Turning Liabilities of Global Operations into Assets: IT-enabled Social Integration Capacity and Exploratory Innovation

Abstract

Although the ability to produce exploratory innovations is important for firm performance, firms face difficulties in producing exploratory innovations because knowledge is often distributed across cultures and geographies. In this study, we examine whether information technology (IT) helps firms to overcome the liabilities of global operations particularly when it comes to creation of exploratory innovations. We argue that information technologies that promote social integration facilitate more novel knowledge recombinations that help to overcome the difficulties arising from global operations. We draw on the knowledge-based view of the firm and hypothesize that IT-enabled social integration capacity influences exploratory innovation by enabling firms to leverage global cultural diversity and global geographical dispersion. Our empirical analyses using archival panel data from 120 public U.S. manufacturing firms from 2003 to 2014 support these hypotheses. A key implication of our results is that IT helps firms to achieve greater exploratory innovation by turning the potential liabilities of cultural diversity and geographical dispersion associated with global operations into assets.