Valuing Internal vs. External Knowledge: Explaining the Preference for Outsiders

Stanford GSB Working Paper No. 1776

33 Pages Posted: 8 Apr 2003

See all articles by Tanya Menon

Tanya Menon

University of Chicago - Booth School of Business

Jeffrey Pfeffer

Stanford Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 2003

Abstract

This paper compares how managers value knowledge from internal and external sources. Although many theories account for favoritism toward insiders, we find that preferences for knowledge obtained from outsiders are also prevalent. Two complementary case studies and survey data from managers demonstrate the phenomenon of valuing external knowledge more highly than internal knowledge and reveal some mechanisms through which this process occurs. We found evidence that the preference for outsider knowledge is the result of managerial responses to 1) the contrasting status implications of learning from internal versus external competitors, and 2) the availability or scarcity of knowledge - internal knowledge is more readily available and hence subject to greater scrutiny, while external knowledge is more scarce, which makes it appear more special and unique. We conclude by considering some consequences of external knowledge preference for organizational functioning.

Suggested Citation

Menon, Tanya and Pfeffer, Jeffrey, Valuing Internal vs. External Knowledge: Explaining the Preference for Outsiders (January 2003). Stanford GSB Working Paper No. 1776, Available at SSRN: https://ssrn.com/abstract=369480 or http://dx.doi.org/10.2139/ssrn.369480

Tanya Menon (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Jeffrey Pfeffer

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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