Abandonment of core knowledge areas and innovation performance

Abstract

Within a constantly evolving technological environment, it is imperative for innovative organizations to be able to successfully respond and adapt to environmental changes. To achieve this, they must have the ability to efficiently and timely modify their innovation resources by divesting and reorganizing them, even if these are their core ones. Although divestiture of core innovation resources is an important managerial phenomenon, the literature is rather silent on this issue. To address this significant gap, this study examines how the abandonment of core knowledge areas is related to innovation performance and how this relationship is moderated by absorptive capacity. Two hypotheses are developed about these research questions and tested on a sample of firms from the pharmaceutical, biotechnology, and chemical industries. Findings suggest that the abandonment of core knowledge areas is a negative predictor of innovation performance; however, when the abandonment interacts with absorptive capacity the effect becomes positive.