Appropriating value from external technology: Absorptive capacity dimensions and innovation strategy
AbstractInnovation from external sources has continued to grow in importance in recent years, in defiance of conventional wisdom advocating internal sourcing of core technologies. One important reason for the previous emphasis on internal sourcing of core technologies relates to concerns of horizontal and vertical appropriability. Thus, the question arises of whether and how firms can reconcile horizontal and vertical appropriability with the rise of the external sourcing of new technologies. Must firms sacrifice value appropriation on the altar of value creation? To answer these questions, we delve beneath individual technological innovations to examine the technical and market capabilities underlying them. Specifically, we show how the amount of value a firm stands to appropriate relative to competitors and relative to technology suppliers depends on the fit between its innovation strategy and its previous investments in distinct dimensions of absorptive capacity. At the same time, we also show how first-order capabilities and dynamic capabilities interact to determine firm performance. Thus, we shed light on how and when the move to 'open' innovation will affect the amount of value innovating firms stand to appropriate.
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Bibliographic InfoPaper provided by IESE Business School in its series IESE Research Papers with number D/669.
Length: 29 pages
Date of creation: 17 Jan 2007
Date of revision:
Innovation strategy; external sourcing; technology innovation; value appropriation;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-04 (All new papers)
- NEP-CSE-2007-05-04 (Economics of Strategic Management)
- NEP-INO-2007-05-04 (Innovation)
- NEP-IPR-2007-05-04 (Intellectual Property Rights)
- NEP-MIC-2007-05-04 (Microeconomics)
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- Fuentelsaz, Lucio & Gómez, Jaime & Palomas, Sergio, 2012. "Production technologies and financial performance: The effect of uneven diffusion among competitors," Research Policy, Elsevier, vol. 41(2), pages 401-413.
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