Externally Acquired or Internally Generated? Knowledge Development and Perceived Environmental Dynamism in New Venture Innovation

We investigate the relative importance of external market knowledge acquisition and internal knowledge generation in new venture innovation. We argue that the effectiveness of externally acquired knowledge is less important in environments that are perceived as highly dynamic. To test our model, we examine 316 new ventures in one singular, high-growth sector. We find that managers have different interpretations of dynamism within this single sector and that these perceptual variations have important implications for how new ventures develop knowledge in pursuit of innovation. In so doing, we illustrate important within-sector mechanisms and boundary conditions behind new venture knowledge development and innovation.