Internal knowledge accumulation and the acquisition of external technology: is there a trade-off?

Abstract

I combine the markets for technology framework and research on organizational boundaries to examine the impact of internal knowledge accumulation and licensing acquisitions. I argue that when firms specialize in internal knowledge and adopt an inward oriented knowledge accumulation process, they can be reluctant to adopt external technologies. While recent studies have emphasized the importance of combining technologies from different sources, there is a lack of attention on the integration of external technologies into innovative production. This paper focuses on the potential tension between external knowledge acquisition and internal knowledge accumulation. Results show that reliance on existing knowledge reduces the marginal effect of licensed technologies on firm market capitalization. As a consequence, this inward attitude may conflict with the exploitation of external technologies, thereby limiting the potential benefits associated with the markets for technology. Higher level of absorptive capacity and a decentralized organizational structure moderate the negative bias towards external technologies.