Profiting from external knowledge: the impact of different external knowledge acquisition strategies on innovation performance

Abstract

Innovation is key to company growth, but hinges on timely access to new knowledge. Individual companies have difficulty pursuing innovation and acquiring the knowledge they need on their own. Companies therefore resort to various governance modes (licensing-in, collaborations, mergers and acquisitions, etc.) that suit the preferred innovation trajectories. We expect governance modes directed at knowledge exploration to generate long-term, radical innovations, and governance modes aimed at knowledge exploitation to generate short-term, incremental innovations. Employing data from two Dutch community innovation surveys, we indeed discovered that companies that license in technology tend to produce more incremental innovations. We also found a strong positive correlation between inter-organisational collaboration and both long-term and short-term innovation. Finally, we concluded that M&As have a major impact on the production of long-term radical innovations.