Intra-Firm Knowledge Spillovers vs. Inter-Firm Spillover Friction

In Simple Words

Imagine a restaurant chain opening a second kitchen. The head chef willingly shares secret recipes and training logs with the new branch manager because both kitchens share profits. However, the chef refuses to share those recipes with the restaurant across the street out of fear of losing customers and staff.

Research question

Firms easily transfer operational management practices between plants owned by the same company, but knowledge spillovers between independent competing firms remain extremely limited due to business secrecy and fear of poaching.

Participants

28 plants across 17 family-owned cotton textile firms in India (including 5 nonexperimental plants in treatment firms and 96 nonproject firms surveyed in the local industry around Mumbai).

Study Design

Randomized Controlled Trial (RCT) tracking adoption rates in nonexperimental plants within treatment firms and a ground-based survey of 96 independent nonproject firms.

Results

Nonexperimental plants within treatment firms increased management practice adoption by 17.5 percentage points without direct consulting, mirroring the 12.0 percentage point increase in control plants. Conversely, inter-firm spillovers were negligible: only 16% of 96 independent local firms had heard of the experiment and only 2% knew specific details, localized exclusively to Tarapur and Umbergaon.

Takeaway

1. Replicate newly validated standard operating procedures from pilot production units across all secondary operational plants owned by the same corporate parent before attempting external licensing or benchmark disclosures.

Read alongside the research

Plain-English glossary

Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.

Percentage points

The difference between two percentages.

ExampleA rise from 40% to 50% is 10 percentage points. Relative to the starting value, that is a 25% increase.

Office for National Statistics · Percentages ↗Read more about percentage points →

Randomized controlled trial

A study that uses chance, like drawing lots, to decide who receives each option being compared. Researchers compare the groups’ outcomes to estimate the effect of those options.

ExampleA lottery assigns volunteers to a training programme or a comparison group. Researchers then compare their outcomes.

GET-IT glossary · Randomized study ↗Read more about randomized controlled trial →

Related findings

• Asymmetric Management Practice Stickiness →Firms & operations

  Think of house chores where putting a physical label on a storage bin stays forever because it requires a one-time setup, whereas writing a daily task log on a whiteboard gets abandoned quickly because it demands constant daily effort.

• Baseline Practice Prevalence as Persistence Predictor →Firms & operations

  Think of teaching sports techniques to a beginner; a student is far more likely to permanently retain basic fundamental drills that everyone in the league uses than obscure, hyper-complex tactical plays that nobody else in their town practices.

• Cadence-Matched Payout Architecture →Firms & operations

  Just as a garden watering system is programmed to sprinkle water precisely when soil moisture drops rather than on a fixed calendar date once a month, payroll structures should deliver funds at the exact moments household expenditures or debt settlements fall due.

• Owner Time-Constraint Bottleneck via Centralized Decision-Making →Firms & operations

  Think of a growing restaurant where the master chef insists on signing off on every $25 purchase of vegetables; as the business attempts to open new locations, kitchen equipment breaks down and growth halts because every decision stalls waiting for the master chef's personal sign-off.