In this study we examine how different approaches to exploratory search are used to generate an innovation influence appropriation of its technical value. Technical value is the benefit a firm derives from utilizing the underlying knowledge embedded in an innovation to stimulate and generate further innovations. Based on a sample of 772 patents from the ink jet printing field, we find that exploratory search that spans technical domains enhances appropriation of innovations’ technical value; conversely, exploratory search spanning industry domains diminishes appropriation of innovations’ technical value. These effects are further influenced by the age of the knowledge explored. In addition, we find that appropriation of innovations’ technical value enhances the market share of the innovators. We discuss the implications of these findings for both future research and for improving business practice.
Innovations notably influence the competitiveness of organizations in the marketplace. They can, for example, enhance cash flows and profits and make organizations attractive to investors. Indeed, the significance of an innovation's value to organizations is evident from several empirical studies that find innovation irrefutably linked to a wide range of market performance outcomes such as sales growth, market share, profitability, and share price valuations (e.g., Bowen et al., 2010 and Jimenez-Jimenez and Sanz-Valle, 2011).
Even as market performance is a more apparent value of innovations, a different and not as conspicuous an aspect of its value stems from the new underlying knowledge that innovations embed in themselves. This new knowledge often provides a foundation for ensuing knowledge advancement and a consequent flow of continuing innovations. For example, when aspirin was introduced by Bayer as an innovation, it embodied new knowledge of a chemical called acetyl salicylic acid (ACA) that reduced pain and fever ( Sneader, 2000). This knowledge of ACA eventually generated a novel understanding of how the blocking of platelets in blood can prevent heart attacks ( Julian, Chamberlain, & Pocock, 1996), thereby spawning a subsequent set of innovations and a new class of drugs such as Plavix and Reopro ( Randall & Neil, 2004). We distinguish such value as an innovation's technical value.
An innovation's technical value usually takes longer to realize compared to market performance outcomes. Also, while an innovation's market performance related benefits are clearly enjoyed by the innovator, the benefits related to an innovation's technical value can spill over to other organizations and are not always retained by the innovator. After an innovation enters the public domain, its underlying knowledge may become visible and accessible to the world. Consequently, the benefits of its technical value also become potentially available to other interested organizations, which are frequently competitors. These rival organizations can use this underlying knowledge to advance their trajectories in their own way and exploit it to generate their own set of innovations. Bayer, for instance, was not the only company to benefit from the new knowledge about ACA embodied in its innovation, aspirin. A host of other companies used that knowledge not only to develop alternative mechanisms for reducing pain and fever (such as Motrin and Aleve) but also to develop a new class of drugs for other medical applications such as to prevent strokes and heart attacks ( Randall & Neil, 2004).
Our study attempts to understand the factors that influence how organizations advance their own innovation trajectory from the knowledge embedded in their innovations. Put another way, we examine how organizations appropriate for themselves the technical value of their innovations. We define technical value as the extent to which the underlying knowledge embedded in an innovation stimulates subsequent innovations. We further define the appropriability of an innovation's technical value as the extent to which the locus of subsequent innovations stimulated by an innovation is retained within the organization initiating that innovation.
