Knowledge and Innovation Strategy

VideoArticle Title/ Author(s)/Managerial Abstract
Shane Greenstein on the Decline of Encyclopedia Britannica | SMJ Video AbstractThe Reference Wars: Encyclopædia Britannica’s Decline and Encarta’s Emergence
Greenstein,Shane Mitchell
An established and leading firm, such as Encyclopædia Britannica, would seem to have enormous advantages over its competitors in a new market. Why would a successful firm come to have severe difficulties organizing for a new market? Of particular importance for explaining Britannica's decline are theories that stress its inherited capabilities, especially inherited technological (in)abilities and inherited (mis)perceptions about the potential for new market opportunities. This article argues that Britannica's management did not misperceive the opportunities and threats, and Britannica did not lack technical prowess. This narrative stresses that Britannica's management faced organizational diseconomies of scope between supporting lines of business in the old and new markets, which generated internal conflicts. The narrative directs attention at managing commercialization activity around new products using new technologies .
The Nanoeconomics of FirmLevel DecisionMaking and Industry Evolution | SMJ Video AbstractThe Nanoeconomics of Firm-Level Decision-Making and Industry Evolution: Evidence from 200 Years of Paper and Pulp Making

Lamberg,Juha-Antti; Mirva Peltoniemi
What determines firm outcomes in terms of acquisition, dissolution, and survival? This article answers this crucial question of strategy and elaborates on the extent to which the outcome is under top management control. Our findings highlight the importance of technology investments and we identify factors that make such investments possible and profitable. Our results emphasize that firms weighing options must assess the economic meaningfulness of generational technology investments which result in narrowing profit margins and intensifying competition. Another insight concerns the management of political risks. Long‐term fluctuations in regulation and foreign trade policy make it hazardous to optimize to the contemporary political regime. Skillful strategists invest in geographical and technological complexity, which in combination increase the chances of survival in rapidly changing political regimes.
If You Want to Innovate, Follow These 5 Steps | SMJ Video AbstractHow innovators reframe resources in the strategy-making process to gain innovation adoption
Kannan-Narasimhan,Rangapriya; Rangapriya (Priya) Kannan-Narasimhan
How do innovators from lower levels of an organization gain approval for their innovations especially when their ideas do not readily fit their organization's strategy? To explore this question, we conducted 138 interviews with innovators and their decision makers in 14 firms based in Silicon Valley. We find that successful innovators shape a story supporting their innovation by rethinking their firm's current and potential resources. They then use this story to convince decision makers that their innovation creates unique competitive advantage. Contrary to conventional wisdom, decision makers approved such innovations even without external validation, solely based on the innovators' success in depicting their reorganization of the firm's resources.
Platform Ecosystems as Metaorganizations | SMJ Video AbstractPlatform ecosystems as meta‐organizations: Implications for platform strategies
Tobias Kretschmer; Aija Leiponen, Melissa Schilling, Gurneeta Vasudeva
Platform ecosystems have spurred new products and services, sparked innovation, and improved economic efficiency in various industries and technology sectors. A distinctive feature of the platform architecture is its modular and interdependent system of core and complementary components bound together by design rules and an overarching value proposition. This makes platform ecosystems an organizational form on its own (a “meta-organization”), neither possessing the hierarchical instruments of a firm, nor the largely uncoordinated decisionmaking of markets. Successful platform ecosystems require coordination among multiple participants with possibly conflicting interests. We discuss some of the most salient features of platform ecosystems as meta-organizations, specifically in terms of the sources of authority or power in the ecosystem, the motivation and incentives a platform creates to attract participants, and its governance and coordination structures. These features affect how platform ecosystems compete: i) with a traditional incumbent, ii) with other platform ecosystems, and iii) between different participants of the same platform ecosystem. The articles published in this special issue speak to different aspects of platform competition from the perspective of organization design.
Christian Stadler on Erwin Danneels about innovation & competence renewal | SMJ Video AbstractThe dynamics of product innovation and firm competences
Erwin Danneels
Mahka Moeen and Rajshree Agarwal: Incubation of an Industry | SMJ Video AbstractIncubation of an Industry:Heterogeneous Knowledge Bases and Modes of Value Capture
New technological breakthroughs present managers of existing firms and aspiring entrepreneurs with opportunities to create altogether new industries. During the vibrant incubation period, we find that multiple firms capitalize on diverse knowledge bases to shape the industry's knowledge evolution and also capture economic value in diverse ways. Existing firms in the obsolescing industry are more likely to become targets in acquisitions given their complementary knowledge. Science‐based start‐ups are more likely to engage in acquisitions and collaborations with established firms. Diversifying firms are more likely to commercialize products after leveraging of internal development, acquisitions, and alliances. Our study highlights the importance for managers to think about “success” and “failure” across multiple yardsticks of performance, rather than only as product commercialization as the sole goal .
Replication using templates | SMJ Video AbstractReplication using templates: Does the unit learn from itself, the template, or both?
Megan Lawrence
Transferring valuable practices within the firm is an important yet difficult task for many firm types, especially multi-unit firms. One way that firms choose to transfer practices is through the use of templates—working examples of the new practice that act as models. Using data from a Fortune 100 retail chain, I show that the use of templates affects the way in which units learn to implement the practice. Because managers face tradeoffs when devoting attention to implementing the new practice, they must balance learning from the template with incorporating their own local experience with the new practice. Overall, my results suggest that choosing many templates is less important than choosing a few templates with superior performance for firms whose units or contexts are similar.
Threat of platformowner entry and complementor responses: Evidence from the mobile app market | SMJ Video AbstractThreat of Platform-Owner Entry and Complementor Responses: Evidence from the Mobile App Market
Zhu,Feng; Wen Wen
We examine one prevalent source of conflict: platform owners' entry into complementary product spaces. We show that app developers on Google's Android system are strategic and nimble actors. They respond to the threat of Google's entry by adjusting both value‐creation and value‐capture strategies. We also show that platform owners could use direct entry to shape innovation directions and encourage variety of complements. Overall, on the one hand, Google's entry may have pushed complementors into other areas (which might be less lucrative) and strengthened its position in the mobile market. On the other hand, the entry may have reduced wasteful production efforts in the development of redundant applications. The overall welfare implication is thus ambiguous.
The Evolution of Cooperation in the Face of Conflict | SMJ Video AbstractThe evolution of cooperation in the face of conflict: Evidence from the innovation ecosystem for mobile telecom standards development
Gurneeta Vasudeva; Stephen L. Jones, Aija Leiponen,
Firms in innovation-driven industries cooperate to develop interoperability standards and compatible technologies. Yet, cooperative firms may disagree about what constitutes fair, reasonable, and non-discriminatory terms for licensing intellectual property. Thus, conflict and patent litigation arise even as firms cooperate to build technologies and industry standards. We find that in innovation ecosystems, firms commonly increase cooperative efforts in response to conflict. Less-connected firms or those with valuable complementary technologies will likely expand cooperation than well-connected firms or technological competitors. Well-connected firms may pursue alternative cooperative opportunities. We suggest that defendant firms' managers can adopt a dual cooperative strategy: (a) identify private and shared benefits from the joint development of complementary technologies with aggressors and (b) invest in alternative technological partnerships to influence the direction of future standards development.
Aaron Chatterji & Kira Fabrizio - User innovation (SMJ 2013 & 2014) | SMJ Video AbstractUsing users: When does external knowledge enhance corporate product innovation?
Aaron K. Chatterji; Kira R. Fabrizio
Surrendering Control to Gain Advantage | SMJ Video AbstractSurrendering Control to Gain Advantage: Reconciling Openness and the Resource-based View of the Firm
West,Joel; Oliver Alexy, Helge Klapper, Markus Reitzig
Conventional wisdom holds that firms must control scarce and valuable resources to obtain competitive advantage. That being said, over the past decade, many firms—among them Computer Associates, IBM, and Nokia—embarked on open strategies and made parts of their valuable resources available for free. These decisions pose an obvious conundrum, which we solve in our article. We use a mathematical model, grounded in principles of the resource‐based view, to show why and under what conditions open strategies will succeed. Firms significantly improve their performance when (a) opening resources reduces their cost base while (b) strongly increasing demand for their still‐proprietary resource(s). We also explain how openness can reshape markets by weakening competitors, particularly in highly rivalrous environments.
The Lean Startup Method | SEJ Video AbstractThe lean startup method: Early-stage teams and hypothesis-based probing of business ideas
Michael Leatherbee; Riitta Katila
Lean startup methodology has rapidly become one of the most common and trusted innovation and entrepreneurship methods by corporations, startup accelerators, and policymakers. Unfortunately, it has largely been portrayed as a one-size-fits-all solution—its key assumptions subject to little rigorous empirical testing, and the possibility of critical boundary conditions ignored. Our empirical testing supports the key assumptions of the method, but points to business education of team members as a critical boundary condition. Specifically, MBAs resist the use of the method despite being in a strong position to leverage it. Results from a post hoc analysis we conducted also suggest that more engagement with the method relates to higher performance of the firm in the 18-month period following the lean startup intervention.
Martin Ganco - Work Context & Entrepreneurship | SMJ Video AbstractCutting the Gordian knot: The effect of knowledge complexity on employee mobility and entrepreneurship
Martin Ganco
Alvarez-Garrido and Dushnitsky: Investor complementary assets | SMJ Video AbstractAre Entrepreneurial Venture’s Innovation Rates Sensitive to Investor Complementary Assets? Comparing Biotech Ventures Backed by Corporate and Independent VCs
Dushnitsky,Gary; Elisa Alvarez-Garrido
Entrepreneurial ventures are a key source of innovation. Nowadays, ventures are backed by a wide array of investors whose complementary asset profiles differ significantly. We therefore assert that entrepreneurial ventures can no longer be studied as a homogeneous group. Rather, we harness the inherent dichotomy in the profiles of independent VCs and corporate investors to study ventures' innovation outcomes. Our sample consists of 545 U.S. biotechnology ventures founded between 1990 and 2003 and backed by independent venture capitalists (VCs ) or corporate VCs (CVC ). We find CVCs ' investees exhibit higher rates of innovation output, compared to independent VC ‐backed peers. Moreover, the performance of CVC ‐backed ventures is sensitive to their ability to leverage corporate assets, underscoring the role of CVC accessibility and FDA approval requirements as the mechanisms associated with CVC contribution .
Engineering Serendipity | SMJ Video AbstractEngineering serendipity: When does knowledge sharing lead to knowledge production?
Jacqueline N. Lane; Ina Ganguli, Patrick Gaule, Eva Guinan, Karim R. Lakhani
Managers often try to stimulate innovation by encouraging serendipitous interactions between employees, for example by using office space redesigns, conferences and similar events. Are such interventions effective? This article proposes that an effective encounter depends on the degree of common knowledge shared by the individuals. We find that scientists who attend the same conference are more likely to learn from each other and collaborate effectively when they have some common interests, but may view each other competitively when they work in the same field. Hence, when designing opportunities for face-to-face interactions, managers should consider knowledge similarity as a criteria for fostering more productive exchanges.
Kauppila, Bizzi and Obstfeld: Connecting and Creating | SMJ Video AbstractConnecting and Creating: Tertius Iungens, Individual Creativity, and Strategic Decision Processes
Kauppila,Olli-Pekka; Lorenzo Bizzi, David Obstfeld
To innovate, managers are often advised to make strategic decisions based on changes in their external business environment. Our research suggests that managers should also consider how strategic decision‐making enables the social processes through which employees generate creative ideas essential to organizational innovation. Our results show that employees who bring people in their network and their diverse ideas together (i.e., the tertius iungens [TI] orientation) tend to improve creative performance. However, for those employees is it easier to develop creative ideas when strategic decisions are comprehensive and slow? Paradoxically, when top managers consider a narrower range of options and act more quickly to respond to challenges in the external environment, they risk constraining the social processes that lead to creativity within the organization.
Rockart & Dutt on competitive advantages from learning | SMJ Video AbstractThe rate and potential of capability development trajectories
Scott F. Rockart; Nilanjana Dutt
This paper examines differences in the rate and potential of firms' capability development trajectories. Capability development trajectories are the paths over which firms' capabilities change with experience and other activities. While prior research focused on factors affecting capability development rate (the fraction of the gap between a firm's current and potential capability eliminated with each unit of activity), we argue that capability development trajectories also differ in potential (the maximum capability level a firm could achieve through repeating a given set of activities over time). We develop and estimate a formal model of capability development, showing that larger underwriting projects lead to a lower rate of improvement toward higher potential capabilities, and derive implications for research on industry dynamics and the nature of competitive advantage.
JP Eggers: Reversing Course: Competing Technologies, Mistakes, and Renewal in Flat Panel Displays | SMJ Video AbstractReversing Course: Competing Technologies, Mistakes, and Renewal in Flat Panel Displays
Firms facing technological uncertainty may need to recover from unlucky bets. But responding to failure is politically and organizationally difficult. This study explores how IBM recovered from its failed bet on plasma displays to lead the LCD display market. This study identifies six key factors, highlighting two. First, IBM 's researchers received centralized funding, but could also receive funding directly from division managers. This structure helped preserve options and variety. Second, internal LCD champions focused on the business case for displays and not technology. This fostered technology agnosticism and helped avoid managerial biases from failure. For managers looking to use real options to maintain flexibility in an uncertain environment, this study offers clear suggestions related to design and decision making that can foster flexibility .
Value creation in innovation ecosystems | 2020 SMJ Best Paper PrizeInnovation Ecosystems and the Pace of Substitution:
Re-examining Technology S-curves
Kapoor,Rahul; Ron Adner
Why do some new technologies emerge and quickly supplant incumbent technologies while others take years or decades to take off? We explore this question by presenting a framework that considers both the focal competing technologies as well as the ecosystems in which they are embedded. Within our framework, each episode of technology transition is characterized by the ecosystem emergence challenge that confronts the new technology and the ecosystem extension opportunity that is available to the old technology. We identify four qualitatively distinct regimes with clear predictions for the pace of substitution. Evidence from 10 episodes of technology transitions in the semiconductor lithography equipment industry from 1972 to 2009 offers strong support for our framework. We discuss the implication of our approach for firm strategy.
Complexity Offering Opportunity: Mutual Learning Between ZGH and Volvo in Post-Acquisition Process |GSJ Video AbstractComplexity offering opportunity: Mutual learning between Zhejiang Geely Holding Group and Volvo Cars in the post-acquisition process
Anna Jonsson; Jan-Erik Vahlne
A key finding is that ZGH does not understand complexity only as a risk that should be coped with, managed and controlled—following the western idea of risk management—but also as an opportunity for learning. While the importance of knowledge management and organizational learning is often emphasized as a means to achieve competitive advantage, it is seldom as easily managed in practice. Building on insights from ZGH we illustrate that to enable knowledge development and mutual learning, top-management from the acquiring firm needs to emphasize learning and trust the acquired firm rather than controlling it. It is equally important that the acquired firm trust the intentions of the new owner and reflect on the interest in learning—not least to improve and remain valuable.
When do latecomer firms undertake international open innovation? | GSJ Video AbstractWhen do latecomer firms undertake international open innovation: Evidence from China
Xiaolan Fu; Yawen Li, Jizhen Li, Henry Chesbrough
Little is known about when do latecomer firms undertake IOI. This study uses a national survey data set of manufacturing firms in China, examining how the characteristics of firms and their surrounding environment affect their degrees of international openness in innovation. Heckman's two-step model is used to test the hypotheses, supplemented with robustness checks. Demand side factors appear to be more significant drivers of IOI in latecomer firms than the pursuit of technology leadership. Market expansion-oriented innovation strategy, international orientation, previous collaboration experiences, and technology intensity of the industry are found to be associated with a high degree of IOI; firms with stronger R&D capacity tend to be less open to international collaboration. Managerial and policy implications are discussed.
Headquarters‐Subsidiary Knowledge Strategies at the Cluster Level |GSJ Video AbstractHeadquarters-subsidiary knowledge strategies at the cluster level
Pengfei Li; Harald Bathelt
How do multinational enterprises (MNEs) transfer knowledge over space between clusters and between other locations? To explore this question, we construct a typology of four MNE knowledge strategies (replicating, scouting, connecting, and integrating) and examine the spatial, industrial, and leadership conditions of each. By examining 49 headquarter-subsidiary linkages between Canada and China through detailed interviews, we find that replicating strategies occur in cluster-to-non-cluster contexts or industries with a knowledge gap between the two countries, whereas scouting strategies are typical in non-cluster-to-cluster investments. Connecting and integrating strategies are focused on cluster-to-cluster contexts. We also find that while connecting occurs in fields where knowledge is locally bounded, integrating dominates where this is not the case. Finally, scouting and integrating strategies are associated with home nationals as subsidiary leaders.
Chen and Thompson on the replacement of founder CEOs |SEJ Video AbstractNew Firm Performance and the Replacement of Founder-CEOs
Jing Chen; Peter Thompson
We study the causes and consequences of the replacement of founder-CEOs in a sample of 4,172 Danish start-ups. We propose that founder-CEO replacement is driven in part by mismatches between business quality and founder ability. Our framework suggests that replacements are more likely among the worst- and best-performing firms, with low (high)-ability founders replaced by manager with higher (lower) ability. Replacement is not unambiguously associated with better subsequent performance. Firms that replaced the founder were much more likely to fail, but the surviving firms among them grew considerably faster. Our empirical results are consistent with these proposed predictions.
Founder–inventors and their investors: Spurring firm survival and growth |SEJ Video AbstractFounder–inventors and their investors: Spurring firm survival and growth
Carolin Haeussler; Maria Hennicke, Elisabeth Mueller
The role of founders and founder competences is critical as firms progress along their life cycles, whereby founders face decisions about which tasks deserve their attention and which ones they can delegate to their employees, middle-management, and/or new hires. One key strategic choice for founders is whether to engage in inventive activities themselves and remain engaged. Based on a large firm dataset, we find that founders' inventive activities spur survival and growth. Furthermore, venture capital investors leverage the effect on growth because they often bring in their own industry expertise, turn attention to the core capabilities, and revitalize the top management team. These investor activities enable founders to focus their attention on areas in which their involvement best supports the firm's performance, namely inventive activities.
A fresh look at patterns and assumptions in the field of entrepreneurship |SEJ Video AbstractA fresh look at patterns and assumptions in the field of entrepreneurship: What can we learn?
Gary Dushnitsky; Sharon F. Matusik
Has the entrepreneurial journey remained unchanged over the past decades? And if there have been substantive changes, what are they? And what are their implications? These are critical questions that talk to entrepreneurship scholars and practitioners alike. The purpose of this article is to encourage a dialogue among and across the two groups. We present dual theory-practitioner conversations around three points of dialogue; the origin of entrepreneurial opportunity, organizing and scaling, and resource acquisition. In each case, we show that drawing on both the practice and academic community is important in identifying the value of extant theories and frameworks and where there are important opportunities for new frameworks and predictions. We believe that this kind of theory-practitioner dialogue offers invaluable guidance to further advance our field.
Entrepreneurial Strategies During Institutional Changes | SEJ Video AbstractEntrepreneurial strategies during institutional changes: Evidence from China's economic transition
You (Willow) Wu; Charles E. Eesley, Delin Yang
Institutional environments influence the effectiveness of entrepreneurial strategies. How should entrepreneurs adopt different strategies at different stages of an institutional change? We tackle this question by examining China's transition from a planned economy to a market economy. Using data from an alumni survey in China, we find that relationship-based strategies promote firm growth in the early stage, innovation-based strategies appear more effective in the late stage, and locating in science parks benefits firm growth in the intermediate stage. Overall, our study implies that entrepreneurs should adopt different strategies to fit different types of institutional environments. Also, our study provides implications to policymakers that cocoon institutions, such as science parks, may be temporarily effective during the intermediate stage of an institutional change.