Innovation Through Boundary Spanning: The Role of IT in Enabling Knowledge Flows Across Technological and Geographical Boundaries

Introduction

Innovation is the engine of growth for most companies. This is especially true for pharmaceutical firms. Executive of Eli Lilly stated, “If we don't innovate, we go out of business.”¹ However, research has shown that on average it takes about three thousand raw ideas to produce one significantly new successful commercial product (Schilling, 2006; Stevens & Burley, 1997). The odds of certain industries are even worse. For instance in pharmaceutical industry, one out of every five thousand compounds reach a pharmacists’ shelf ². And, only one-third of those will be successful enough to recoup their R&D costs (Schilling 2006). Recently information technologies have been widely used in innovation activities to enhance the effectiveness of innovation. For instance, AstraZeneca, a major player in the pharmaceutical industry, is relying on its IT to redesign its innovation model, targeting technologies to “facilitate spontaneous conversations between stakeholders… to share huge data sets and images… to support collaboration both within the walls of the enterprise as well as with outside partners” (Hickins, 2012). Wyeth, a biotechnology and pharmaceutical company that was acquired by Pfizer, also invests significantly in IT to support its innovation activities (Mandviwalla & Palmer, 2008). These investments enable virtual teams from different business units around the world to collaborate in research and to develop new drugs (Carr, 2008).

Recent empirical studies also attest to the role of IT in facilitating innovation, showing that IT has a positive effect on technological discoveries (Kleis, Ramirez, & Cockburn, 2011; Ravichandran, Han, & Mithas, 2017), new product/services (Joshi, Chi, Datta, & Han, 2010; P. A. Pavlou & Sawy, 2006) and growth potential (Bardhan, Krishnan and Lin 2013). However, little attention has been paid to the effect of IT on specific type of innovation (Nambisan, Lyytinen, Majchrzak, & Song, 2017). We aim to investigate the effect of IT on the innovations that involve firms’ drawing on distant knowledge (i.e., knowledge from unfamiliar technological domains or distant geographic regions), which we refer to as innovation through boundary spanning because firms need to go beyond their existing technological or geographic boundaries to create such innovations (Fleming, 2001; Schilling & Phelps, 2007; von Krogh, 2012).

Innovations through boundary spanning are likely to generate breakthrough impact (Ahuja & Katila, 2001) (Harhoff & Lakhani, 2016) and greater influence on the subsequent technological evolution (Rosenkopf & Nerkar, 2001). For instance, the major strength of Thomas Edison’s laboratory lies in combining knowledge from disparate industries. Their inventions, such as the phonograph, light bulb, motion picture camera, and electric motor, all involved blending existing unconnected technologies used in telegraph, lighting, telephone and railway systems (A. B. Hargadon & Sutton, 1997). Innovation through boundary spanning also has the potential to speed up new product development and reduce the costs of innovation (Fleming, 2001; A. Hargadon, 2003). For instance, a European partner of Proctor & Gamble’s (P&G) discovered a small Italian bakery that had invented an ink-jet method for printing edible images on food products. This partner shared the discovery with P&G by posting it on P&G’s knowledge management system. The Italian bakery’s invention was then quickly integrated into the development of Pringles potato chips. As a result, P&G created a whole new product line of Pringles Prints from concept to launch in less than a year, which might have otherwise taken much longer, and at a fraction of what it would have otherwise cost (Huston & Sakkab, 2006). In this example, P&G innovated through spanning its geographic boundaries and was able to reduce the costs of innovation and the time to market.