This paper examines whether firms consider adopting cross-functional teams as a device of transforming external information to innovation or upgrading. While addressing the difference between firms with cross-functional teams and without teams, we examine the effects of complementarities between internal and external resources on product innovation and product-level creative destruction, using survey data on enterprises' self-reported customers and suppliers of manufacturing in Indonesia, the Philippines, Thailand, and Vietnam. The firms with cross-functional teams are more likely to have higher impacts of exchanging engineers on product innovation and destruction. We use the interaction terms between teams and exchanging engineers as an instrumental variable for acquiring information on the past failure experience of other firms, explaining the higher level of product innovation and replacement. Product innovation and replacement need a wider sharing of outside knowledge within a firm.
Global production chain; Interfirm learning; Teams; Linked producer-supplier analysis
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The DRUID Society Conference 2012 on Innovation and Competitiveness