross-fertilization offered by diversification (Miller, Fern & Cardinal, 2007;. Mirroring the inverted U relationship between diversification and financial performance, but for different reasons, Ahuja and Katila (2001) find that moderate degrees of technological overlap between acquiring and acquired firms are associated with the greatest post-merger innovative productivity.…”

Internationalization and innovation performance of emerging market enterprises: The role of host-country institutional development

“…Furthermore, stronger absorptive capacity can bridge distant technological contexts (Rosenkopf & Almeida, 2003), helps firms recognize gaps in the technological landscape (Miller, Fern & Cardinal, 2007) and acquire complementary assets to develop new capabilities. Because knowledge is highly localized, only EMEs with higher absorptive capacity can improve their innovation performance by cognitively processing various sources of information, utilizing and integrating knowledge, and reducing transaction costs associated with external technology acquisition.…”

In Pursuit of Corporate Entrepreneurship: How Employees Perceive the Role of Formalization and Centralization

“…Many studies reveal that flexible organizational boundaries facilitate innovation and entrepreneurial processes (Miller et al, 2007;Hornsby et al, 2009). Organizations as open systems gather external information and share it among the individuals and departments.…”