The Problem You Know: an Empirical Examination of Firms' Recombination Strategies

Abstract: In this study, we empirically examine the approaches firms take when recombining knowledge to develop new technologies. Conceiving of recombination as the matching of problems to solutions, we develop a typology of four recombination strategies based on whether the firm is familiar with the problem and / or the solution. We then examine the prevalence of these four strategies, both in general and when pursuing potentially radical inventions. Citation-level analyses for the population of patents granted to for-profit firms by the US patent office between 1981 and 2004 show that while firms are most likely to recombine knowledge across domains with which they are already familiar, a surprisingly high proportion of recombinations occur across domains that are both new to the firm. More interestingly, when recombining existing and new knowledge, firms are substantially more likely to seek unfamiliar solutions to familiar problems than to apply familiar solutions to unfamiliar problems, with this pattern being more pronounced when pursuing potentially radical technologies. Supplementary analyses suggest that this ‘preference for problems’ is not driven by access to complementary assets or the superior effectiveness of such a strategy, but seems to reflect a cognitive focus on problems when evaluating technological opportunities.