Knowledge investment and search for innovation: evidence from the UK firms

Abstract

AbstractRecent research on innovation management and knowledge transfer has demonstrated that industry knowledge collaboration and knowledge spillovers matter for innovation, but so does a firm's Research and Development (R&D). Conditional to a firm's R&D investment, this study makes a theoretical investigation into the role of two knowledge transfer strategies—industry coopetition and industry knowledge spillovers for a firm's innovation. Based on an analysis of a sample of 17,859 UK firms from 2002 to 2014, we demonstrated why and under what conditions firms will (a) invest in internal R&D, (b) engage in coopetition, and (c) access knowledge spillovers to introduce new to firm (incremental innovation) and new to market products (radical innovation). The results of this study demonstrate that firm managers who choose knowledge spillovers versus coopetition are likely to achieve radical vis-à-vis incremental innovation. Benefits from the coopetition can be achieved with low investment in R&D, while R&D is essential in recognizing the knowledge spillover for radical innovation. By deciding whether to deploy its costly R&D and access external knowledge via industry coopetition or spillovers, the firm is also making a concomitant decision about the type of innovative activity it will generate. Thus, a firm strategy for knowledge transfer and investing in knowledge internally is inextricably linked to a firm strategy involving the type of innovative output.