The Benefits and Liabilities of Interacting for Innovation : a Quantitative Model

Sheen S. Levine, Trish Gorman, and Michael J. Prietula study how corporate performance is affected by peer-to-peer sharing, instances when people supplement their knowledge by interacting with others. Popular wisdom holds that such interaction benefits performance unequivocally, but the authors find otherwise. Combining qualitative fieldwork – interviews, observation, and document analysis – with mathematical modeling, they show that sharing can benefit performance, matter little, or even harm it. The effect of sharing on performance depends on a least three variables (and likely more): the learning capacity of individuals in the organization, the state of organizational memory, and turbulence in the competitive environment. The findings suggest that the effects of interaction on innovation are neither pure nor simple