Understanding the Process of Knowledge Spillovers: Learning to Become Social Enterprises

• Date: 01 September 2015
• DOI: http://doi.org/10.1002/sej.1198
• Published date: 01 September 2015

UNDERSTANDING THE PROCESS OF KNOWLEDGE

SPILLOVERS: LEARNING TO BECOME SOCIAL

ENTERPRISES

WAI WAI KO1and GORDON LIU2*

1Southampton Business School, University of Southampton, Southampton,

United Kingdom

2School of Management, University of Bath, Bath, United Kingdom

Through analyzing in-depth interview data obtained from representatives of U.K.-based social

enterprises, we explore how traditional third-sector organizations acquire entrepreneurial

knowledge via knowledge spillover and use this to transform themselves into more market-

driven, businesslike social enterprises. An integrated framework for knowledge spillover is

developed to highlight the connection with organizational efforts at each stage of the knowl-

edge spillover process; this framework assists organizations in collecting leaked knowledge

and turning it into both organizational action and specific social and human capital that can

play an important role in facilitating these connections. This research contributes toward our

further understanding of the knowledge spillover phenomenon. Copyright © 2015 Strategic

Management Society.

INTRODUCTION

Knowledge spillover, which refers to the uninten-

tional flow of knowledge from one network party to

another, has received much academic attention (e.g.,

Audretsch and Lehmann, 2006; Agarwal, Audretsch,

and Sarkar, 2007, 2010; Audretsch and Keilbach,

2007; Kotha, 2010). Unlike knowledge transfer,

which involves cross-party collaboration and com-

pensation due to the exchange, the external benefits

of the creation of knowledge via knowledge spillover

accrues to the network parties other than the creator

(Agarwal et al., 2007; Audretsch and Keilbach,

2007; Acs et al., 2009). Despite this well-

documented research, we still have little understand-

ing of the process of knowledge spillover. In this

research, we will attempt to address this knowledge

gap by studying the knowledge spillover phenom-

enon among U.K.-based third-sector organizations,

whereby they acquire and implement entrepreneurial

knowledge to transform themselves into more

market-driven, businesslike social enterprises (SEs).

In developing our argument, we make several

important contributions. First, we extend the current

understanding of knowledge spillover by identifying

organizations’ efforts to access, collect, and imple-

ment the knowledge that is available in the network

environment. In so doing, we seek to understand

what an organization can do to improve its chance of

reaping the benefits of knowledge spillover. Second,

prior research has paid little attention to the factors

that may speed up the process of knowledge spill-

over. By identifying these factors (SEs’ social and

human capital), we will be able to gain a more com-

prehensive picture of what may influence the flow of

knowledge during the process of knowledge spill-

over. Third, we develop an integrated framework for

knowledge spillover to highlight the connections

between an organization’s efforts to access and

collect leaked knowledge and turn it into organiza-

tional action and how SEs’ social and human capital

Keywords: learning; knowledge spillovers; social enterprise;

entrepreneurial knowledge; knowledge sharing

*Correspondence to: Gordon Liu, School of Management, Uni-

versity of Bath, Claverton Down, Bath BA2 7AY, United

Kingdom. E-mail: cygliu@gmail.com

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Strategic Entrepreneurship Journal

Strat. Entrepreneurship J., 9: 263–285 (2015)

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/sej.1198

Copyright © 2015 Strategic Management Society

play an important role in facilitating these connec-

tions. Currently, most of the frameworks for the

knowledge spillover process are based on conceptual

discussions (Agarwal et al., 2007; Agarwal et al.,

2010). In this research, we provide empirical support

for our integrated framework. Finally, we contribute

to the knowledge spillover literature from the indus-

try study aspect. To the best of our knowledge, we

are the first to explore the knowledge spillover phe-

nomenon in the third sector. We highlight the role of

knowledge spillover in helping traditional third-

sector organizations transform themselves into more

market-driven, businesslike SEs. In doing so, we

show how SEs can manage their efforts to take

advantage of the benefits of knowledge spillover.

Theoretical context

Knowledge is a critical resource for business success

because it is closely related to the development of

organizations’ intellectual advantage, especially in

tacit form. Tacit knowledge is the task-oriented

know-how, usually embedded within operational

routines (Nelson and Winter, 1982) and networks

(Nahapiet and Ghoshal, 1998), which is difficult to

formalize and communicate (Lam, 2000; Acs et al.,

2009). Because of this, tacit knowledge is difficult to

imitate and usually leads to organizations’ competi-

tiveness (Lam, 2000; Acs et al., 2009). In order for

organizations to obtain tacit knowledge, they (i.e.,

the managers or employees) usually engage in close

interaction with the knowledge holders within their

internal and external networks in order to learn about

the relevant context through practical experience

(Yang, Phelps, and Steensma, 2010; Phelps, Heidl,

and Wadhwa, 2012).

A network refers to the collection of relationships

that provide an environment that fosters the flow of

knowledge among its members (Nahapiet and

Ghoshal, 1998; Phelps et al., 2012), consisting of rela-

tionships at both the organizational and individual

levels. In this research, we focus on the knowledge

sharing that takes place at the individual level but is

encouraged by the organization for three reasons. First,

knowledge spillover, in comparison to collaborative

knowledge sharing (such as knowledge transfer), rep-

resents a type of knowledge sharing that occurs when

no collaborative arrangements (i.e., strategic alliance)

between organizations have been made (Audretsch

and Keilbach, 2007; Agarwal et al., 2010). Thus, we

argue that most of the knowledge flow is happening at

the individual level. Second, Argote and colleagues

(Argote and Ingram, 2000; Argote et al., 2000)

suggest that the building blocks of knowledge sharing

are often formed through interpersonal interactions

between individuals from the same or different orga-

nizations, considering that an organization can be

viewed as an aggregation of individuals. Third, previ-

ous research on knowledge spillover highlights the

important role of organizations in acting deliberately

to encourage their employees to access (learn) the

knowledge flow from the network (Kotha, 2010;

Oldroyd and Gulati, 2010).

The research on knowledge sharing in the network

environment is well established and can be divided

into several key areas. First, there is the content of

the network. This stream of research explores the

availability (or richness) of the specific knowledge in

certain network environments, such as professional

networks (e.g., Tagliaventi and Mattarelli, 2006;

Ynalvez and Shrum, 2011) or industrial clusters

(e.g., Saxenian and Hsu, 2001; Bell, 2005). Second,

there is a network structure that dictates the flow of

knowledge. For example, Granovetter (1973) indi-

cates that the strength of network ties influences the

knowledge flow between individuals—a smaller,

tighter network provides fewer opportunities to

introduce new ideas, while a more open network,

with many weak ties and social connections, offers

greater diversity in terms of a knowledge base. Burt

(1992) suggests that the absence of a link between

two individuals in the network (i.e., structural holes)

restricts an individual’s ability to acquire and access

knowledge, so a third party can act as a middleman

to broker the transactions between them and benefit

from this act. Tsai (2001) argues that the position of

the social network will influence the knowledge indi-

viduals can access, and individuals who place them-

selves in a central position in the network (centrality)

tend to access more knowledge than others. Third,

there is the context that facilitates the flow of knowl-

edge in networks. Scholars point out the importance

of the overlapping knowledge sets and contexts

between the source (senders) and recipient with

regard to the assimilation of the knowledge into the

recipient’s knowledge base (Cohen and Levinthal,

1990; Van Baalen, Bloemhof-Ruwaard, and Van

Heck, 2005). Fourth, there is the organization’s

ability to acquire knowledge and implement the

knowledge from its network (e.g., Nahapiet and

Ghoshal, 1998; Argote et al., 2000; Saxenian and

Hsu, 2001). In this research, we focus specifically on

extending this last stream of literature in relation to

the phenomenon of knowledge spillover.

264 W. W. Ko and G. Liu

Copyright © 2015 Strategic Management Society Strat. Entrepreneurship J.,9: 263–285 (2015)

DOI: 10.1002/sej