Fuels for Moving Forward and Staying Ahead: Effective Knowledge Sourcing Strategy for Leaders

Abstract

This paper examines leading firms’ strategies in the strategic factor market for technological competition. We try to examine the effects of knowledge sourcing for leaders’ performance in competitions with followers. Particularly, this paper focuses on where leaders can obtain knowledge to move forward and keep their technological leadership. The findings of this paper suggest that the optimal knowledge sourcing strategy in the strategic factor market for a leader may be different from the strategy for a follower. Relying on the other leading firm’s knowledge does not provide benefits to leaders, but relying on the exploitation of their own knowledge hinders future innovative performance. In addition, knowledge sourcing from followers also shows positive impacts on leaders' innovative performance. It suggests that relying on other similar players in the same area does not provide enough benefit to leaders for future innovation. However, relatively new knowledge from followers is beneficial for leading firms. Regarding distant knowledge sourcing, outer knowledge contributes to the better innovative performance of leaders. On the other hand, regarding the capability of staying ahead, the findings of this paper show interesting results. Path dependence and outer knowledge show the same results with the innovative performance. However, in contrast to the previous model, knowledge sourcing from leading firms benefits leaders for staying ahead, but knowledge sourcing from followers does not help the leaders. It suggests leaders have to consider the proper knowledge sourcing in the strategic factor market according to their status and goals. Empirical analyses using US patents data on 3,357 firms in chemicals, pharmaceutical, and semiconductor industries over the 1981-2004 period largely support our arguments.