Core or periphery: Examining where to allocate heterogeneous inventors and the impact on firms' innovation

Abstract Research Summary We examine how firms should allocate their inventors to network locations to achieve their best innovation performance. We use an NK model to model the interactions between key factors that influence a firm's innovation: (a) individuals' embeddedness within the firm's network, (b) individuals' heterogeneity across their search distance as well as their adoption (i.e., imitation) propensity, and (c) the complexity of the firm's landscape. We find that in high‐complexity landscapes, firms benefit from allocating low‐adopter agents to the core and high‐adopters to the periphery, thereby promoting more independent search at the core. The opposite is true for low complexity landscapes. We further find that when agent types are unknown, individuals should be allocated based on their adoption propensity versus search distance. Managerial Summary Where should firms locate their heterogeneous inventors within their networks? Simulating a complex innovation landscape, our study focuses on the interaction of three essential factors that may influence firms' innovation: the location of inventors in the core (embedded position) or periphery of a firm's structure, the distance inventors search for solutions, and the adoption propensity with which inventors will imitate their peers' solutions versus being independent and following their own trajectory. Our results show that firms benefit by placing independent searchers who also search far at the core of the firm when facing highly complex problems, and at the periphery otherwise. Though search distance and adoption propensity have substitutive effects on innovation performance, firms should allocate based on inventors' adoption propensity to lower innovation‐performance variance.