Organisation of networking and absorption of knowledge for innovativeness (Chapter 4)

Dynamic nature of absorptive capacity

The study in Chapter 4 contributes to the existing literature on knowledge absorption which is based on the developments in the knowledge-based and dynamic capabilities view. Next to the fact that the study in Chapter 4 explores the absorptive capacity within an unexplored area (pig farmers), the study delivers a theoretical contribution by establishing support for the dynamic nature of absorptive capacity. It is found that there is not only a sequential relationship between the potential (acquisition and assimilation) and realised (transformation and exploitation) absorptive capacity, but that there is also a link in the opposite direction. The study shows that the capacity to transform knowledge (or facilitate the recognition of opportunities and consequences of new external knowledge) can enhance the (acquisition) capacity to allocate the network actors who can provide the knowledge about innovations in the sector. This is in line with Zahra and George’s statement that ‘absorptive capacity follows a multidirectional and fluid path, rather than a patterned trajectory of knowledge acquisition and exploitation’ (Zahra and George, 2002, p. 198). The study in Chapter 4 also shows that exploitation capacity is most strongly related to profitability. This is supportive of the conclusion by previous research that ‘“realized” absorptive capacity approaches the “potential” absorptive capacity in firms with a high efficiency factor (Grant, 1996). Given that profits are primarily created through realized absorptive capacity’ (Grant, 1996; Zahra and George, 2002, p. 191), knowledge acquisition should be exploited to result in return on investment. Firms should find a balance between acquisition and exploitation.

Organisation of networking behaviour as element of absorptive capacity

Next to the analysis of the non-sequential/dynamic nature of absorptive capacity, the study in Chapter 4 also addresses the relation between the organisation of the networking behaviour and absorptive capacity. The study addresses the neglected potential of organisational capabilities to absorb knowledge, in studies with a social network perspective. The study in Chapter 4 addresses this gap by suggesting that the networking frequency within a wide network range23 (Granovetter, 1982; Krackhardt, 1992; Burt, 1996, 2005; Reagans and McEvily, 2003) reflects one part of the intensity and direction of efforts of the firm to access external information (Zahra and George, 2002). The other part reflecting the intensity and direction of efforts to acquire external information consists of the organisational aspects entailed in acquisition, such as identification of the most important knowledge sources, discussion with business partners and participation in sector meetings (acquisition capacity). The study shows that these aspects have a positive effect on the assimilation capacity (ability to understand and recognise relevant changes and possibilities). It is concluded that frequency of contact in a specific network range affects innovativeness positively, but also indirectly through acquisition and assimilation capacity. A proactive and strategic approach towards absorption of knowledge and use of the network is needed to assure that sufficient interest and dynamism is created to induce change.

6.1.4 Interplay governance mechanisms in co-innovation partnerships

(Chapter 5)

The study in Chapter 5 contributes to existing literature by demonstrating the advantages and necessity of structural governance mechanisms. Instead of the assertion that socially defined, norm-driven definitions of proper behaviours can substitute formalised definitions of these norms (Grandori, 2006; Lampel, 2004; Caniëls and Gelderman, 2010), the study in Chapter 5 demonstrates that the interplay between structural and relational governance mechanisms is especially important to deal with the organisational challenges in co-innovation partnerships. Extra-contractual formalisation explicates rational commitment and induces competence trust

The study demonstrates the structuring value of extra-contractual agreements (Grandori and Furlotti, 2010) which can reduce uncertainty entailed in innovation to a certain extent. The making of extra-contractual agreements constitutes the basis for the achievement of commonalities, explication of motives and commitment, and solving of coordination problems (Omta and Van Rossum, 1999). The structuring effect turned out to be rather limited in partnerships where either insufficient attention was given to the initial formalisation process of interests and goals created restraints on rational commitment, or where insufficient structural governance took place through application and coordination of the initial agreements. The

process of formalisation and information exchange at the initial stage is more important than

the number of agreements. Involvement of all the partners in a detailed extra-contractual

formalisation process, and use of the initial agreements as an anchor point for adjustments and alignment can contribute to acquaintance with partners’ competences and higher competence trust in heterogeneous conditions. This interplay between extra-contractual formalisation and competence trust can contribute to efficiency through structure, while at the same time it can offer the necessary flexibility.

Compliance trust complementary to rational commitment

Compliance trust has the most governance potential in low network heterogeneity. However, compliance trust is only a complementary mechanism as absence of sufficient rational commitment to comply with the agreements can override the norm-based compliance trust. This is demonstrated in the study in Chapter 5 by the case involving low network heterogeneity and high innovation uncertainty. In conditions of high innovation uncertainty, it might be the case that the incentive is not large enough to uphold or increase the level of compliance trust. Rational commitment entices attitudinal commitment

Attitudinal commitment is only found in the low innovation uncertainty and low network heterogeneity partnership. However, in this partnership rational commitment, or an initial level of potential pay-off from the relationship, induced attitudinal commitment to develop. Cullen et al. (2000) also state that relational investments, building attitudinal commitment, must begin with the practicalities of the business relationship. However, they also point out that previous research demonstrated that predominance of calculative/rational commitment,

without the attitudinal component, may be detrimental to the relationship (Kumar et al.,

1994). The conclusion from the study in Chapter 5 is that the balance between attitudinal and rational commitment is important in order to attain a fruitful and efficient collaboration outcome (Cullen et al., 2000).

Competence trust as precondition for rational commitment which encourages compliance The challenges related to innovation uncertainty about the progress and outcome of the innovation process can be tackled by means of competence trust. However, network heterogeneity imposes obstacles to competence trust which requires a shared understanding of professional conduct and technical and managerial standards (Sako, 2006). The case with high innovation uncertainty and high network heterogeneity in Chapter 5 showed how the absence of understanding of competencies’ complementarities, limited rational commitment and compliance trust. Competence trust can thus also be a pre-condition for rational commitment to develop (further) and encourage compliance.