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

Knowledge Boundaries <strong>of</strong> <strong>the</strong> Firm in Russian Heavy
Engineering Companies
Evgeny Blagov
Graduate School <strong>of</strong> Management, Saint Petersburg University, Russian
Federation
evgeniy.blagov@gmail.com.
Abstract: The purpose <strong>of</strong> this research is to look at <strong>the</strong> factors influencing a company’s choice <strong>of</strong> technological
knowledge renovation sources in <strong>the</strong> Russian heavy engineering industry. The <strong>the</strong>oretical foundations <strong>of</strong> this
research are <strong>the</strong> transaction cost <strong>the</strong>ory <strong>of</strong> <strong>the</strong> firm, mainly continuing O. Williamson’s views on <strong>the</strong> boundaries <strong>of</strong>
<strong>the</strong> firm problem, and <strong>the</strong> knowledge-based view <strong>of</strong> <strong>the</strong> firm as a part <strong>of</strong> <strong>the</strong> resource-based view. The problem
addressed by <strong>the</strong> research is how a company chooses between different sources <strong>of</strong> technological knowledge
renovation (where <strong>the</strong> term “knowledge” refers to technological know-how) when <strong>the</strong> knowledge used for
developing <strong>the</strong> products <strong>of</strong> <strong>the</strong> company seems obsolete, thus creating a “knowledge gap” (or “knowledge
absence”). Continuing <strong>the</strong> “make-buy-or-ally” stream <strong>of</strong> literature, such variants <strong>of</strong> technological knowledge
renovation sources are considered as creation <strong>of</strong> necessary knowledge by own strength, focal firm’s acquisition
<strong>of</strong> <strong>the</strong> necessary knowledge provider, long-term alliance relationship creation with <strong>the</strong> necessary knowledge
provider, and, finally, non-recurring purchase <strong>of</strong> necessary knowledge from an external provider on <strong>the</strong> open
market. On <strong>the</strong> basis <strong>of</strong> <strong>the</strong> literature review in fields <strong>of</strong> boundaries <strong>of</strong> <strong>the</strong> firm and knowledge-based view <strong>of</strong> <strong>the</strong>
firm studies a set <strong>of</strong> factors is figured out <strong>the</strong> influence <strong>of</strong> which on <strong>the</strong> technological knowledge renovation
sources choice is analyzed in <strong>the</strong> quantitative study. These factors are <strong>the</strong> following: importance <strong>of</strong> <strong>the</strong>
knowledge resource involved in <strong>the</strong> focal transaction for <strong>the</strong> firm’s result, uniqueness (in comparison to <strong>the</strong>
respective market and industry) <strong>of</strong> <strong>the</strong> knowledge resource(s) involved in a focal transaction, <strong>the</strong> focal firm’s
technological knowledge as a whole, and <strong>of</strong> <strong>the</strong> focal firm’s production, <strong>the</strong> focal firm’s comparative orientation
on cost- or quality-based competition, congruence between <strong>the</strong> results <strong>of</strong> <strong>the</strong> focal firm and its (potential)
counterparty, focal firm’s ability to control <strong>the</strong> actions <strong>of</strong> that (potential) counterparty and, finally, necessity <strong>of</strong>
support and fur<strong>the</strong>r development <strong>of</strong> <strong>the</strong> focal knowledge resource. To check <strong>the</strong>se factors’ influence on <strong>the</strong>
companies’ technological knowledge renovation sources choice a set <strong>of</strong> hypo<strong>the</strong>ses is formulated, considering
both <strong>the</strong> direct influence <strong>of</strong> <strong>the</strong> factors’ importance on <strong>the</strong> firm’s technological knowledge renovation sources
choice and <strong>the</strong> mediating effect <strong>of</strong> such variables as “congruence between <strong>the</strong> results <strong>of</strong> <strong>the</strong> focal firm and its
(potential) counterparty”, “focal firm’s ability to control <strong>the</strong> actions <strong>of</strong> <strong>the</strong> counterparty” and “necessity <strong>of</strong> support
and fur<strong>the</strong>r development <strong>of</strong> <strong>the</strong> focal knowledge resource” on <strong>the</strong> direct interactions. The quantitative method
used for hypo<strong>the</strong>ses testing is <strong>the</strong> ordered probit regression with <strong>the</strong> influencing factors’ importance for <strong>the</strong> firm in
a knowledge renovation act as independent variables and four technological knowledge renovation source
variants as dependent variables. The questionnaire constructed for <strong>the</strong> quantitative study has been sent via email
to sample <strong>of</strong> 300 Russian companies <strong>of</strong> <strong>the</strong> industry classification “Heavy, energetic and transport
engineering” randomly selected by region with <strong>the</strong> response rate <strong>of</strong> 10%, giving <strong>the</strong> resulting sample <strong>of</strong> 30
companies.
Keywords: technological knowledge renovation, knowledge boundaries <strong>of</strong> <strong>the</strong> firm, transaction cost <strong>the</strong>ory <strong>of</strong> <strong>the</strong>
firm
1. Purpose <strong>of</strong> <strong>the</strong> research
The purpose <strong>of</strong> this research is to look at <strong>the</strong> factors influencing a company’s choice <strong>of</strong> technological
knowledge renovation sources in <strong>the</strong> Russian heavy engineering industry. Thus, <strong>the</strong> research
objectives are to suggest <strong>the</strong> main variants <strong>of</strong> technological knowledge renovation sources and <strong>the</strong>
main factors possibly exerting influence on <strong>the</strong> choice between <strong>the</strong>se sources, to suggest hypo<strong>the</strong>ses
about <strong>the</strong>se influences and to test <strong>the</strong> hypo<strong>the</strong>ses in an empirical setting <strong>of</strong> Russian heavy
engineering companies.
2. Theoretical framework
In <strong>the</strong> mainstream <strong>of</strong> contemporary economic and managerial sciences it is conventional to associate
<strong>the</strong> deliberate development <strong>of</strong> boundaries <strong>of</strong> <strong>the</strong> firm studies as a separate area <strong>of</strong> research with <strong>the</strong>
name <strong>of</strong> Ronald Coase, especially with his 1937’s work “Theory <strong>of</strong> <strong>the</strong> Firm”.
A main proposition <strong>of</strong> this work, forming <strong>the</strong> basis <strong>of</strong> such a branch <strong>of</strong> economic <strong>the</strong>ory as <strong>the</strong> New
Institutional Economics, is a proposition that <strong>the</strong> boundaries <strong>of</strong> <strong>the</strong> firm are determined by a balance
<strong>of</strong> <strong>the</strong> “costs <strong>of</strong> using <strong>the</strong> price mechanism” (later called “transaction costs” by a number <strong>of</strong> different
authors in 1950s; a good general definition <strong>of</strong> <strong>the</strong> transaction costs concept was given by Kenneth
Arrow in [Arrow, 1969], where <strong>the</strong>se were referred to as “<strong>the</strong> costs <strong>of</strong> using <strong>the</strong> economic system”)
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