Knowhow and Asset Complementarity and Dynamic Capability Accumulation
Know-how and Asset Complementarity and Dynamic Capability Accumulation: The Case of R&D Constance E. Helfat Strategic Management Journal, 18(5): 339 -360 Prepared by Grace C. Su
Research Question When firms seek to alter their stock of knowledge in response to change in the external environment, do such efforts depend on the firms’ existing stocks of complementary know-how and other assets, and if so, how? Dynamic capabilities: Teece and Pisano (1994) Complementary asset stock: Dierickx and Cool ( 1989 ) Complementary knowledge produces economy of scope on R&D Settings: R&D by U. S. oil companies from 1976 -1981 When oil companies sought to augment their stock of capabilities via coal conversion R&D in response to rising oil prices, did complementary know-how and assets influence the degree of the augment?
Petroleum Industry 1976 -1981 Major oil price increases: 1973 -73, 1978 -79, expected supply shortage Oil companies increased expenditures on alternative fuels technologies in pursuit of cost competitiveness Conventional existed tech • • Oil and gas recovery Refining Other coal Nuclear Less developed tech • • • Coal conversion Oil shale Tar sands Geothermal Sola
Dynamic Capabilities Accumulated via Coal Conversion R&D Complementary knowledge Prior refining tech (+) Accumulated refinery assets (+) But expected to be smaller than prior refining tech due to the smaller econ of scope of less developed knowledge Complementary assets Broader technical competences Other synthetic tech (+) Econ of scope on established knowledge + high TC of knowhow Accumulated coal assets (+) Others: Financial resources (+), competitor’s R&D spillovers (-) Control: Oil price, firm dummy
Evidences Descriptive: Total R&D expenditure Refining R&D Coal conversion R&D Hypothesis tests: Prior refining tech (+) Accumulated refinery assets (+) Other synthetic tech (+) Accumulated coal assets (+) Financial resources (+) Competitor’s R&D spillovers ( -) Oil price Firm dummy
Discussion & Conclusion When firms sought to augment knowledge stocks, the accumulated knowledge and resources provide complementarity and econ of scope When real oil prices fell in the 1980 s, coal conversion R&D spending slumped Established > less developed The econ of scope from complementarity < price drop Comment: Very good empirical paper Captures environment “change” Tests “accumulation”
- Slides: 6