Knowledge sources and operational problems: Less now, more later

Unlike problems requiring new-to-the-world solutions that combine knowledge from multiple sources, operational problems can often be solved by repurposing existing knowledge from other contexts into new-to-the-firm solutions. Firms that seek new-to-the-firm solutions to operational problems face a cost-benefit tradeoff when deciding how many knowledge sources to use. With less need for knowledge recombination than for new-to-the-world solutions, greater knowledge breadth incurs greater screening and implementation costs without concomitant benefits. We study how U.S. manufacturing facilities from 1991 to 2005 improve operational performance by reducing their rate of annual output of toxic chemical waste (i.e., improvements to operational effectiveness). Results show that search involving fewer knowledge sources in a given year is associated with greater improvements in operational performance (greater waste reduction). At the same time, however, using multiple knowledge sources over time helps improve operational performance, suggesting that avoiding satiation from a single source and learning across sources play temporal roles in toxic chemical waste reduction. Overall, the results suggest that the greatest improvements in operational performance arise with a focused search for new-to-the-firm solutions within periods while also exploring multiple sources over time.

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