Cross-Functional Knowledge Integration, Patenting and Firm's Performance

Abstract

Knowledge integration, which facilitates interactions between R&D and other functions within a firm value chain, and patenting are both reckoned to increase the returns to R&D and firm performance. However, the combined effect of a joint use is in many ways ambiguous since those strategies pursue different objectives in terms of managing the flow of information within the firm’s boundaries. Although knowledge integration tends to foster within-firm flows of information that may be complementary to patented ideas, some of the internal knowledge leaking to competitors could deteriorate the profitability of appropriability strategies. Using survey-based data on the organization and appropriability of R&D in the US manufacturing sector, we present evidence suggesting that contextual variables favoring R&D spillovers across rivals tend to increase the substitutability between patenting and cross-functional knowledge integration.

Keywords: R&D, Performance, Knowledge Integration, Patents, Spillovers

JEL Classification: O31, O32, L15