Internal capabilities, external structural holes network positions, and knowledge creation

Abstract

Social network theory suggests that firms bridging structural holes by connecting disconnected partners in a network benefit from timely access to diverse knowledge. However, the existing literature reports mixed evidence with regard to the performance implications of this view. Our study examines how a firm’s diverse knowledge base and knowledge-processing capabilities affect knowledge creation when a firm bridges multiple structural holes in an inter-firm network. The model is tested on a sample of 191 firms in high-technology industries. The dependent variable, knowledge creation, was measured by the number of patents generated. Results show that when a firm spans multiple structural holes, its diverse technological knowledge facilitates knowledge creation. However, when a firm already possesses well-developed knowledge acquisition capabilities, spanning structural holes reduces knowledge creation. This paper suggests that internal knowledge base and knowledge-processing capabilities determine the impacts of external network positions on firm knowledge creation. It provides implications on how a firm best capitalizes on external network positions.