Uncertainty has long been understood as a stimulus for firms to manage their boundaries, i.e., to define the scope of their activities. However, two to some extent competing strategy perspectives – governance and competence – predict that firms faced with uncertainty would either increase or decrease their scope of activities, respectively. In an attempt to reconcile these conflicting positions, we propose a model in which the system-level property knowledge interdependence moderates the effect of technological uncertainty on firms‟ R&D scope decisions. To test our model empirically, we develop a new set of measures for knowledge interdependence and technological uncertainty, and collect 33 years of data (1967-2000) on patenting activity and firm boundary location in the automotive airbag industry. The results of our analysis generally support our model, and show that in case of knowledge-creating activities such as R&D, scope decisions under technological uncertainty are more driven by concerns about co-specialization effects than transaction efficiencies. We discuss implications of these findings for managerial practice and future research.
Business Administration, Management, and Operations | Management Sciences and Quantitative Methods
Lee, Won Hee and Fixson, Sebastian K., "Modularity moderating between Governance and Competence Perspectives: The Effect of Knowledge Interdependence on Firms’ R&D Scope Decisions" (2010). Technology, Operations & Information Management Working Papers. 1.