To explore or exploit: The influence of inter-firm R&D network diversity and structural holes on innovation outcomes

The degree to which inter-firm research and development (R&D) networks benefit a firm's exploitative and exploratory innovation depends on two factors: (1) the kind of knowledge that the firm can access from networks and (2) how the firm acquire these knowledge resources through its connections. Utilizing a knowledge-based view of the firm, we argue that related and unrelated network knowledge diversity differ in their effect on a company's innovation outcomes and that the existence of structural holes in an inter-firm R&D network has a discrepant, moderating effect on performance. Empirical analyses based on archival data from 158 Chinese automobile companies from 1996 to 2010 indicate that the inter-firm R&D network that emphasizes diversified unrelated knowledge is more beneficial for enhancing a firm's exploratory innovation outcomes. Conversely, the inter-firm R&D network that relies on diversified related knowledge can be more helpful for companies that engage in exploitative innovation. Further, structural holes are expected to be complementary to unrelated network knowledge diversity while a dense neighborhood is complementary to related network knowledge diversity in improving firm exploitative and exploratory innovation outcomes.