A Knowledge-Based Framework of Innovation Strategy: The Differential Effect of Knowledge Sources

Using an exploration-exploitation framework, this study examines how firms' innovation strategies rely on different knowledge sources (own-generated, bought-in, and codeveloped) that affect innovation performance. It utilizes data from the 2008 Community Innovation Survey covering 9054 sample firms from 14 European countries. Results derived from multiple-method empirical analysis indicate that investments into acquiring different knowledge sources will generate different values, depending on key contextual factors. In particular, we find that for firms following explorative innovation strategy (focused on developing new products, processes, and technologies), investments in own-generated and bought-in knowledge will improve innovation performance, whereas for those following exploitative innovation strategy (focused on refining existing products, processes and technologies), only investments in bought-in knowledge will create a positive impact on innovation performance. Additionally, firms that simultaneously pursue both exploration and exploitation (ambidextrous innovation strategy) will have maximal innovation performance by investing into all three types of knowledge sources. This study hence contributes new insights regarding the strategic choice of knowledge source.