Does the source of external knowledge matter? Examining the role of customer co-creation and partner sourcing in knowledge creation and innovation

Abstract

External knowledge is widely acknowledged to be critical for organizational innovation. However, we lack understanding of how different sources of knowledge—namely knowledge from customers and partners—influence innovation. Grounded in the knowledge-based view of the firm, we theoretically develop and empirically test a model of mechanisms through which two forms of external knowledge acquisition i.e., customer co-creation and partner sourcing, foster knowledge creation and innovation. We posit that the different forms of external knowledge acquisition contribute differentially toward innovation outcomes. Finally, we examine the moderating role of knowledge dissemination capability on the relationships between external knowledge of both forms. We test our proposed model using data gathered from 655 organizations in two knowledge intensive sectors i.e., financial and information technology. Our model explains 65% of the variance in knowledge creation and highlights that organizations with higher degree of knowledge creation are more likely to innovate through new patents. We extend prior research on customer co-creation and organizational innovation by identifying intervening organizational variables and mechanisms that explicate the effects of external knowledge on innovation. The results provide important implications for organizations regarding the capabilities needed to utilize external knowledge for innovation.