The Nature of Knowledge and Decisions on Activity Sourcing: An Innovation Model

The main drivers for R&D collaboration uncovered by the economic literature are the access to external cognitive capabilities and costs. Very seldom the nature of knowledge has been considered a determining factor for activity externalisation. This paper analyses the role of the nature of knowledge in the locus of innovation. Then, a knowledge management model for the internalisation of innovative activities is developed. The model proposed allows executives to summarize their strategic reflection about innovation, leading to a more coherent decision making process. The research is implemented to the innovative activities performed by Spanish firms in the agro-chemical industry. The empirical evidence supports the existence of a positive incidence of tacit knowledge on the internal performance of an activity; though it is altered by the existence of capable suppliers to perform an activity. This economic sector also allows us to implement the model and categorize the firms operating in the Spanish agrochemical sector according to their behaviour in the innovation spiral