The impact of R&D sources on new product development: Sources of funds and the diversity versus control of knowledge debate

We build on the knowledge-based view to study the relative impact of alternative R&D sources on innovation performance. We contrast two arguments that have created a debate in the literature: One is that diversity of knowledge is better for innovation, because the integration of a larger variety of knowledge helps create new products that can fulfill unmet customer needs; another is that control of knowledge is better, because the incentives and contextual system of the firm facilitate employees' experimentation, which supports the creation of new products. We provide one solution to this debate by arguing that the relative importance of diversity and control of knowledge on innovation depends on the sources of finance. Hence, we find that, in general, control of knowledge has a higher impact than diversity of knowledge on the sale of new products. We also find that alternative sources of finance moderate the relationships: internal funds strengthen the impact of R&D sources with more diversity of knowledge on the sale of new products, while external funds strengthen the impact of R&D sources with more control of knowledge on the sale of new products.Authors appear in alphabetical order. We thank Tina Ambos, anonymous reviewers, and participants at the European International Business Academy annual meeting for useful suggestions for improvement. We thank the National Statistics Institute, the Science and Technology Foundation, and the Foundation for Technical Innovation of Spain for access to the database. This project was funded by the Ministry of Economy and Competitiveness (ECO2015-67296-R, MINECO/FEDER, UE) and the Community of Madrid and the European Social Fund (S2015/HUM-3417, INNCOMCON-CM). Cuervo-Cazurra thanks the Walsh Research Professorship, the Robert Morrison Fellowship and the Lloyd Mullin Fellowship for financial support. Rodriguez thanks Ramon Areces Foundation for financial support