The influence of flexibility in buyer-seller relationships on the productivity of knowledge

This study is the first empirical examination of the knowledge substitution and flexibility effects derived from the relational and resource-based views of the firm. In these perspectives, it is critically important for firms whose strategic value creation depends on innovation and knowledge to develop interfirm knowledge-sharing routines with their trading partners. These routines enable more productive knowledge resources to replace less productive stocks of knowledge, and the effectiveness of the substitution is influenced by the flexibility with which the supplier and buyer firms adapt to the change. Using a sample of entrepreneurial software firms, we find that their productivity increases as their relationships with trading partners become increasingly flexible. Thus, this paper offers evidence that in an innovative, knowledge-intensive industry context, flexibility in interorganizational relationships is an important interfirm resource.