Using External Knowledge to Improve Organizational Innovativeness : Understanding the Knowledge Leveraging Process

Organizations struggle constantly to develop competitive advantages over rivals because advantages are often short-lived. As a result, the marketplace is in a constant state of change. To be successful in this environment, managers must find ways to innovate – again and again. That is, they must continually introduce new processes, products, or ideas to the organization. However, the question is, “How can organizations continue to be innovative?” Innovation requires companies to develop new knowledge and expertise. Yet, many organizations find it difficult to acquire the necessary capabilities on their own. Consequently, many of them turn to partners for assistance. In order to have a better understanding of this process, this study proposes a knowledge leveraging process model, which hypothesizes (1) joint sensemaking is a key antecedent to both explicit and tacit knowledge exchange, (2) a dual role for explicit knowledge exchange (i.e., as an antecedent of both tacit knowledge exchange and absorptive capacity), and (3) absorptive capacity is a key mediator between knowledge exchange (both explicit and tacit) and organizational innovativeness. Using survey data gathered from over 230 Chinese companies, the results suggest key roles for both joint sensemaking and absorptive capacity in the knowledge exchange process. In addition, our findings provide evidence regarding the interplay between explicit and tacit knowledge exchange and their role in the leveraging process. The study increases our understanding of how organizations leverage external knowledge to improve organizational innovativeness. In addition, it provides specific guidance for managers interested in leveraging external knowledge