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Drinking in Knowledge
Wharton professor says small Silicon Valley firms find informal ways — and places — to acquire know-how.
Companies are no different from the people who comprise them — they have to acquire knowledge to thrive, even survive. Lori Rosenkopf, an associate professor of management at the Wharton School, wanted to know whether big companies did that differently than little ones did.
In a study recently published in Research Policy, she and two co-authors found that they did.
Rosenkopf's study says bigger startups learn more from formal
outside sources such as alliances than smaller firms, which instead leverage
informal sources
such as employee networking and job-hopping.
Interestingly, Rosenkopf and her co-authors also found that a firm's
appetite for learning from informal outside sources shrinks as its size increases.
Big
firms appear to have greater means for external learning but less motivation. "Larger
firms become more self-reliant and fail to value relationships with other institutions
within the region," the paper says. Think about it this way: Just because
spinach is good for you doesn't mean you want to eat it.
Rosenkopf, who started her career as an engineer, examined patent citations in the semiconductor industry in California. That industry is centered in Silicon Valley, a place that puts a famously high premium on informal networking. A storied spot there for exchanging ideas — and business cards — was the Wagon Wheel bar. For many, a big part of the Valley's dotcom legend includes the now-closed Wagon Wheel.
Happy hours at the
Wagon Wheel were the sort of informal means that little firms exploit
better than their bigger counterparts
do. The crowd of programmers
and
engineers in a bar such as the Wagon Wheel on a Friday night may appear
to be just catching a buzz or chatting up members of the opposite sex.
But Rosenkopf
would argue that, in some cases, they're also laying the groundwork
for future collaborations.
Internet chat rooms and professional groups work the same way. Employees
may not participate with the stated goal of acquiring knowledge that they
can apply
at work. But that's often the outcome.
"These networking organizations create a climate where ideas are being
exchanged," Rosenkopf
says. "Informal venues allow you to incorporate innovative ideas
into your technology development. For small firms, especially, they're
important because they're not as resource intensive, and these firms
don't
have as many other options."
Job-hopping — another trait that Silicon Valley is famous for — also leads to intellectual cross-pollination.
"Everybody does hiring," Rosenkopf explains. "But smaller firms are better at incorporating the knowledge. Their patents are building on the work that other firms have done." A prior study has shown that firms increasingly cite their own patents over time.
What do Rosenkopf's findings mean for managers?
At big firms, they need to fully exploit whatever alliances they have and look for opportunities to form new ones. But they also need to be sure that they're not missing opportunities for their employees — and thus their firms — to learn from informal channels.
Granted, the culture and bureaucracy of big firms typically makes it tough to simply head down to the local bar for a staff meeting. But big firms can put in place procedures that encourage employees to take advantage of informal means.
Consider Rubbermaid,
Rosenkopf says. "They
have something they call ‘museum
time.' They allow their tech people to use some time to go
to external activities without trying to manage that time very
heavily."
The name came from a visit that several Rubbermaid engineers
paid to a museum, she says. They saw an ancient Egyptian pot,
and it
inspired them
to create
a new kind of closure they could use on Rubbermaid's containers. "Lots
of people say that innovation is really just the recombination
of idea," she
points out.
A more formal means of tapping into the informal exchange of ideas is university executive-education programs. "When companies send employees to exec ed, they're giving them a chance to interact with managers from other industries."
Small firms, for their part, need to make the best of the limited resources they have. "Your first means of attack is these informal channels," Rosenkopf says.
And they need to let their employees go to Happy Hour.
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