Knowledge cannibalism in the European ICT sector

Abstract

Purpose Based on the sample of the European information and communications technology (ICT) companies, this paper aims to identify which strategy of knowledge generation is most beneficial for companies: internal knowledge development or absorption of knowledge external to the company through corporate acquisition or merger. Design/methodology/approach In this study, a longitudinal analysis of European ICT companies was conducted, contrasting internal knowledge creation, in the form of patent accumulation and research and development (R&D) efforts, with external learning through merger-and-acquisition (M&A) activities to uncover the best strategies for performance maximization. Findings Results suggest that the two knowledge generation strategies are not complementary and demonstrate only marginal impact on organizational performance. However, intriguing patterns in combining the two became apparent. It was found that patent accumulation improves learning achieved through M&A activities, while also acting as a protection against corporate takeover. At the same time, the internal knowledge generation strategy was found to have a negative impact on financial performance, with external knowledge generation demonstrating somewhat mixed results. Practical implications This paper provides practical insights into the patterns of internal and external knowledge generation activities. The two strategies were found not to be complementary, implying that companies must carefully choose their preferences. Originality/value This large-scale study tackles the interplay between internal and external knowledge generation strategies, which are mostly studied separately. It reveals new patterns in corporate acquisition and divestment strategies as sources of new knowledge. It also ties the knowledge paradigm to organizational performance.