Structure of a firm’s knowledge base and the effectiveness of technological search

In this study, we address the issue of how firms should structure their knowledge bases. The structure of a firm’s knowledge base refers to the pattern of combinative relationships or couplings between the elements of the knowledge base. We make a distinction between coupling, a search related decision made by a firm on which knowledge elements should be combined and interdependence, the inherent relationship between knowledge elements. We argue that this distinction provides additional insights into the factors that affect technological search. Specifically, we investigate the proposition that, in contexts where interdependencies are pervasive, a nearly decomposable structure increases the usefulness of inventions by mitigating the effects of computational complexity associated with technological search and improving our knowledge about interdependencies. We also investigate the proposition that a nearly decomposable structure makes the knowledge base malleable by increasing the absorptive capacity of the firm. We find support for our hypotheses in the context of the global semiconductor industry.