In Search for the Not-Invented-Here Syndrome: The Role of Knowledge Sources and Firm Success

The not-invented-here (NIH) syndrome refers to internal resistance in a company against externally developed knowledge. Although previous research has shown that firms can benefit significantly from external knowledge inflows in terms of firm performance and innovativeness such positive effects from external knowledge sourcing cannot be taken for granted. The adaption of external knowledge requires flexible processes facilitating changes in the company’s vision, strategy and culture and a welcoming attitude of employees towards externally generated knowledge. If such an attitude of the employees is missing they can show resistance against external knowledge and the expected benefits for the company fail to realize: this is the NIH syndrome. The literature on the NIH syndrome is relatively scarce. Existing studies focus on potential antecedents of the NIH syndrome like team tenure and inappropriate incentive systems. In this paper, we argue and show that the occurrence of the NIH syndrome also depends on the source of external knowledge and the success of the company that aims at adapting the external knowledge. Drawing from social identity theory we hypothesize that internal resistance is most likely to occur if knowledge is acquired from similar organizations. Individuals and working teams can feel their own expertise threatened when they valuate competitor knowledge and react with resistance against the externally generated knowledge. This hypothesis is supported by our finding that the NIH syndrome occurs when knowledge is acquired from competitors but not if knowledge is acquired from suppliers, customers or universities. Further, we show that successful companies are most likely to experience the NIH syndrome (if knowledge is acquired from competitors). This is in line with our hypothesis that firm success increases the extent to which employees identify themselves with their company resulting in stronger in-group favoritism and a superior tendency to reject externally generated knowledge. Our empirical analysis is based on a sample of German manufacturing firms.

Hussinger, Katrin and Annelies Wastyn (2011), In Search for the Not-Invented-Here Syndrome: The Role of Knowledge Sources and Firm Success, ZEW Discussion Paper No. 11-048, Mannheim, published in: R&D Management.