Keep searching and you'll find: what do we know about variety creation through firms' search activities for innovation?

Abstract

This paper critically reviews and synthesizes the contributions found in theoretical and empirical studies of firm level innovation search processes. It explores the advantages and disadvantages of local and non-local search, discusses organizational responses, and identifies potential exogenous triggers for different kinds of search. It argues that the initial focus on local search was a consequence, in part, of the attention in evolutionary economics to path-dependent behavior, but that as localized behavior was increasingly accepted as the standard mode, studies began to question whether local search was the best solution in all cases. More recently, the literature has focused on the trade-offs being created, by firms having to balance local and nonlocal search. We account also for the apparent “variety paradox” in the stylized fact that organizations within the same industry tend to follow different search strategies, but end up with very similar technological profiles in fast-growing technologies. The paper concludes by highlighting what we have learnt from the literature and suggesting some new avenues for research.