The development of knowledge in the technological sector – how does bringing the parts together matter for inventive capabilities?
Firms operating within the technological sector require certain basic drivers of inventive performance, including R&D investment, a sizeable, diverse knowledge base and the ability to innovate. The latter point raises the most interesting issue –
how such firms actually “create” something genuinely novel? How do they go about refining and re-deploying existing technologies in order to devise new products or services? Maybe it is the way that the parts come together that counts more than the wealth and variety of technological knowledge at the firm’s disposal…
In the context of the technological sector, a “knowledge base” refers specifically to sets of capabilities, knowledge and technologies on which companies draw to solve problems, set up inventive activities and ultimately release new products or services. Given the rate of technological change, there is an almost-constant pressure to refine, update and even invent new services and products. However, this often entails testing new, previously untried combinations of existing technology and knowledge, and also experimenting new technological combinations from scratch.
Finding the right match in order to exploit and explore
One might expect that the size and breadth of a firm’s knowledge base would provide some guarantees to boosting inventive performance. Whilst these factors clearly do no harm, the example of semi-conductor companies reveals that it is actually the structure and interrelation of components within a knowledge base that can make the difference. In short, it is finding the right combinations from within a firm’s accumulated stock of knowledge that can spark the inventive process, in alignment with the firm’s inventive strategy.
Recent research into the semi-conductor industry has employed the awarding of patents as a measure for the extent to which technological firms exploit existing knowledge and/or explore new options. The semi-conductor industry is illustrative of the technological sector in general in terms of the rapid rate of change and resultant pressure to continue innovating. The results of a study of active firms within this market holding patents across the period 1968-2002 underline the importance of how these firms structure their knowledge base by managing the complementarity and substitutability relationships between knowledge.
Combining or replacing knowledge shapes the structure of a knowledge base
The structure of a knowledge base can be viewed by two main characteristics of knowledge linkages – “complementarity” and “substitutability”. The former represents the synergistic effects of two types of knowledge to produce a particular result, following a search process designed to exploit combinations that proved to be beneficial. The latter describes the similarity between two different knowledge components in their applications when combined by other components.
The afore-mentioned research into the semi-conductor industry suggests that the “complementary linkages” incur far lower R&D costs as the need to seek out brand new options is reduced, as are communication and coordination costs. To put it simply, if a firm isn’t completing re-inventing the wheel by exploiting two existing and complementary technologies, then less explanation and organisation is required and higher inventive performance can be achieved. However, experimenting with substitute but different optional technologies may generate extra research costs, but the explorative potential of such a process is higher, meaning that the effect on the firm’s inventive performance could be fundamental. It is through a fine coupling of both processes that a firm may be able to re-deploy what it already knows and does best, whilst leaving sufficient margin for experimenting with substitute technologies to explore and find out new and useful combinations.
The (re)search continues
Future research activity could provide new insight into the role of substitute and complementary knowledge during technological change. Worthy of attention is also the impact that the structure of a firm’s knowledge base may have on its chances of expanding into new markets and/or providing a more diversified service or product. This remains to be seen. However, what is clear is that firms should no longer assume that the sheer size and variety of their knowledge base will provide a clear path to improved inventive performance. It is the way in which they structure and interrelate capabilities, knowledge and technologies that will boost their chances – the fine art of doing what they already do best, without losing the ability to explore.
This article draws inspiration from the paper Substitutability and complementarity of technological knowledge and the inventive performance of semiconductor companies, written by Ludovic Dibiaggio, Maryam Nasiriyar and Lionel Nesta and published in Research Policy 43 (2014).
Maryam Nasiriyar is an assistant professor of Strategy and Innovation at ESC Rennes School of Business, France. Her research interests include Technological Knowledge Exploitation and Competitive Advantage.