Knowledge mobilization in the face of imitation: Microfoundations of knowledge aggregation and firm-level innovation

Research Summary Firms in technology-based settings continuously mobilize the knowledge of individuals in the firm to execute new opportunities arising over time. Yet we have only a limited understanding of how individual-level knowledge aggregates to shape firm-level innovation. We use a computational model to develop a microfoundational theory of firm-level innovation that captures both intra-firm knowledge mobilization and inter-firm competition. A key insight is that despite intuitions that knowledge mobilization should protect against rival imitation, knowledge mobilization can often benefit rivals more than the focal firm itself, due to a process of continuous knowledge spillover-sharing among rivals. In addition, while knowledge-based advantages are often thought to be temporary without some isolating mechanism, sustainable advantage may emerge under limited conditions under which knowledge-mobilizing firms outrace rivals' imitation efforts. Managerial summary Managers in fast-moving technology-based industries innovate by mobilizing the knowledge of individuals in their firm to execute new market opportunities arising over time. A central challenge in such settings is that competitors may imitate this knowledge, thereby diminishing the advantages to the focal firm that derive from its innovations. We highlight the conditions under which such efforts at mobilizing individual knowledge within a firm can backfire and thus accelerate imitation as a result of knowledge spillover-sharing among the firm's industry rivals. To protect themselves, innovative firms in highly complex industries can use a recombination process to outrace their imitating rivals and generate sustainable advantages.