Organizing for Knowledge Generation: Internal Knowledge Networks and the Contingent Effect of External Knowledge Sourcing

Research summary: When faced with a new technological paradigm, incumbent firms can opt for internal development and/or external sourcing to obtain the necessary new knowledge. We explain how the effectiveness of external knowledge sourcing depends on the properties of internal knowledge production. We apply a social network lens to delineate interpersonal, intra-firm knowledge networks and capture the emergence of two important firm-level properties: the incumbent’s internal potential for knowledge recombination and the level of knowledge coordination costs. We rely on firm-level internal knowledge networks to dynamically track the emergence of these properties across 106 global pharmaceutical companies over a 25-year time period. We find that a firm’s success in developing knowledge in a new technological paradigm using external knowledge sourcing is contingent on these internal knowledge properties.