Sourcing Applied and Basic Knowledge for Innovation and Commercialization Success

We study how sourcing of applied and basic knowledge is related to the likelihood and speed at which inventions become innovations as well as their profitability. By using a patent database with unique commercialization information, we reveal that inventions strongly based on applied knowledge lead to innovations more quickly, while inventions embedding basic knowledge lead to more profitable innovations. Sourcing both applied and basic knowledge (i.e., their combination effect) is negatively related to innovation speed. Explanations include the notion that inventions based on applied knowledge follow more established technological trajectories. Hence, such inventions relatively easily turn into innovations, but due to hard competitive pressure, profits are modest. Conversely, inventions embedding basic knowledge likely depart from conventional technological trajectories and market logic and are more difficult and/or riskier to transform into innovations. However, if such innovations are launched, the gains could be significant because of their improved performance and distinctiveness. Finally, recombining applied and basic knowledge may become too complex to handle, thus hampering innovation speed. From a managerial perspective, managers who seek to innovate quickly should exploit inventions embodying applied knowledge; however, those who seek increased profitability should exploit inventions embodying basic knowledge even if this may be more difficult and riskier. From a policy perspective, actions aiming to lessen the risks associated with commercializing inventions based on basic knowledge should be implemented.