Knowledge Protection in Firms: A Conceptual Framework and Evidence from HP Labs

Date01 March 2019
DOIhttp://doi.org/10.1111/emre.12336
AuthorJulian Williams,Andrea Patacconi,Karen Elliott,Joseph Swierzbinski
Published date01 March 2019
Knowledge Protection in Firms: A Conceptual
Framework and Evidence from HP Labs
KAREN ELLIOTT,
1
ANDREA PATACCONI,
2
JOSEPH SWIERZBINSKI
3
and JULIAN WILLIAMS
4
1
Newcastle University Business School,Newcastle University, Newcastle NE1 4SE,UK
2
Norwich Business School, University ofEast Anglia, Norwich NR4 7TJ, UK
3
University of Aberdeen Business School, University of Aberdeen, Aberdeen AB24 3QY, UK
4
Durham University Business School, Durham University, Durham DH1 3LB,UK
This paper proposes a simple framework to examine organizational methods of knowledge protection. The
framework highlights a basic trade-off between improving decision-making and innovation through communication
and mitigating security risks by imposing restrictions on communication flows. The trade-off is mediated by factors
such as the sensitivity of information, the degree to which employees can be trusted to handle sensitive information
appropriately, and firmsinvestments in legal protection mechanisms. Evidence from HP Labs supports the basic
predictionsof the model, in particular the importance of employee trustworthiness andinternalized codes of behavior
in promotingopen communication.Our interviews also suggest a potential conflictbetween two of the most important
appropriability mechanisms: secrecy and lead-time advantage.
Keywords: Secrecy; information security; organization design; trust; innovation; appropriability mechanisms
Applesobsession for secrecy is legendary. Big projects
are dividedinto small teams and employees aretold not
to fraternize with members of other groups, lest
someone gain access to the bigger picture (New York
Times, July 10, 2008).
1
Introduction
What advantages do firms, as a nexus of contracts, have
over markets, as a nexus of firms? A widespread view,
usually associated with the knowledge-based view of the
firm, is that firms have superior capabilities in managing
knowledge assets (Kogut and Zander, 1992; Grant,1996;
Nahapiet and Ghoshal, 1998). One particular capability
that firms may have developed is the ability to protect
valuable information (Liebeskind, 1996; Rajan and
Zingales, 2001). Client lists, customer information, non-
patentedtechnical knowledge are examplesof information
that, if leaked, may compromise a firmssourceof
competitive advantage and reputation. To protect this
information, firmsemploy a variety of methods including
the use of secure IT infrastructure, the screening and
monitoring of employees, restrictions to communication
flows, and requirements that employees and contractors
sign non-disclosure agreements.
In this paper we explorea fundamental trade-off.On the
one hand, firms often encourage interactions and
knowledge sharing among employees to improve
decision-makingand foster innovation.On the other hand,
firms also sometimes restrict employeesaccess to
information to prevent information leakage (Liebeskind,
1996; Hannah, 2005). We propose a simple framework
that highlights a number of factors that are likely to
influence whether communication flows should be
restricted or kept open. These include the sensitivity of
information, employee trustworthiness, and various legal
instruments such as patents and non-disclosure
agreements that organizations can use to mitigate the risk
of information leakage.
Then we examine how HP Labs the research unit of
Hewlett-Packard Company (HP) internally protects its
knowledge in practice. Previous research on the
management of R&D labs (e.g., Tushman and Katz,
1980; Katz and Tushman, 1981; Chesbrough, 2002;
Von Zedtwitz, 2004) and science-based businesses
(e.g., Gambardella, 1995; Pisano, 2006) has paid scant
Correspondence: Andrea Patacconi, NorwichBusiness School, University
of East Anglia,Norwich NR4 7TJ, UK, Tel: +44 (0) 1603593337. E-mail
a.patacconi@uea.ac.uk
1
See https://bits.blogs.nytimes.com/2008/07/10/apple-imposes-gag-rule-on-
iphone-application-makers/(accessed 14/09/2018).
European Management Review, Vol. 16, 179193, (2019)
DOI: 10.1111/emre.12336
©2018 European Academy of Management

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