Relationship between Knowledge Transfer and Innovation.

Relationship between Knowledge Transfer and Innovation.

Firstly, we try to define the definition of innovation and knowledge transfer since these two key terms are widely studied by different research paper. Some papers categorized innovation into product innovation, process innovation, organizational innovation, and marketing innovation etc. From these innovations we can group into horizontal innovation and vertical innovation. Horizontal innovation basically mean that a firm just try to improve the existing product/service based on the existing resource and/or existing technology, where vertical innovation is defined as a process of creating a new product/service based on new technology and/or existing technology. The term knowledge transfer is defined as the process of using knowledge from internal and external sources to improve a firm innovation and firm performance.

There are two different types of knowledge transfer: Internal knowledge sources and external knowledge source. Internal knowledge source is a process where knowledge is transferred among a peer subsidiary firms. For example, a peer subsidiary firm may use the material or manuals from a headquarter at the beginning to run the business. Thus, this is called the peer subsidiary firms got internal knowledge transfer from a headquarters. For external knowledge sources refer to the using of outside resources to improve the firm capabilities. There are different types of external knowledge transfer sources. These sources are customers, suppliers, universities, external research centers, competitors. A firm can acquire external knowledge transfer through joint venture, collaboration, and cooperation etc.

From these both internal and external sources of knowledge transfer, we can see that firm innovation also improve because knowledge from these two sources can bring innovative ideas to a firm to create something by themselves. There are different types of knowledge that a firm adopt from external knowledge. For example, a firm might adopt some innovative ideas such are Human Resource Management Practices, Career Path Development Program, Innovation Contest, and Employee Retention Program etc. Actually, these processes happen in a similar way to SECI model, where the interaction from both internal and external resources are important for firm innovation. 

In conclusion, Innovation is critically important for a firm to survive in a competitive golden age era. The knowledge from innovation can be acquired from both internal and external sources.