Proceedings of the 12th European Conference on Knowledge ...

2. Literature review
Meysam Poorkavoos, Yanqing Duan and John Edwards
2.1 Inter-firm networks and innovation
Previous literature addressed different motivations for establishment <strong>of</strong> inter-firm relationships e.g.
spreading <strong>the</strong> cost, sharing risks, and knowledge sharing. Among <strong>the</strong>m acquisition <strong>of</strong> knowledge and
capabilities from partner firms are one <strong>of</strong> <strong>the</strong> most cited reason for inter-firm collaboration (Mowery et
al. 1996). Knowledge is <strong>of</strong>ten tacit and difficult to price, thus it is rarely possible for a firm to buy it from
market (Mowery et al. 1996). A firm that requires a particular knowledge for a special purpose ,such
as creating a new product, has a better chance <strong>of</strong> success by forming a relation with a partner which
already has <strong>the</strong> expertise in that area. So <strong>the</strong> focal firm is able to fill <strong>the</strong> gap in its knowledgebase by
<strong>the</strong> transferred knowledge from <strong>the</strong> partner.
2.2 Innovation
Innovations are not all similar, <strong>the</strong>y reflect <strong>the</strong> strategic objectives pursued by <strong>the</strong> company (Anderson
and Tushman 1990). Because <strong>of</strong> <strong>the</strong> heterogeneity in innovation, a distinction between its different
types is necessary (Moller et al. 2007). Van de Ven et al. (1999) defined innovation as “<strong>the</strong>
development and implementation <strong>of</strong> new ideas and knowledge into a socially and economically
successful product, process or service". Incremental innovation is defined as minor changes or
extensions to <strong>the</strong> current products, existing services or processes <strong>of</strong> <strong>the</strong> organizations (Dewar and
Dutton 1986) and radical innovation is <strong>the</strong> development <strong>of</strong> new products that requires significantly
new technology or ideas that were not existed in <strong>the</strong> market before or requires fundamental changes
to <strong>the</strong> existing market (McDermott and O'Connor 2002). As it is shown in figure 1, product and
process innovations are subgroup <strong>of</strong> radical and incremental innovations. In <strong>the</strong> o<strong>the</strong>r word
companies can have both radical product/service innovation and incremental product/service
innovation. This is same with process innovation (radical process innovation, incremental process
innovation). Since products/services and processes in SMEs are limited and <strong>the</strong>y do not have
different variety in <strong>the</strong>ir product or services comparing to larger organizations, it is more appropriate
for this research to study innovation in radical and incremental level.
Figure 1: A taxonomy <strong>of</strong> innovation
3. Hypo<strong>the</strong>sis development
Ego network approach has been adopted because it helps to explain how being part <strong>of</strong> a network
affect firms action and outcomes (Provan et al. 2007). Ego network is defined as networks consisting
<strong>of</strong> one focal actor (ego) toge<strong>the</strong>r with all partners in first order neighbourhood (alters) <strong>of</strong> <strong>the</strong> ego and
all <strong>the</strong> links among <strong>the</strong> partners (Everett and Borgatti 2005). Three aspects <strong>of</strong> ego network are
identified: 1) structural properties (Burt 1992), 2) relational properties (Gulati et al. 2002), and 3) nodal
properties (Beckman and Haunschild 2002). Following section presents <strong>the</strong> hypo<strong>the</strong>ses <strong>of</strong> <strong>the</strong> study.
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