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Who knows best? How important is external knowledge when it comes to new venture innovation? 

Published: 2018-01-03

It might be better to build internal knowledge then to get external knowledge in a dynamic market, according to Anna Brattström, Alexander McKelvie and Johan Wiklund, in an article in Entrepreneurship Theory and Practice.

Anna Brattström has, together with Alexander McKelvie and Johan Wiklund, published an article in Entrepreneurship Theory and Practice. They conclude that it might be better to build internal knowledge then to get external knowledge in a dynamic market. 

In a dynamic market, knowledge is key, and time often a scarce resource. Knowledge leads to innovation, new development and growth. To a small, newly developed company resources are often limited, and in a highly dynamic and moving market, knowledge will become old fast. In what way should an entrepreneur spend their time in the best way in their pursuit of knowledge? By seeking external knowledge – through discussions with costumers, studying market reports or benchmarking? Or by generating knowledge internally – by recruitment, training or internal R&D? 

These questions are studied through a survey to 316 Swedish companies in IT, telecommunication, media and entertainment. The companies are active on a - generally speaking - dynamic and changing market. This is a market where external knowledge is highly important, according to previous research. 

This study shows that companies that rely in external knowledge were less innovative. Instead, it is the companies who build their own internal knowledge that are found to be more innovative. A unique feature of this study is the insight that different managers have different views of what “dynamism” means, and that this interpretation actually have an impact. Maybe it is the entrepreneurs – rather than the costumers – that are best equipped to perceive fast changes in the market, reasons the researchers. An entrepreneur that is proactively investing in internal knowledge generation can in this way drive market change. While an entrepreneur who is reactively listening to their surroundings will fall behind as the market is changing. 

McKelvie, A., Wiklund, J., & Brattström, A. 2018. ”Externally acquired or internally generated? Knowledge development and perceived environmental dynamism in new venture innovation”. Entrepreneurship Theory and Practice, 42: 24-46.

Associate senior lecturer Anna Brattström, is a researcher at Sten K. Johnson Centre for Entrepreneurship, Lund University School of Economics and Management. Alexander McKelvie and Johan Wiklund are both researchers at Syracuse University, USA. 

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Entrepreneurship Theory and Practice