The influence of a firm's prior related knowledge on the use of external information sources
Boer, T. den
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Many scholars acknowledge that innovation is very important for firms’ competitive advantage. Several governments confirm this by supporting the development of innovations with the help of policy programmes that stimulate knowledge transfer, R&D and innovative environments. An important determinant for successful innovation is the search of information. Understanding the organizational search process is therefore essential to increase firms’ innovative output. It supports firms’ managers to develop successful strategies and offers insights for policy makers to set up efficient policy instruments to stimulate external knowledge transfer. The organizational literature encloses however, very little empirical evidence on the relations between firms prior related knowledge, information search and innovation. This study aims to bridge these gaps in the literature by providing an empirical exploration on 1) the relationship between the use of external information sources and firms’ innovative output as well as 2) the relationship between a firm’s prior related knowledge and the use of external information sources. The empirical results are based on the data gathered by an online questionnaire for a study of the Province South Holland. The sample contains 164 innovative firms. Two types of external information sources are distinguished: institutional sources and market sources. A positive relationship is expected between the use of both sources and firms’ innovative output. Further, it is hypothesized that institutional sources are stronger related to product innovation and market sources have a stronger link with process innovation. The economics of information (EI) perspective and absorptive capacity (AC) theory are used to set up hypotheses on the relationship between prior related knowledge and the use of external information sources. Based on these theories, an inverted U-shape relationship is hypothesized between prior related knowledge and the use of institutional and market information sources. It is expected that the turning point of the curve of institutional sources has a higher value of prior related knowledge than the turning point of market sources, because institutional sources contain more information that is fundamental and market sources include more information that is practical. Further, based on these theories, five mediating factors are identified that are expected to mediate the relationship between prior related knowledge and the use of external sources: perceived costs and risks (both negatively); search benefits, accessibility and comprehensibility (positively). The analysis contains 1) ordinal regression and binary logit models to test the relationship between the use of external information sources and firms’ innovative output, 2) linear regression models to study the relation between a firm’s prior related knowledge and the use of external information sources and 3) linear regression models and a Pearson correlation matrix to test the relationship between the mediating factors and the use of external information sources. The results show that the use of institutional information sources is positively related to the development of product innovation; process innovation is dependent on the use of market information sources. However, this study shows also that for the creation of more and multiple innovations, the use of both institutional and market sources are important. Further, the results confirm the inverted U-shape relationship between prior related knowledge and the use of external information sources. The inverted U-shape is mediated out by the addition of the five mediating factors into the model. The influence of the mediating factors perceived benefits, accessibility, comprehensibility and risks are confirmed. This is in line with the theoretical predictions. The factor perceived costs shows however deviating results. The factor perceived costs has no significant relationship with the use of market sources and, even more remarkable, it has a positive relationship with the use of institutional sources. This is not in line with the predictions from the economics of information perspective. Therefore, it is debatable whether this theory can be used as explanatory mechanism for organizational search behavior. Based on the results, theoretical and managerial recommendations are proposed.