2.2.1 Knowledge-based view and Resource dependency
RBV (resource-based view) scholars have mentioned that major sources of success of new firms are sufficient resources, innovative capability and
entrepreneurships (Zahra and Bogner, 2000; Christensen, 1997). They highlight the importance of resource that a firm held. The fundamental concept of RBV is that firms must develop their own competitive advantages through applying and exploiting their resources, and then can make profit from the market they compete in (Wernerfelt, 1984; Rumelt, 1984). The definition of “resource” was also discussed. Barney (1991) quoted the concept from Daft (1983) and Porter (1981) that they consider the resources of a firm include all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. They controlled by firm and enable the firm to implement strategies that improve its efficiency and effectiveness.
KBV extends the concept of RBV, which specifically emphasizes the strategic importance of knowledge based resources (Nonaka et al., 2000; Boer et al., 1999). It is initially promoted by Penrose (1959) and later inherited by Wernerfelt (1984), Barney (1991) and Conner (1991).
Knowledge is defined as those information been verified and refined (Machlup, 1983; Dreske, 1981). It is primarily embedded in firms’ intellectual capital (Edvinsson and Malone, 1997), including human capital, structural capital (Edvinsson and Malone, 1998; Roos et al., 1998) and relational capital (Youndt, 1998; Stewart, 1997). It is said positively related to innovation level of firms (Porter, 1980) and verified by several empirical studies (Karakaya and Kobu, 1994; Guzzo and Shea, 1992; Bantel and Jackson, 1989). Firms can easily leverage their knowledge when integrated with other knowledge (Demsetz, 1991), and generate knowledge heterogeneity that often becomes the critical determinant of superior corporate performance (Winter, 1984; Decarolis and Deeds, 1999). To summarize, KBV considers obtaining unique and in-imitable knowledge is the trigger of firms’
growth and profitability (Grant, 1996; Spender, 1996; Lei et al., 1996). Some scholars even take knowledge integration as the prime function of enterprises (Teece, 1998; Grant, 1996; Demsetz, 1991).
Given that knowledge based resources are so important to firms, there are several ways mentioned by scholars that how to acquire those resources firms need (Inkpen, 1996; Leonard- Barton, 1995; Helleloid and Simonin, 1994). It can be developed inside or acquired outside the firms (Wernerfelt, 1984; Barney, 1991;
Hamel and Prahalad, 1993; Das and Teng, 1998). Some scholars especially highlight the importance of external sources that claimed many critical resources may exist outside the firms (Cohen and Levinthal, 1990; Arrow, 1974) and firms must stride across organizational boundaries and learn from the environment (Ulrich and Barney, 1984; Tiliquist et al., 2002). CVC activities is one of the channel (Maula and Murray, 2001; Stuart et al., 1999; Pisano, 1991; Teece, 1986) and it is especially much important for those firms were just started up and lack of crucial resources for survival (Laitinen, 1992). That is the view point of resource dependency. Resources provided by firms themselves are not always enough for their operation. To survive, firms must rely on the interaction with environment, including other organizations (Pfeffer and Salancik, 1978). Resource dependence views organizations as being embedded in networks of interdependency and social relationships (Granovetter, 1985). It treats maximizing power of organizations in those networks to gain the control of critical resources as their goal and success (Pfeffer 1981), and thus can reduce the dependencies on environment.
For the sake of the importance of knowledge, to focus upon venture firms’
innovation performance, this research complies with KBV and RDT, and pays more attention on acquiring and transferring of knowledge-related resources. This
perspective has indeed been widely adopted in CVC relative researches (Hayton, 2005; Schildt et al., 2005; Wadhwa and Kotha, 2006).
2.2.2 Knowledge transfer
Organizations can acquire new knowledge through internal development or external transfer (Ciborra, 1991; Hagedoorn, 1993). When acquiring from external sources such like consultant, customer, national lab, university, supplier, rivals and non-rivals (Leonard- Barton, 1995), the first thing to firms for wholly exploiting the value of external knowledge is affirming whether they possess the ability to differentiate the usage of components (Zahra and George, 2002), and can capture it carefully then (Argote, 1999). It is so called knowledge transfer. Argote and Ingram (2000) define knowledge transfer as “the process through which one unit is affected by the experience of another”. Better knowledge transfer brings more knowledge base resources with better quality. That is extraordinarily favorable for firms’ innovation activities (Dushnitsky and Lenox, 2005; Stuart, 2000; Powell et al., 1996).
Passed down from the concept of resource dependency, many literatures discussed the influential factors of the knowledge transfer and acquiring process since the importance that scholars claimed the development of valuable resources and capabilities is highly related to it (Teece et al., 1997; Henderson and Cockburn, 1994). It includes the characteristics of each participants (Kogut and Zander, 1992;
Dougherty, 1995; Henderson, 1993), the relationship between knowledge sender and receiver (Simonin, 1997; 1999) covering the social network fit between participants (Weber and Weber, 2007; Scholl, 2003), the relevance between each party’s knowledge base (Lane and Lubatkin, 1998; Arrow, 1974) and the similarity of parents and their children (Festinger, 1954) that we will discuss in this research.
The efficiency of knowledge transfer is first determined by each party’s characteristics, such as the absorptive capacity of knowledge receiver and the organizational inertia embedded in each firms. Better absorptive capacity may facilitate better transferring and combination of knowledge (Kogut and Zander, 1992; Cohen and Levinthal, 1990) but while innovative activities may restrained because of organizational limits (Henderson, 1993), the pressures and rigid core incompetencies (Dougherty, 1995; Block, 1989).
Social capital is another focal point of discussion. The two dimensions of social capital, structural dimension and relational dimension, are both considered influencing firms’ knowledge transfer (Granovetter, 1992). In this research, we will pay more attention on relational social capital fit since strong tie is constructed most of time when CVC investment relationship is built up. Conative fit in relational social capital represents firms’ intention and willingness of collaboration; affective fit is besides the emotional compatibility between firms (Scholl, 2003). They are said will positively influence knowledge transfer between parent and venture firm (Weber and Weber, 2007).
From the perspective of social interaction, homophily principal may also influence the interaction between firms. It claims that people like to identified the similarity by relevance of social categories (Mehra et al., 1998), and associate others who are similar (McPherson et al., 2001). When the level of similarity is low or even firms are belong to totally different sub-groups within the environment, interactions for knowledge or resource transfer will be impeded and whittled down.
Some scholars claimed that each participant’s knowledge base may also have the influence (Lane and Lubatkin, 1998). Literatures revealed that
technological synergy from complementary technologies can increase both firms’
R&D efficiency (Gerpott, 1999). Similarity of knowledge base can assist the cooperation between each firm’s employees and bring benefit to transfer activities (Hellmann, 2001).
This research takes these perceptions and proceeds empirical verification that to clarify the relationship between parent firms and venture firms, focus upon the dependent variable, innovation performance, which KBV emphasized, trying to gain understanding of the activities about external resources acquisition and internalization.