Academic journal article Innovation: Organization & Management

The Effect of External KISA on Innovation in Manufacturing Firms

Academic journal article Innovation: Organization & Management

The Effect of External KISA on Innovation in Manufacturing Firms

Article excerpt

Introduction

With the growing dependency on knowledge in our economies and societies, knowledge is regarded as one of the most strategically important resources of the firm (Grant, 1996b). Knowledge has always been an intangible factor in production, and perhaps for that reason has been somewhat overlooked compared with the roles of raw materials and labour. Despite the importance of knowledge, firms are often short of the knowledge they need and therefore must either produce it internally or source it externally. Due to the complexity, time, and resources needed for internal knowledge production, accessing relevant knowledge externally is important for firms, especially in fast-paced industries (Carayannopoulos & Auster, 2010; Daniels & Bryson, 2002; Grant, 1996b). In addition, firms are assumed to benefit from adopting open innovation strategies (Saebi & Foss, 2015), which can accelerate their internal and external innovation by purposeful inflows and outflows of knowledge (Chesbrough, 2003). Knowledgeintensive service activities (KISA, hereafter) are such activities that firms undertake to seek and acquire knowledge-intensive services (Albors, Hervas, Marquez, & MartinezFernandez, 2008). They have many roles and may thus be the sources and carriers of knowledge within and between industries (Miles et al., 1995; OECD, 2006). It is therefore assumed that KISA may provide fertile ground for innovations and the diffusion of novel ideas (Albors et al., 2008; Elfring & Baven, 1994; OECD, 2006).

Firms are institutions of knowledge integration (Grant, 1996b). When firms are challenged by the fast-changing competitive environment, integrating and reconfiguring knowledge-based resources are of vital importance (Zhou & Li, 2010). Using external KISA will increase firms' knowledge, which strengthens the potential of knowledge integration and ultimately influences firms' innovation (Weigelt, 2009). This paper sheds empirical light on the relationships among external KISA, knowledge integration, and innovation.

China, as a developing country, is usually understood as a big manufacturing country that is not yet very knowledge-intensive. Chinese manufacturing firms must move up the production chain and away from labour-intensive and low-value production. In addition, the emerging economy of China is characterized by volatile environments and a lack of institutions (Luo, 2003), making it dif ficult for Chinese manufacturing firms to cooperate with their competitors effectively. Accordingly, knowledge-intensive services providers, as third parties, become good partners. They are the defining element of regional innovation systems (Corrocher & Cusmano, 2014) and play a major role in promoting innovation in China (Shi, Wu, & Zhao, 2014). KISA may have a profound and far-reaching significance for Chinese manufacturing firms. In response to such business situations, Chinese manufacturing firms increasingly supplement their internal knowledge with relevant external KISA. China's transitional economy therefore becomes one rich context to explore how the performance of external KISA influences innovation in manufacturing firms.

Many researchers argue that external KISA has a very important role in innovation (Albors et al., 2008; Martinez-Solano, Majella Giblin, & Walshe, 2005; Rajala, Westerlund, & Rajala, 2008). In addition, some researchers have analysed the relationship between acquiring different types of knowledge-intensive services and innovation (Doloreux & Shearmur, 2013; Shearmur & Doloreux, 2013), and explored the relationship between the geography of knowledge-intensive services use and innovation (Shearmur & Doloreux, 2015). Analysis of the internal mechanisms of KISA on innovation, however, is limited. Previous analyses have focused mainly at the industry level (Shi et al., 2014), largely ignoring firm-level analysis (Hertog & Bilderbeek, 1998b; Müller & Zenker, 2001; Martinez-Fernandez, 2010; Martinez-Fernandez, Soosay, Venkata, Turpin, & Bjorkli, 2005). …

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