Handbook of Organizational Learning and Knowledge Management, Second Edition

Knowledge and Innovation

The quest for identifying and assimilating knowledge that is useful to innovation poses a very real challenge for today’s firms. Knowledge is now recognized as a key competitive asset that forms the basis of firm growth and sustainable competitive advantage (Grant, 1996). Since organizational innovation can be viewed as a result of the combination of existing and new knowledge (Kogut and Zander, 1992), firms that are adept at both sourcing and integrating knowledge are likely to be successful innovators in research and development, marketing, and operations.

Firms themselves are crucibles of knowledge—managerial, operational, and technical. However, they must exploit this internal knowledge in conjunction with external knowledge to compete successfully, gain profitability, and grow. Yet, which firm can claim to harness the potential of its knowledge fully and effectively? Which firm can find (within the organization or outside it) all the knowledge needed for innovation? Few, if any. Until the answers to these questions are in the affirmative, there will always be opportunities for firms to increase their operational efficiency, manage risk, and learn by further developing the capabilities to manage knowledge available within the organization or within their environment.

Previous research has extensively studied the various external sources of firm knowledge (including competitors, universities, and government bodies) and the formal mechanisms used to acquire ...