Academic journal article Academy of Strategic Management Journal

A Social-Cognitive Perspective on Firm Innovation

Academic journal article Academy of Strategic Management Journal

A Social-Cognitive Perspective on Firm Innovation

Article excerpt

INTRODUCTION

Innovation is the driving force of economic growth, but much confusion centers on how to encourage it. This paper reviews the literature on social networks and organizational learning and incorporates the cognitive and social factors that influence innovation research. A firm's social capital constitutes an important source of its innovation, and the cognitive understanding of a firm's management team or its entrepreneurs of innovation also contribute to this initiative. Accordingly, this paper addresses three related questions regarding cognition, social capital, and innovation. First, how do external social capital and internal cognitive structure influence each other in the process of undertaking innovation? Second, how does social capital influence a firm's innovation? Third, how do cognitive structures influence innovation? In examining these questions, I addresses one fundamental question in strategic management--How do firms achieve innovation?

Innovation involves both the generation and the exploitation of new products, processes, services and business practices. As a special kind of economic activity, innovation requires special kinds of informational and coordination mechanisms (Teece, 1992). Technological innovation is, of course, an important source of differentiation in organizations (Nelson & Winter, 1982). A firm's competitive advantage rests both on exploiting current technologies and resources so as to achieve efficiency, and on exploring new opportunities (March, 1991; Teece, Pisano, & Shuen, 1997).

Meanwhile, social capital has been defined as networks of relationships and assets located in these networks (Batjargal, 2003; Bourdieu, 1986; Burt, 1997; Coleman, 1988; Lin, 2001a). Dynamic industries find social capital crucially necessary to support innovative activities. In a competitive marketplace, the profitable commercialization of technology requires timely access to complementary assets, and the study of the effects of various social networks on innovation output can provide insights into this process. In a homogeneous social network, firms focus on logical extensions of their past successes. In a diverse social network, a firm's access to external heterogeneous knowledge and ideas can enhance its explorative innovations.

Cognition has been defined as the knowledge structures or mental templates that actors impose on an information domain to give it form and meaning (Lyles & Schwenk, 1992; Walsh, 1995). The process of innovation is influenced by the cognitive mechanisms through which people acquire, store, transform and use information. Innovative activities arise from the actors' actions; therefore, understanding why and how these persons act as they do becomes essential to understanding the innovation process itself. Since minds propel actions, managerial cognition lies at the center of the strategic management process (Stubbart, 1989). This paper incorporates the top management team's or the entrepreneur's cognitions in the creation of a firm's social capital and explores their effects on innovation output.

RESEARCH ON INNOVATION, SOCIAL CAPITAL AND COGNITIONS

Next I present a focused literature review of innovation research, social capital studies of innovation, and cognition studies of innovation. I then build a theoretical model based on the representative works reviewed in this section.

Innovation Research

Product and process innovations constantly disturbed the evolutionary process of enterprises (Nelson & Winter, 1982; Schumpeter, 1934). Innovative behavior is a strategic activity by which organizations gain and lose competitive advantage (Jelinek & Schoonhoven, 1990; Von Hippel, 1988). Innovation can involve the implementation of new combinations of different resources in a firm (Drucker, 1998; Hargadon, 2002). Two principal types of innovation include technological innovation and social innovation. …

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