Winning combinations: search strategies and innovativeness in the UK

Abstract

Searching for the most rewarding sources of innovative ideas remains a key challenge in management of technological innovation. Yet, little is known about which combinations of internal and external knowledge sources are triggers for innovation. Extending theories about searching for innovation, we examine the effectiveness of different combinations of knowledge sources for achieving innovative performance. We suggest that combinations involving integrative search strategies – combining internal and external knowledge – are the most likely to generate product and process innovation. In this context, we present the idea that cognitively distant knowledge sources are helpful for innovation only when used in conjunction with knowledge sources that are closer to the focal firm. We also find important differences between product and process innovation, with the former associated with broader searches than the latter. Using a large-scale pooled sample of UK firms, we find overall support for our conjectures, particularly in terms of product innovation.

Keywords:

• Innovation
• openness
• innovation search
• knowledge integration
• innovative performance

JEL Codes:

• O30
• O31
• O32

Acknowledgements

Paola Criscuolo, Ammon Salter, and Toke Reichstein are grateful to the Engineering and Physical Sciences Research Council’s IMRC at Imperial College London for financial support (EP/F036930/1). Ammon Salter would like to acknowledge the financial support of the UK Innovation Research Centre (RES-598-28-0001), which is funded by the ESRC, NESTA, Innovate UK and the Department of Business, Innovation and Skills.

Notes

¹ Laursen and Salter argues that the firms that invest in broader external search ‘… may have a greater ability to adapt to change and therefore to innovate.’ It does not, however, allow for the possibility of using integrative search strategies involving both internal and external sources of knowledge to achieve innovation.

² In the empirical part of the paper, we work with a total of five knowledge sources. In this context, we consider a strategy consisting of at least three sources to be ‘broad.’

³ The survey was administered at the reporting unit level, with a reporting unit defined as ‘the smallest combinations of legal units which have a certain degree of autonomy within an enterprise group.’ Thus, a reporting unit can be assumed to be a firm, which may have more than one business establishment (e.g. a plant) and can be part of a larger multi-enterprise business entity (i.e. a group).

⁴ These are available upon request.

⁵ We tested the equality of the coefficients for all strategies using only one search channel and found that we cannot reject the null hypothesis (p-value = 0.603). In other words, they all have the same effect in terms of likelihood of product innovation. The results regarding the equality of coefficients for strategies involving only one or two search strategies were similar (p-value = 0.254).

⁶ This is confirmed by the fact that when we test whether all the coefficients of search strategies employing one or two sources are the same using only one search channel, we can reject the null hypothesis (p-value = 0).