Knowledge mobilization in the face of imitation: Microfoundations of knowledge aggregation and firm‐level innovation

• Published date: 01 November 2020
• DOI: http://doi.org/10.1002/smj.3187
• Date: 01 November 2020
• Author: Vikas A. Aggarwal,Jason P. Davis

RESEARCH ARTICLE

Knowledge mobilization in the face of

imitation: Microfoundations of knowledge

aggregation and firm-level innovation

Jason P. Davis

1

| Vikas A. Aggarwal

2

1

INSEAD, Singapore

2

INSEAD, Fontainebleau, France

Correspondence

Jason P. Davis, INSEAD, 1 Ayer Rajah

Avenue, Singapore 138676.

Email: jason.davis@insead.edu

Abstract

Research Summary: Firms in technology-based set-

tings continuously mobilize the knowledge of individ-

uals in the firm to execute new opportunities arising

over time. Yet we have only a limited understanding of

how individual-level knowledge aggregates to shape

firm-level innovation. We use a computational model

to develop a microfoundational theory of firm-level

innovation that captures both intra-firm knowledge

mobilization and inter-firm competition. A key insight

is that despite intuitions that knowledge mobilization

should protect against rival imitation, knowledge mobi-

lization can often benefit rivals more than the focal

firm itself, due to a process of continuous knowledge

spillover-sharing among rivals. In addition, while

knowledge-based advantages are often thought to be

temporary without some isolating mechanism, sustain-

able advantage may emerge under limited conditions

under which knowledge-mobilizing firms outrace

rivals' imitation efforts.

Managerial summary: Managers in fast-moving

technology-based industries innovate by mobilizing the

knowledge of individuals in their firm to execute new

market opportunities arising over time. A central chal-

lenge in such settings is that competitors may imitate

this knowledge, thereby diminishing the advantages to

Received: 30 May 2013 Revised: 6 December 2019 Accepted: 6 December 2019 Published on: 13 August 2020

DOI: 10.1002/smj.3187

Strat Mgmt J. 2020;41:1983–2014. wileyonlinelibrary.com/journal/smj © 2020 John Wiley & Sons, Ltd. 1983

the focal firm that derive fr om its innovations. We

highlight the conditions under which such efforts at

mobilizing individual knowledge within a firm can

backfire and thus accelerate imitation as a result of

knowledge spillover-sharing among the firm's indus-

try rivals. To protect themselves, innovative firms in

highly complex industries can use a recombination

process to outrace their imitating rivals and generate

sustainable advantages.

KEYWORDS

competition, imitation, innovation, knowledge mobilization,

microfoundations

1|INTRODUCTION

In fast-moving technology-based market settings, a central challenge for firms is to utilize the knowl-

edge held by individuals within the firm to execute innovative market opportunities arising over time

(Brown & Eisenhardt, 1997; Davis, Eisenhardt, & Bingham, 2009; Rindova & Kotha, 2001;

Shane, 2000). Such settings are characterized by ongoing change, temporary advantage, and hyper-

competition, which require firms to match their own knowledge and capabilities to emerging opportu-

nities in areas such as new product development and market entry (D'Aveni, Dagnino, & Smith, 2010;

Roy, Lampert, & Stoyneva, 2018; Wiggins & Ruefli, 2005). While multiple streams of the strategy litera-

ture point to the importance of individual-level knowledge in the context of firm-level innovation

(Aggarwal, Hsu, & Wu, 2020; Coff & Kryscynski, 2011; Dahlander, O'Mahony, & Gann, 2016;

Grigoriou & Rothaermel, 2014), prior work has more often tended to conceptualize knowledge as resid-

ing at the level of the firm or team (Felin & Hesterly, 2007). Of course, viewing knowledge through this

more macro level lens has led the strategy field to important insights and has significantly expanded

our understanding of a broad range of issues related to knowledge, innovation, and competitive advan-

tage (e.g., Arora & Gambardella, 2010; Garg & Zhao, 2018; Helfat et al., 2007). At the same time, how-

ever, it has meant that the processes of aggregation that link individual-level knowledge to firm-level

innovation outcomes have been somewhat obscured and understudied.

This gap in our understanding of how individual-level knowledge aggregates to influence

innovation at the level of the firm points us toward potentially fruitful avenues for theory devel-

opment. This is because alternative approaches to mobilizing the knowledge of individuals

inside a firm may have non-obvious effects on the heterogeneity and distribution of a firm's

knowledge pool, in turn influencing the extent to which firms can capture opportunities under

varying market conditions. In addition, imitation by rivals, enabled by individual-level knowl-

edge flows, is closely intertwined with the innovation process (Almeida & Kogut, 1999;

Audretsch & Feldman, 1996; Saxenian, 1994; Singh, 2005). Knowledge mobilization and

imitation-based competition thus represent individual-level processes that may jointly interact

with one another in unexpected ways when aggregated to the firm-level. A deeper theoretical

understanding of these aggregation processes thus promises to substantively increase our

understanding of the determinants of heterogeneity in firm-level innovation outcomes.

1984 DAVIS AND AGGARWAL

There have been numerous calls to more deeply examine the role of individuals in shaping

macro, firm-level outcomes (Barney & Felin, 2013; Felin, Foss, & Ployhart, 2015). Scholars have

argued for “opening up the proverbial black box of the firm”by taking individuals as the natural

starting point for theory development (Felin & Hesterly, 2007, p. 213). Such a microfoundational

approach holds the promise of deepening our understanding of the individual-level antecedents

of heterogeneityin firms' knowledge-based outcomes.Pursuing a microfoundational research pro-

gram, however, requires attention not simply to individuals as a focal unit of interest per se, but

more importantly to how individual characteristics “interact and aggregate to generate macro-

level phenomena”(Aggarwal, Posen, & Workiewicz, 2017, p. 1213).

In developing a microfoundational theory of individual to firm-level knowledge aggregation,

we direct our attention toward the most salient forms of individual-level interactions occurring

in knowledge-based contexts. We focus in this regard not only on intra-firm interactions among

individuals, but also on inter-firm interactions that we argue play an equally important role in

opening up the black box of firm-level innovation outcomes. This focus on both the intra- and

the inter- distinguishes our theory development effort from extant microfoundational work,

where the relevant set of interactions is generally confined to within-firm boundaries. We

include inter-firm competitive considerations in our theory development because spillovers of

knowledge among competing firms are of particular importance in technology-based settings

(Ethiraj & Zhu, 2008; Knott, Posen, & Wu, 2009; Posen & Martignoni, 2018).

By focusing attention on the conjunction of intra- and inter-firm processes, we bridge two

distinct streams of work on knowledge and innovation. First, work on the intra-firm processes

of knowledge mobilization addresses the ways in which managers can create a productive delta

between “what is known [by individuals] within the organization and what is actually put to

use”(Szulanski, 1996, p. 38). This stream of work examines issues such as within-firm social

networks (Hansen, 2002; Nerkar & Paruchuri, 2005; Phelps, Heidl, & Wadhwa, 2012), divisional

recombination (Karim & Kaul, 2015), and knowledge variety (Caner, Cohen, & Pil, 2017). Sec-

ond, work on imitation suggests that imitation-based competition stemming from the spillovers

of individual knowledge across firms can erode the performance benefits to firms from their

innovation efforts (Ethiraj & Zhu, 2008; Posen & Martignoni, 2018; Zander & Kogut, 1995).

Viewed collectively, each of these two streams of research appears to form a productive micro-

foundation by addressing individual-level interactions that aggregate to macro-level outcomes.

Yet the two seem incomplete without one another. While the mobilization stream offers descrip-

tions of the intra-firm mechanisms underpinning innovation, it pays less attention to competitive

concerns that could impact mobilization effectiveness. And while the imitation stream offers a

theory of the inter-firm effects of knowledge spillovers under conditions of imitation, it pays less

attention to how this knowledge is subsequently used by individuals within firms. Both intra- and

inter-firm mechanisms are thus implicated in the aggregation process linking individuals to the

macro; yet the ways in which this joint interaction plays out is less than clear.

While our microfoundational theory takes into consideration the collective intra- and inter-

firm interactions among individuals that may in the aggregate influence firm-level innovation

outcomes, what is perhaps most important for strategy scholars is to have a testable and predic-

tive theory linking particular strategic choices around individual-level knowledge mobilization

to systematic heterogeneity in firm-level outcomes. To this end, we focus on three distinct

knowledge mobilization mechanisms that firms might employ, linking these distinct design

considerations to firm-level performance as captured by the firm-level ability to execute oppor-

tunities in the face of imitative pressures: (1) the movement of knowledge among individuals in

the firm (“transfer”); (2) the degree to which individuals can borrow (i.e., access and use)

DAVIS AND AGGARWAL 1985