Managing Innovation Networks for Knowledge Mobility and Appropriability: A Complexity Perspective

Despite widespread recognition that an enterprise’s critical resources may extend beyond the enterprise’s traditional boundaries, with the focal enterprise drawing upon the resources of other firms and institutions through networks, there is a dearth of empirical research on knowledge mobility and appropriability patterns among innovative Australian small and medium-sized enterprises (SMEs) through the lens of complexity science. We address this gap, by examining what, how, and why innovation-related knowledge flows from networks into SMEs, and how SMEs protect intellectual property (IP) and appropriate value. Based on a survey of 838 SMEs, we find patterns of internal and external knowledge flows with SMEs searching for ideas internally, and via market-based networks, with internally sourced ideas having the strongest impact on innovativeness. The results also show SMEs are most likely to network with market-based agents relative to localised learning networks. Further, networking with suppliers increases innovativeness, as does sourcing knowledge as part of a package with the purchase of new equipment, underscoring the importance of the vertical supply chain network. Despite limited interaction with localised learning networks, outsourcing R&D to these networks increases innovativeness. We also find that informal IP, in particular, secrecy, complexity of product design, and frequent and rapid changes to products/services increases innovativeness, as do formal copyrights and trademarks. In addition to protecting IP, these practices are product market strategies, enabling SMEs to commercialise innovations and appropriate value. But while appropriability mechanisms provide innovation benefits to individual agents, from the perspective of complexity science, IP mechanisms act as barriers to effective knowledge flows (e.g. information sharing) preventing innovative networking through the mechanism of a positive feedback loop to evolve to the state where distributed intelligence comes into play and facilitates break-through innovations.