Immobility of tacit knowledge and the displacement of the locus of innovation

Purpose – The paper seeks to identify the drivers behind the displacement of the locus of innovation from a hierarchical model to a distributed environment including customers, (lead) users, intermediaries and other external stakeholders. Design/methodology/approach – Exploring the corporate, technological and contextual transformations the paper combines ideas from innovation (taking Rothwell's 1994 fifth‐generation innovation process as a point of departure) with knowledge management theories. Findings – Immobility of tacit knowledge – a prerequisite for innovation – is a crucial factor behind the increasing disintegration of the R&D function. Innovation‐related activities will tend to be allocated between companies and other external sources (customers and users, etc.) depending on the location of tacit knowledge underlying them. Increasingly, customers are taking over more and more of firms' innovation‐related activities because of the high costs of importing to the R&D department the tacit knowledge underlying them. Firms, in their turn, will retain those (manufacturing) activities of which they possess experience‐based knowledge. Research limitations/implications – The present research is explorative in nature; thus, the propositions tentatively developed are in need of further elaboration and empirical investigation. Practical implications – To the extent that innovation is displaced into distributed environments, one of the crucial implications for organisations is how to build the necessary competencies to effectively exploit, coordinate and streamline knowledge flows from different sources and turn them into new ideas and innovations. Originality/value – The value of the paper is its extension of Rothwell's Fifth generation innovation process model.