Shinea Sharma - Inter-organizational studies

The article, “Knowledge diversity as a moderator: inter-firm relationships, R&D investment and absorptive capacity” by Bou-Wen Lin looks at how inter-organizational diversification may have many benefits including lowering the costs of research and development.  The more comprehensive a business can become through inter-organizational relationships with one or more other businesses, the better chances that business have of being profitable. For mangers this is important to know that worth is not all valued in capital but also in non-tangible assets like a business’s knowledge portfolio and its potential for innovation. This article provides newly researched findings about the ability for shared and diverse knowledge that results from inter-organizational interaction and collaboration to increase a company’s worth.
    Lin’s research consists of hypothesis testing drawing from a small study of U.S. publicly traded businesses with five or more patents in one year. Lin came up with a seven hypotheses based on theories from previous studies and the relevant literature, both of which Lin cites. The first hypothesis tests the theory that knowledge diversity will positively affect a company’s growth potential. Li also wanted to test the theory that corporate diversity of technology would improve performance as well as other similar implications found in the literature of knowledge diversity.  Based on these ideas, Li proposed his first hypothesis:  “A firm’s knowledge diversity will be positively associated with its performance” (333). Li’s second, third and fourth hypotheses have to do with research and development. The second, Li says is intuitive: “A firm’s R&D investment will be positively associated with its performance” (333). The existing research suggests that strategic alliances may have positive effects on corporate performance, which resulted in Lin’s third hypothesis: “A firm’s strategic alliance intensity will be positively associated with its performance” (334). Lin’s fourth hypothesis tests the idea that acquisition of knowledge and other intangible resources reinforces acquisition strategies while keeping in mind that the intellectual assets of a company help to create synergy. “A firm’s acquisition intensity will be positively associated with its performance” (334).
    Lin’s last three hypotheses test theories of knowledge diversity and absorptive capacity. To test if knowledge diversity can moderate a company’s performance in other areas too like acquisition orientation, strategic alliance intensity and research and development investment Lin’s fifth hypothesis says, “The contribution of strategic alliances on firm performance will be stronger when the firm’s knowledge diversity is high” (335). Lin’s sixth hypothesis, “The contribution of mergers and acquisitions on firm performance will be stronger when the firm’s knowledge diversity is high,” tests whether knowledge diversity can help with the creation and transfer of knowledge by solving inter-organizational communication problems (335). Lin’s final hypothesis tests whether a firm’s performance would be positively associated with its technology diversification. “The contribution of R&D investment on firm performance will be stronger when the firm’s knowledge diversity is high” (336).
    Lin found that some of his hypotheses were supported and others were not. He found that the effect of knowledge diversity on firm performance is not significant, but that it acts as a moderator for other variables like investment in research and development, the intensity of strategic alliances and the way acquisitions are handled. He also found that for companies with greater diversity of knowledge strategic alliances and alliances were more effective, but for companies with a low level of diversity of knowledge, alliances and acquisitions did not improve performance. The data from study shows that positive growth results from strategic alliances.
    Lin’s findings imply that a company should seek to diversify its knowledge base through inter-organizational relationships as early as possible. Managers should foster an environment of knowledge sharing to promote research and development, encourage alliances, and make acquisitions as much as possible to promote profitability.

Work Cited
Lin, Bou-Wen. "“Knowledge diversity as a moderator: inter-firm relationships, R&D investment and absorptive capacity”." Technology Analysis & Strategic Management 23.3 (2011): 331-343.