Introduction

Knowledge interaction describes all types of direct and indirect personal and non-personal interactions between and among organizations and/ or individuals. Through knowledge interactions among diverse knowledge components, firms develop combinative capabilities (Kogut and Zander, 1992) to synthesize and apply the exchanged knowledge within innovation processes (Schartinger et al., 2002), thus generating a variety of innovative activities such as new forms of production and service provisions (Spender, 1996). Because of the complexity of knowledge interaction and the various kinds of business innovation involved, our research aims to address the question: how do the different forms of knowledge interaction affect business innovation?

In order to understand the effects of knowledge interaction on business innovation, two things need to be clarified: (1) What do we know about the quality of knowledge interaction? (2) What kind of business innovations can be achieved? On the topic of knowledge for innovation, studies in economics (Romer, 1986; Haussler, 2010) and strategic management (Leiponen and Helfat, 2010; Zhou and Li, 2012) tend to describe knowledge at generalized level as resources or information. However, knowledge in an organizational setting requires deeper scrutiny about content and context (Ahlstrom and Nair, 2000; Wang et al., 2008). Additionally, prior studies (Van de Ven, 1980; Griffin and Hauser, 1996; Moenaert and Souder, 1996; Schartinger et al., 2002; Todtling et al., 2009) have mostly examined knowledge interaction in the context of the interorganizational environment. The effects of knowledge interaction were measured through the frequency of communication (Griffin and Hauser, 1996; Moenaert and Souder, 1996), and diverse innovative results were examined in terms of product, customer service, or research development. Thus, a lack of understanding of innovation–knowledge interaction at the intraorganizational level exists as well as the quality of the knowledge being verified and classification of resultant innovations. This study attempts to explore the important and subtle distinctions of knowledge interaction by thoroughly examining the different sources of knowledge content under various innovation conditions within business.