Unleashing knowledge arbitrage potential: empowering startups through knowledge management

Abstract

Purpose

Organizations increasingly use knowledge arbitrage to stimulate innovation and achieve competitive advantage. However, in knowledge management its use in startups is yet unexplored. This study aims to examine the utilization of knowledge arbitrage by startups, specifically during COVID-19.

Design/methodology/approach

This study employed an open-ended essay methodology to explore the drivers and barriers that startups face in utilizing knowledge arbitrage. We collected data from 40 participants to understand the role of knowledge arbitrage in startups’ knowledge management practices.

Findings

This study’s findings highlight the significance of knowledge arbitrage for startups. The benefits identified include organizational benefits such as building networks, innovating new products and achieving competitive advantage and financial benefits such as cost reduction and sales growth. The study also identifies several technological and organizational drivers and barriers that startups confront during knowledge arbitrage.

Originality/value

This study contributes to the existing literature on knowledge management by extending our understanding of knowledge arbitrage’s role in startups. Additionally, it sheds light on the importance of knowledge arbitrage for startups and the challenges they face, particularly in a disrupted environment reared by COVID-19. The study provides insights for the scholars and practitioners interested in effective knowledge management in startups.

Citation

Nawaz, R., Hina, M., Sharma, V., Srivastava, S. and Farina Briamonte, M. (2024), "Unleashing knowledge arbitrage potential: empowering startups through knowledge management", Journal of Knowledge Management, Vol. 28 No. 11, pp. 221-254. https://doi.org/10.1108/JKM-06-2023-0503

1. Introduction

The rapid advancement in knowledge sharing, along with its numerous advantages and the ever-growing competitive pressures, has driven companies to actively seek innovative solutions through knowledge acquisition (Tian et al., 2018). Acquiring and effectively using knowledge is widely recognized as one of the most critical sources of gaining a competitive edge in business (Yeşil et al., 2013; Luqman et al., 2022). Existing research has consistently argued that the processes involved in generating, acquiring, sharing, and storing knowledge can have a positive impact on the innovative performance of any organization (Susanty et al., 2018). Knowledge combines technical proficiency with creativity, ultimately driving innovation (Madanaguli et al., 2021; Alavi and Leidner, 2001; Iaia et al., 2023). Traditionally, innovative firms overcome their lack of resources through technology assisted by the inflow and outflow of knowledge specially startups (Spithoven et al., 2013).

Startups have gained immense popularity and emerged as crucial economic entities driving economic development (Kuckertz et al., 2020). Prior scholars have regarded startups as new firm with a business model centered on innovation and technology (Krejci et al., 2015), with tacit knowledge enables the formation of a competitive edge (Scuotto et al., 2023). Acquiring and utilizing knowledge from different sources is extremely important for startups. Currently, startups actively seek new knowledge, converting it into innovative technologies and leveraging it to establish profitable and sustainable business practices that generate profits. By adopting this efficient approach, startups can reap several benefits. Firstly, using knowledge leads to new inventions, such as novel products or services (Kuckertz et al., 2020). Secondly, entrepreneurs in startups often begin with limited information and actively acquire new knowledge to gain a competitive edge in the market (Carayannis et al., 2017). Thirdly, knowledge assists companies in developing a comprehensive understanding of their target market, client needs, and industry trends. This knowledge enables companies to identify market gaps, devise customer-centric solutions and tailor their services to individual preferences, thereby enhancing their chances of success (Baker et al., 2003; Sarasvathy, 2009).

The colossal scholarly discussion emphasizing the influential role of knowledge has led to the knowledge arbitrage concept, which is now increasingly used by organizations, particularly startups, for practicing innovation and achieving competitive advantage (Carayannis et al., 2011). Knowledge arbitrage is inspired by the concept of arbitrage, which has historically been utilized in financial markets(Crépellière et al., 2023). In economic contexts, arbitrage involves capitalizing on price disparities and market variations to generate profitable returns (Grant, 1996a; Zheng et al., 2011). However, in realm of knowledge arbitrage, it pertains to leveraging disparities in knowledge availability, accessibility and its applicability across multiple sources (Su et al., 2023). By leveraging these differences, organizations engaging in utilizing knowledge arbitrage enhance their problem-solving capabilities, refine their decision-making processes and improve their overall organizational performance (Cohen and Levinthal, 1990; Weber and Maurer, 2023).

The literature has provided various definitions to help us grasp the concept of knowledge arbitrage. According to Carayannis (2008), knowledge arbitrage can be defined as the strategic utilization of specific knowledge to gain a competitive edge. This knowledge can be used to redistribute and recombine assets, ultimately leading to benefits that are nonappropriable, defensible, sustainable, and scalable. Building on this idea, Carayannis (2014) adds another layer to this concept by describing knowledge arbitrage as a process that involves transferring knowledge from one industry to another with the aim of achieving financial advantages. This highlights the dynamic nature of knowledge arbitrage, where ideas and discoveries in the development stages of innovation play a crucial role. Instead of being confined to the initial creation process, knowledge arbitrage involves exploring new avenues and applications that were not originally envisioned. It includes the discovery of untapped markets, industries, or products, thus expanding the scope and potential of knowledge creation through knowledge arbitrage (Canestrino et al., 2022).

The importance of knowledge arbitrage is widely recognized in the realm of startups. It serves as a critical process in environments where knowledge is limited, providing the foundation for survival in highly competitive landscapes (Carayannis et al., 2011). Knowledge arbitrage involves the acquisition of new and specific knowledge from diverse sources and its integration into products, processes, or through active collaboration with external entities (Carayannis, 2008; Powell and Grodal, 2006). Entrepreneurs leverage knowledge arbitrage in their startups to obtain high-level knowledge, establish virtual networks, gain a competitive advantage, and enhance firm performance (Carayannis and Stewart, 2013). Knowledge arbitrage plays a pivotal role in fostering innovation within startups. By combining both internal and external expertise, startups can uncover fresh opportunities, create new products or services and define unique value propositions (Carayannis et al., 2011; Carayannis et al., 2016). This ability to innovate provides startups with a competitive edge and elevates their performance in the market(Cantamessa et al., 2018). Firms acquire existing or new knowledge that can potentially lead them to a competitive advantage, resulting in growth and innovation (Baker and Nelson, 2005). In today's fiercely competitive marketplace, knowledge acquisition and learning are essential strategies for developing competencies through innovation, enabling startups to achieve sustainable growth (Carayannis et al., 2017).

Acquiring and sharing new knowledge sharing is vital in times of crisis because it enables rapid dissemination of critical information, best practices and innovative solutions. This collaborative approach fosters a more effective and coordinated response to emergencies, helping communities and organizations adapt and mitigate the impact of crises (Kuckertz et al., 2020; Arain et al., 2021). Organizations face dynamic challenges to manage the knowledge produced, acquired, maintained and exchanged during the time of crisis (Bratianu and Bejinaru, 2021). For instance, in the face of a pandemic such as COVID-19, knowledge-related processes should be more accurate and rapid (Zieba and Bongiovanni, 2022). The COVID-19 pandemic is one of the most destructive crises in recent history, with far-reaching consequences for economies, organizations, and employees worldwide (Choudhury et al., 2021). In COVID-19, people were forced to work from home, which led to almost no face-to-face interaction and digital platforms for knowledge sharing (Elia et al., 2020). Numerous platforms like Zoom, Teams and social media apps were used to share knowledge and build professional relations (Golden, 2006; Choudhury et al., 2021). Hence, such crises necessitate organizations to rapidly gain and assimilate knowledge from external resources to remain aware of contemporary developments in the market or transform the prior knowledge into value (Pennycook et al., 2020; Zieba and Bongiovanni, 2022). In recent times, prior literature has vastly investigated the importance of acquiring knowledge and then sharing it in organizations during the pandemic. However, its recognition and comprehension regarding the different facets of knowledge, including knowledge arbitrage, is in the infancy phase. Thus, scholarly efforts are required to highlight the pandemic's effects on knowledge arbitrage.

Despite initial advancements and valuable contributions, research on knowledge arbitrage has experienced sluggish progress, with a consistently low volume of scholarly output over the years. While the literature in this field, though limited, offers clear conceptualizations about the topic. Previous literature shows an intrinsic connection between knowledge arbitrage and startups. Nevertheless, only some prior studies have explored the benefits, drivers and barriers of knowledge arbitrage in startups as well as impact of COVID-19 on this process. The previous discussion highlights to understand this phenomenon better and cover the gap by addressing the following research questions (RQs):

RQ1.

What is the importance of using knowledge arbitrage in startup businesses?

RQ2.

What are the drivers and barriers that startups face in the process of knowledge arbitrage?

RQ3.

How did the COVID-19 situation affect the process of knowledge arbitrage for startups?

This study attempts to pinpoint crucial research gaps and generate valuable insights for future researchers and practitioners by undertaking a detailed review of scholarly literature and conducting qualitative data analysis. Ultimately, the overarching goal of this study is to augment our comprehension of knowledge arbitrage and its far-reaching implications for organizational triumph, innovation, and collaborative endeavors within the dynamic startup.

We believe that conducting research on this topic holds great significance for several compelling reasons. Firstly, it provides valuable insights into the acquisition of valuable expertise, enabling organizations to tap into best business practices and gain a competitive advantage (E. Carayannis et al., 2017; Distanont and Khongmalai, 2018). Second, exploring this subject can uncover effective drivers for acquiring and using knowledge, ultimately contributing to the success of organizations (Weber and Maurer, 2023). Third, knowledge arbitrage serves as a catalyst for innovation and the ability to adapt to ever-changing environments. This dynamic process fosters creativity, encourages the development of new products and services and positions organizations to outperform their competitors. Therefore, understanding the importance of knowledge arbitrage is crucial for organizations (Carayannis, 2014). Fourth, this concept can aid in optimizing resource allocation by incorporating external knowledge. This, in turn, enhances operational efficiency and cost-effectiveness (Canestrino et al., 2022; Carayannis et al., 2011). Furthermore, knowledge arbitrage promotes collaboration and partnerships, making specialized knowledge more accessible and encouraging joint innovation (Guzzini et al., 2018). Studying this topic empowers organizations to enhance their overall performance, foster innovation, build networks and achieve sustainable growth in today's competitive landscape (Hughes and Wareham, 2010; Canestrino et al., 2022).

We employed a qualitative research design to answer these research questions and unravel the importance of knowledge arbitrage in business startups. Our qualitative study methodology included an open-ended discussion essay, a popular research tool increasingly used by management researchers (Dhir et al., 2017a). Open-ended essays provide valuable qualitative insights into organizational phenomena that cannot be obtained by direct observation or quantitative approaches (Bradding and Horstman, 1999). Apart from the inherent benefits of this method, due to the lack of face-to-face interaction during COVID-19, this method gained popularity because of collecting responses digitally (Choudhury et al., 2021).

2. Background literature

In the dynamic landscape of contemporary organizations, knowledge is an invaluable asset that is often distributed asymmetrically. Ensuring that critical knowledge is effectively disseminated within an organization at the right time is a paramount concern for firms aiming to foster innovation (von et al., 2022) . This process of innovation, the lifeblood of successful businesses, thrives when there is an active acquisition, exchange and sharing of knowledge among individuals and entities. This flow of knowledge, stemming from diverse sources, empowers firms to not only gain a competitive edge but also sustain it by enhancing their overall performance (Riege, 2005; Santhose and Lawrence, 2023). Delving deeper into the intricacies of knowledge acquisition, it is noteworthy that the benefits derived from it are not always intentional. Previous studies have also emphasized the potential of unique and specific knowledge to act as the building blocks for valuable assets within an organization (E. G. Carayannis et al., 2011). When effectively harnessed, these assets can yield numerous advantages for the firm. This recognition of knowledge's pivotal role within organizations naturally leads us to the concept of knowledge arbitrage, a topic extensively explored in the literature.

In broad terms, knowledge arbitrage represents the process of capitalizing on the known differences in information flow between aggregators or pools of knowledge, by facilitating the transfer of knowledge from surplus pools to those in deficit (Carayannis and Sipp, 2010; Carayannis and Clark, 2011; Carayannis et al., 2011). To delve further into this concept, Carayannis (2008) describes knowledge arbitrage as an organization's ability to efficiently distribute and deploy specific knowledge to create, identify, reallocate, and recombine knowledge assets assets (Carayannis and Stewart, 2014; Carayannis et al., 2013). Knowledge arbitrage is, in essence, an extended form of value generation, encompassing three core elements: the acquisition, assimilation and transformation of knowledge. Whether internally created or externally acquired, knowledge plays a pivotal role in value creation within organizations (Hughes and Wareham, 2010).

Taking this one step further, Carayannis (2014) characterizes knowledge arbitrage as the process of gaining knowledge from one industry and successfully applying it to another to realize financial benefits. The significance of knowledge as a resource is particularly pronounced for startups, as it can significantly influence their trajectory toward success. Startups stand to gain tremendous advantages by harnessing knowledge effectively. This concept reverberates through both internal and external organizational boundaries, enabling firms to enhance their competitiveness and overall productivity (Hughes and Wareham, 2010; Carayannis and Stewart, 2014). When this knowledge is fused with innovative technologies, startups experience tangible impacts in the market (Yeo et al., 2013). Furthermore, the novel and unique knowledge acquired through the knowledge arbitrage process is diffused in startups and used for unidentified purposes (Stejskal and Hajek, 2019).

Going deeper into the intricacies of knowledge arbitrage in view of startups, Carayannis (2014) notes that the process epitomizes how new ventures repurpose existing knowledge assets to meet market demands. When these assets closely align with the needs of potential buyers, they result in successful transactions and improvements in the competitive positioning of startups (Canestrino et al., 2022). Moreover, Canestrino et al. (2022) shed light on the idea that knowledge arbitrage primarily revolves around ideas or discoveries during the development stage of the innovation process in new ventures, rather than being an integral part of the creation process. From this perspective, knowledge arbitrage can be understood as the process of uncovering new avenues and applications, such as in different markets, industries, products, and more, which were not initially intended but ultimately contribute to organizational growth and success.

In the dynamic world of business, forward-thinking firms that prioritize innovation keep a vigilant eye on their surroundings. They eagerly seek fresh opportunities and knowledge, aiming to gain a competitive edge by being the first to introduce innovative solutions tailored to the evolving market demands (Canestrino et al., 2022). Knowledge arbitrage plays a crucial role in this pursuit. Knowledge arbitrage is like a strategy that enables firms to act swiftly in response to their competitors. It's not just about stockpiling knowledge; it's about using it to create new opportunities and fostering an environment where innovative ideas can flourish (Quaglia, 2019). This approach thrives on the foundation of existing knowledge. Being open-minded in the business world is essential (Carayannis et al., 2017). It means being receptive to new concepts and discovering valuable knowledge resources to adapt to the ever-changing market. Open-mindedness is key to staying ahead (Martinidis et al., 2022).

Competitive advantage, a sought-after goal in today's cutthroat business environment, is closely tied to knowledge arbitrage. To build strong foundations for success, new ventures rely on acquiring and continually learning from external knowledge. This external knowledge is a vital asset in the relentless quest for a competitive edge. Knowledge arbitrage isn't just about knowledge; it also plays a role in building networks and enhancing firm performance (Martinidis et al., 2022). In a technologically advancing world, firms are eager to form strong connections with others. By tapping into external knowledge and forming fruitful partnerships, they improve their performance. By skillfully navigating this landscape, firms select the right partners, share experiences and utilize the knowledge gained to optimize their operations (Canestrino et al., 2022). Through these collaborations and partnerships, they reach new heights of performance, ultimately leading to long-term success. Prior research has highlighted the pivotal role of knowledge arbitrage in bolstering firm performance. Firm performance is propelled by knowledge-sharing practices (Carayannis, 2014; Carayannis et al., 2012), which nurture robust networks and unlock competitive advantages through innovation (Quaglia, 2019). Consequently, organizations actively seek environments conducive to effective business growth and heightened firm performance (Carayannis et al., 2015). Acquired knowledge is recognized for its value and subsequently transformed through knowledge arbitrage, providing a competitive advantage and contributing to firm performance (Carayannis et al., 2011). Furthermore, previous literature shows that process of knowledge arbitrage is closely intertwined with absorptive capacity, as it involves acquiring knowledge from diverse sources and transforming it into actionable insights. The process of absorptive capacity, comprising the steps of acquisition, assimilation, transformation, and exploitation, along with the connection between knowledge arbitrage which ultimately leads toward competitive advantage and increased firm performance (Cohen and Levinthal, 1990). Also the study conducted by Robertson et al.(2012), it is recommended to integrate absorptive capacity into network frameworks that facilitate enhanced levels of distributed knowledge and learning. Carayannis et al. (2016) also illustrated that in startups, the acquisition and transformation of novel knowledge takes place by absorptive capacity.

Our review of the literature has unveiled the advantages of knowledge acquisition and utilization, alongside factors identified in prior research that facilitate the processes of acquiring, utilizing, and sharing knowledge. Promoting knowledge acquisition involves nurturing a supportive learning culture that encourages curiosity, experimentation, and information exchange among employees (Nonaka and Takeuchi, 1995). Knowledge-sharing platforms, like intranets and online forums, play a crucial role in facilitating knowledge acquisition by enhancing access to content and fostering active knowledge exchange (Alavi and Leidner, 2001; Alam et al., 2020). Knowledge brokers act as intermediaries, streamlining knowledge transfer within the organization (Jensen and Szulanski, 2004; Conklin et al., 2017). External networks and alliances broaden the scope of knowledge acquisition, leveraging external expertise (Powell et al., 1996; Nurhayati et al., 2023). Training and development programs equip individuals with the skills for effective knowledge acquisition (Davies and Doherty, 2019). Codifying and documenting knowledge in accessible formats ensures its availability, while learning from past experiences helps avoid recurring mistakes. Strong leadership support is key to promoting a knowledge-driven culture and reinforcing the importance of knowledge utilization (Nurhayati et al., 2023).

Despite the recognized benefits and theoretical underpinnings stressing the importance of acquiring, transforming, and utilizing knowledge in business, persistent challenges affect the knowledge acquisition process (Riege, 2005). Key barriers include a lack of awareness in recognizing and accessing specific knowledge sources due to organizational culture, creating difficulties in identifying valuable knowledge (Deng et al., 2022). The sheer volume of available information poses another formidable hurdle, demanding substantial effort to sift through and discern pertinent sources. Organizational culture and structure, particularly within hierarchical and rigid organizations, limit communication channels and hinder knowledge flow (Nonaka and Takeuchi, 1995).

Additionally, cultures discouraging knowledge sharing or promoting knowledge hoarding impede knowledge acquisition. Resources, financial constraints and technology infrastructure are critical to facilitating knowledge acquisition, as they support investment in the necessary processes and tools (Alavi and Leidner, 2001; Jiang et al., 2023). Resistance to change and reluctance to adopt new practices also hinder knowledge utilization, leading to the underutilization of available knowledge (Jensen and Szulanski, 2004; Hwang, 2022). Moreover, perceived irrelevance or inapplicability of acquired knowledge to organizational context and goals further compounds these challenges. A clear link between knowledge and organizational objectives is crucial for overcoming these obstacles effectively (Alavi and Leidner, 2001).

Our comprehensive review of the existing literature has illuminated the manifold benefits of knowledge arbitrage, offering various perspectives and insights. However, a notable research gap emerges when we consider the viewpoint of startups. While there is existing literature that to some extent recognizes the drivers behind the knowledge acquisition and sharing aspects, no previous study has ventured into exploring these drivers and benefits of knowledge arbitrage specifically in the context of startups. This void is particularly surprising given the critical importance of startups in the contemporary business landscape. Additionally, the literature highlights various barriers that can potentially impede the process of knowledge sharing and acquiring (Nisar et al., 2019; Anwar et al., 2019), and yet there is limited exploration of these barriers in the specifically knowledge arbitrage in the startup context, despite their significance.

Furthermore, an intriguing area of research is the examination of uncertain situations and their potential impact on knowledge arbitrage within startups. The dynamic and often unpredictable nature of startup environments demands a closer look at how uncertainty can affect the processes of knowledge acquisition, sharing, and ultimately, knowledge arbitrage. By exploring these dimensions, we can potentially uncover strategies and approaches that startups can adopt to navigate uncertain circumstances effectively, thereby enhancing their adaptability and resilience in the face of challenges.

3. Methodology

We utilized a qualitative research design comprising open-ended essay questions to delve deeply into the benefits, drivers and barriers of knowledge arbitrage in startups. Open-ended essays are prevalent in social science and management research because qualitative data Fprovides rich and deep insights (Nasution et al., 2021; Talwar et al., 2020). Mainly, two reasons led us to adopt the open-ended essay method. First, collecting data from multiple respondents allowed us a more diversified interpretation of knowledge arbitrage phenomena, increasing our findings' validity. Secondly, following our goal of generating insights regarding the drivers and barriers faced by startups in using knowledge arbitrage, the open-ended essay method enabled us to collect narratives reflecting respondents' diverse experiences (Ray et al., 2019; Dhir et al., 2017b).

We conducted a study by inviting participants from various countries to participate through the Prolific Academic platform. The demographics of the participants can be found in Appendix. Many startups were established in their business endeavors within sectors such as fashion, entertainment, construction, biotechnology, and food. Utilizing a systematic purposive sampling method, we meticulously chose startups that had engaged in the acquisition and application of knowledge arbitrage at various points in their business trajectories. The participants comprised business owners occupying executive roles in both manufacturing and service enterprises across diverse sectors. Furthermore, the inclusion criteria ensured that participants possessed first-hand experience with knowledge arbitrage by virtue of their positions within their respective companies.

Data collection occurred on July 20, 2022, during which interviews were conducted with 56 participants representing various sectors predominantly engaged in manufacturing within the UK, and a smaller subset from the USA. We initially selected 56 participants for the study; however, the final participant count was refined to 40. This selection process was informed by the need for clarity, validity and a genuine understanding of the research objectives. We excluded 16 responses due to ambiguity, lack of clarity or inadequacy in addressing the specific criteria outlined in our inquiries. These responses did not meet the predefined criteria, leading to their exclusion from the final participant pool. The final selection of 40 participants ensures a more robust data set with responses that align closely with the study's objectives and criteria, ultimately enhancing the overall quality and relevance of the collected data.

It is imperative to elucidate that all participants actively engaged during the primary wave of invitations, with no subsequent invitation rounds introduced throughout the study. Each startup encompassed in the sample promptly responded to the initial invitation, thereby contributing to the compilation of comprehensive data during the initial phase of the investigation. This methodological approach safeguards the representativeness of the sample, ensuring that it comprises startups responsive to the initial outreach, while precluding any influence from subsequent rounds of invitations on participation rates.

The evaluation of startups engagement with knowledge arbitrage in their business operations or their awareness of it involved a multifaceted approach. Initially, a comprehensive set of questions was posed to business owners holding executive roles in manufacturing and service enterprises across diverse sectors to check their knowledge about the concept. Subsequently, in a follow-up round, inquiries were focused on eliciting details about specific strategies, practices, and instances where knowledge arbitrage was applied within their organizations. This two-step approach aimed to corroborate and triangulate the information gathered through interviews, contributing to a comprehensive and robust understanding of the startups involvement in knowledge arbitrage.

Because of the absence of the multi stakeholder’s perspective on the importance of knowledge arbitrage in the prior literature our aim was to develop a conceptual framework rather than working on already existing theory or framework. Thus, inductive research approach appeared to be appropriate for this study (Gioia et al., 2013; Bansal et al., 2018). Such a method is suitable for studying novel and complex phenomena and exposing fresh theoretical perspectives (Denk et al., 2012; Bansal et al., 2018; Mohajan, 2018). This approach is well established for social science journals (Quarshie and Leuschner, 2020). The chronological progression of our research design is depicted in Figure 1.

Our research interest initially focused our attention on the following research questions:

RQ4.

Familiarity with the concept of knowledge arbitrage

RQ5.

What is the importance of using knowledge arbitrage in startup businesses?

RQ6.

Benefits firms get by utilizing the knowledge arbitrage in their businesses?

RQ7.

What are the drivers and barriers that startups face in the process of knowledge arbitrage?

RQ8.

How to check the quality of the knowledge obtained?

RQ9.

How did the COVID-9 situation affect the process of knowledge arbitrage for startups?

3.1 Sampling and data collection

To investigate knowledge arbitrage, including its drivers, barriers and benefits, we collected data from startups across various countries and industries such as fashion, entertainment, construction, biotech and food, as well as other relevant stakeholders engaged in knowledge sharing processes. Our focus was on startups that had experienced knowledge arbitrage in their operations. We conducted interviews with participants from diverse sectors, predominantly in the manufacturing field, in the UK and USA. These participants, either business owners or executives, possessed first-hand knowledge of knowledge arbitrage's impact on their companies. We selected this setting to best address our research questions (Gioia et al., 2013). It was ensured that respondents held influential roles in decision-making processes and had witnessed significant business transformations through knowledge sharing and transformation (refer to Appendix for participant details).

We utilized a qualitative research design comprising open-ended essay questions to delve deeply into the benefits, drivers and barriers of knowledge arbitrage in startups. Interviews were the primary source of qualitative data for this study. Our data analysis utilized a final data set comprising 40 participants from various organizations (see Appendix). Each participant consented to confidentiality and anonymity, ensuring the privacy of the provided data, which is presented in a nonidentifiable manner. The interviews adhered to a semistructured format, focusing on the topic of knowledge arbitrage. The essay questions were thoughtfully crafted based on a comprehensive review of prior literature on knowledge arbitrage. Respondents received a predetermined set of questions designed to elicit their experiences with knowledge arbitrage, including its benefits, challenges, and encountered opportunities. Participants were encouraged to provide detailed responses based on their personal experiences.

3.2 Data coding and analysis

To conceptualize knowledge arbitrage, we used the Gioia thematic content analysis approach. As a result, we meticulously examined the study's findings (Gioia et al., 2013). Gioia and his colleagues 2013 proposed Gioia's methodology to analyze the qualitative data. We used the deductive approach to analyze the qualitative data (Smith and Lewis, 2011), using the methods outlined below to guarantee objectivity. The coding has been modified several times to reflect our evolving study focus. Our original goal was to monitor the raw data of the participants closely and to examine and contrast ideas across all participants (Gioia et al., 2013).

First, we independently analyzed the data sentence by sentence during open coding and assigned a code to represent data blocks (Smith and Beretta, 2021). Following the Gioia et al. (2013) approach, we coded the data in two rounds, i.e. first-order and second-order codes. The first-order coding procedure used the Gioia et al. (2013) approach. During this procedure, we analyzed each interviewee's response in terms of the function of knowledge arbitrage in business startups. The procedure began with reading the interview transcripts and then a review of the responses. We examined each interviewee's response for a better understanding and then checked the similarities and discrepancies. After finishing the first-order code, we proceeded to the second-order code. Collecting first-order code combinations led the researchers to group them into themes and, from these themes, obtain the more abstract-level findings known as second-order codes (Strauss and Corbin, 1998). The final stage is the aggregate dimension stage, in which all the themes are reevaluated using relevant literature. The researcher revisited the interview transcripts to discover more confirmation in support of each topic (Gioia et al., 2013). Subsequently, themes were grouped to provide more abstract outcomes as an aggregate dimension.

A team of five individuals, including two professors, two researchers, and a domain expert, conducted the content analysis. Their objective was to extract zero-order codes, first-order concepts and second-order themes. These themes were subsequently organized into overarching dimensions related to study. The team adhered to standard coding practices, following the guidance provided by Iyanna et al (2022) they employed open coding to identify zero-order codes, then used axial coding to group them into first-order themes, and finally utilized the selective coding process to identify second-order constructs as described in Table 1.

4. Findings

4.1 Benefits of utilizing knowledge arbitrage

Based on the qualitative analysis of the collected data, we noted several benefits that startups get using knowledge arbitrage in their businesses. This study findings revealed those benefits in terms of financial and organizational benefits. Financial benefits include increased sales (Borousan et al., 2011), lower cost and higher profitability (Alavi and Leidner, 1999). While organizational benefits include building networks (Durbin, 2011), new product innovation (Haas and Hansen, 2007), marketing innovation (Alavi and Leidner, 1999), competitive advantage (Agbim et al., 2014) and increased business performance (Borousan et al., 2011) for the firms.

4.1.1 Organizational benefits.

The advantages that an organization can get through diverse projects, practices and tactics which contribute to its overall performance are referred to as organizational benefits. Knowledge arbitrage has been proven beneficial for startups, helping them to build networks, innovate new products and achieve competitive advantage. The below section discusses each of these benefits in detail.

4.1.1.1 Building networks.

Companies constantly look for new ways to increase their performance. It is strongly believed that creating and sharing new knowledge is extremely useful for this purpose (Enkel et al., 2005). Building networks is considered an extension in the process of knowledge sharing where knowledge owners are connected with the company and help in its growth (Von Krogh and Spaeth, 2007). Specifically, professional network connections have always been critical for startups (Sedita et al., 2019). The assumption behind building knowledgeable networks is tacit knowledge, which is needed to create new knowledge that results in valuable innovation (Denford and Chan, 2011). Moreover, building networks focus on knowledge exchange (Enkel et al., 2005). Interestingly, building networks is considered a central domain that absorbs, creates, transforms, and communicates knowledge (Badaracco, 1991). Firms are competitive these days, and their approaches to growth strategy are increasingly centered on innovation, which can be accomplished by building networks through knowledge arbitrage (Carayannis, 2008).

The participants noted that knowledge arbitrage enabled them to create networks, which proved beneficial in creating strong interorganizational linkages with their stakeholders and helped them to enhance their business performance even during the crisis time of COVID-19. In addition, they also observed that knowledge arbitrage helped them connect with their networks, increasing their business efficiency. The following interview excerpts illustrate the role of knowledge arbitrage in establishing networks in business startups: I have built up strong contacts through networking. Getting knowledge and sharing was beneficial for my business as it helped me in creating strong interorgazational links/networks with other stakeholders. Specially by adopting digital platforms during Covid this helped in increasing my business performance (P22, Male, 46, UK, Music Industry), and The knowledge arbitrage can be based on internal sources like knowledge gained from experience, lessons learned from failures and successful projects you completed. All these sources provide comprehensive knowledge that manage a successful Startups of a business by proving helpful in establishing strong knowledge network which help in increasing business efficiency (P38, Male, 44, UK, Accountancy service).

4.1.1.2 New product innovation.

Product innovation means developing new products/services or significantly improving existing products/services (Polder et al., 2010). In this technologically advanced world product development and innovation have become a global phenomenon (Gassmann et al., 2010) Knowledge is a powerful and strategically important tool in product innovation (Donate and Sánchez de Pablo, 2015). Obtaining new knowledge has been recognized in increasing firms’ innovative capabilities by developing new products (Starbuck et al., 1978). Relying on existing or new information reduces the uncertainty and complexity in the process of product innovation (Liao et al., 2008). Suppose a business constantly acquires new knowledge and methods, seeks new knowledge sources and explores new ideas. In that case, it has a better chance of innovating a new product and helps in business growth and innovation (Xie et al., 2016). Our findings revealed that knowledge arbitrage helps in the process of innovation by capturing new ideas and then turning these new concepts to deliver new products. Respondents also revealed that they continuously seek knowledge arbitrage to understand the market trends, competitor’s pricing strategy, and customer needs, and then use it to improve existing products or altogether innovate a new product. The following interview excerpts illustrate these insights: Knowledge arbitrage helps in the process of innovation by capturing knowledge using it to make new ideas to produce and deliver distinctive products and services (P3, Female, 53, Scotland UK), and Knowledge arbitrage facilitates in to see the range of products to see what their pricing is like and try to see how they are marketing their products. I try to get knowledge and use it for making/developing new products through product innovation that I think will sell before my competitors might sell them. (P20, Female, 26, Northern Ireland)

4.1.1.3 Competitive advantage.

At present, the business world is changing more rapidly than ever before due to technological advancements. Companies are adjusting their operations in response to the increased competition, technological advances, stakeholder expectations and other pressures (Thompson, 2018). Managers should avail all opportunities available to them such as product and service innovation, market development and diversification (Paul O' Riordan, 2018). Those managers who fail to identify these available opportunities often find themselves in a position where there are fewer chances of inventing something new, resulting in the noncompetitiveness of firm and its collapse (Masa’deh, 2016). In addition, firms that learn to adapt to these changes become competitive and provide desired products and services more effectively and efficiently (Jones and George, 2009). Competitive advantage signifies an organization's capacity to excel by delivering essential goods and services more effectively and efficiently than its competitors (Jones and George, 2009). Acquiring new knowledge from suppliers, employees, customers and other sources is the top priority for organizations to gain a competitive advantage (Yang, 2008). Acquiring knowledge and learning are the major tactics for producing competences in new enterprises that offer them with a durable competitive advantage in today's competitive marketplace (E. Carayannis et al., 2017). In today's hypercompetitive environment, gaining a competitive advantage is critical. Learning and utilizing external knowledge contributes to the creation of a competitive advantage (Martinidis et al., 2022). To gain a competitive advantage, businesses must constantly innovate and improve their products or services. Previous studies have demonstrated that new venture entrepreneurs incorporate knowledge arbitrage into their firm through knowledge acquisition and knowledge transformation via absorptive capacity, which leads to competitive advantage through innovation (Carayannis et al., 2011).

The participants confirmed that they get knowledge from different sources to keep themselves updated with pricing strategies, market trends and marketing tools. Participants use tacit knowledge sources such as local community, partners, suppliers, clients, knowledge brokers, etc. and explicit knowledge sources such as R, Python, Microsoft Excel, Tableau and RapidMiner. They further explained that they analyze their competitors' research directions to improve themselves and implement that knowledge to achieve competitive advantage. This competitive advantage can be in any form; for instance, one of the respondents explained that their firm gained knowledge about how they could use a unique geographic location to expand their business and got a competitive advantage. Consider the following insights from participants: We got that specific knowledge and utilized to get the maximum benefit from that. We gained knowledge about how we can use a unique geographic location where our business can grow at maximum. We then successfully implemented that knowledge to the benefit of our business and got competitive advantage over competitors. (P38, Male, 44, UK), and The company I work for currently got and influx of advertisement and upwelling for the local commonwealth games. This gave me the information and type of stock that would be needed during this period which I then got to integrate into my business and make the most of the opportunity and got competitive edge (P13, Male, 22, UK).

4.1.2 Financial benefits.

The positive effect on a firm's financial performance that results from particular initiatives, policies or strategies is referred to as financial benefits for a company. Rising revenue, lower costs, higher profit margins and improved cash flow are all examples of financial benefits. Participants’ responses highlighted that knowledge arbitrage is not merely proven for organizational benefits but also helpful in providing financial benefits. This further advanced the importance of knowledge arbitrage for startups. As explained below, these financial benefits obtained by startups using knowledge arbitrage include a cost reduction and sales growth.

4.1.2.1 Cost reduction.

Cost reduction is concerned with training costs, cost used to acquire key knowledge, avoiding earlier mistakes, and time proficiency. Customers and suppliers can help startups to access information that might be useful for startups innovative processes (Ali and Dominic, 2016). The relation of startups with their customers and suppliers positions them favorably to access vital information at less cost because of the trust generated between both parties (Noelia and Rosalia, 2020). This not only reduces time but also reduces cost. Undoubtedly, sharing information and expertise would foster a learning atmosphere, giving employees the opportunity to learn and develop new abilities. Therefore, cost reduction includes a reduction in training costs and also the cost and time spent in searching for key knowledge to complete projects faster (Ali and Dominic, 2016). Knowledge sharing obviously will reduce the cost of training employees and will develop a learning environment for employees where they can enhance their skills (Noelia and Rosalia, 2020). Thus, using knowledge sharing practices, external or internal training costs may be lowered. Moreover, using digital platforms makes it easier for employees to get knowledge in less time and cost. (Ali and Dominic, 2016). The respondents in our study revealed that they sent their employees for training to check how they can improve the reliability of the information they are getting. Furthermore, they try to reduce the cost by getting expertise in utilizing the digital platforms in cost effective manner. For startups, using digital platforms such as the internet and digital databases not only consume less time but is also cost effective. Consider the following insights from participants for more clarity: We also have sent employees to conferences to learn new techniques on how to check reliability of information which we can then try to put into practice in the business. This not only increase the efficiency but also reduce the cost. By getting training how to get knowledge using digital platforms we were able to reduce cost. In this way getting knowledge is beneficial for our business. (P16, Male, 46)

4.1.2.2 Sales growth.

To sustain in the competitive environment, startups must acquire and utilize new or existing knowledge. Engaging in the process of acquiring knowledge is extremely important to innovate new products and marketing activities (Lussier and Pfeifer, 2000). Entrepreneurship and innovation management are key factors that contribute to achieving a competitive edge in the globalized world, particularly in developing economies that offer substantial development prospects (Oliva et al., 2022). Through these innovative activities, they not only differentiate themselves from competitors but also increase sales and firm performance (Zahra and Gravis, 2000). An organization is believed to be able to generate competitive capabilities to sustain its performance in the form of growth in the business and its sales (Slater and Narver, 1995). Firms leaders who intend to make their firms distinguish from others create a supportive environment for the exchange of ideas and knowledge (Choi and Lee, 2002). The knowledge process is vital for increasing firm performance (Kogut and Zander, 1996). For example, Process innovation through which competitive advantage is achieved is a result of knowledge sharing process (Ipe, 2003). Business process and organizational routines, which capture a great deal of firm-specific knowledge, are crucial to compete in the market. We believe that learning from knowledge and experience, as well as new ideas, would contribute to improvements in business practices, which are considered important for achieving competitive advantage and firm growth (Ngai et al., 2008).

Our study found firms using knowledge arbitrage shape and drive a firm’s activity to sell more and improving sales. Our study's respondents also revealed that innovating new products improved their sales growth and performance. Furthermore, it can also be seen that improving services and modifying their process according to the marketing trends aids the process of sales growth. Consider the following insights from participants: Knowledge shapes and drives to your business activity and your ability to sell or do more. Hence improving sales (P38, Male, 44, UK). And The knowledge for the business benefits comes primarily from the understanding of the product that is being sold. For example, the startup company looks to find deals on cheaper tech items, such as monitors, graphics cards and peripherals and sell these on to customers at RRP. The process of collecting this knowledge is not something that can be read in a book it is a process of thoroughly understanding the technology and equipment to be bought and evaluate the pros and cons of purchase and resale to secure a profit. So, it helps in increasing the sales and increasing business performance. (P5, Male, 22, UK)

4.2 Drivers in the process of knowledge arbitrage

Managing knowledge in an organization is as significant as managing other assets. In today’s marketplace, knowledge is widely seen as a substantial resource of competitive advantage. Knowledge and knowledge sharing are crucial in organizations to achieve success (Asrar-ul-Haq and Anwar, 2016). Certain factors drive the process of knowledge arbitrage. This section presents our findings by highlighting different factors that drive the process of knowledge arbitrage in startups. These drivers are divided into technological and organizational drivers.

4.2.1 Technological drivers.

Firms nowadays rely less on traditional factors (capital, land and labour) and more on technological factors (social media, internet, databases etc.) (Sher and Lee, 2004). Proper exploitation of technological assets results in increased business value in startups. We have recognized online service, and product reviews, social media and the internet as technological drivers, facilitating knowledge arbitrage in startups. The codes have been further elucidated, taking into consideration the comments of the participants. These comments shed light on how online services, product reviews, social media and new technological advancements contribute to the enhancement of value in startup companies.

4.2.1.1 Online services and product review.

Technology has entirely changed the concept of how customers now interact with firms. For example, online feedbacks now enable customers to share their views on services or products they receive (Lackermair et al., 2013). Customers' participation allows firms to get valuable information or knowledge to improve their products or services (Nepomuceno et al., 2014). Many e-commerce sites provide product reviews or ratings (Lackermair et al., 2013). Furthermore, through these sites, firms get information about the customers’ needs and want entrepreneurs to improve in existing products or invent new products. This process drives the process of obtaining knowledge by enabling new firms to provide better products or services. Through e-business, many apps have been introduced, such as live help. This direct app is used to facilitate the interaction between customers and customer service representatives. It is similar to an instant messaging service where you can provide instant feedback and reviews.

Our study finds that customers continuously get the information about their products and services through these apps and try to improve their products/services. The more positive feedback they have, the better it is and more benefit businesses would get. Check the following responses: I use social media to plug my page and to get direct feedback to constantly improve what I offer. The more feedback I get the better it is (P25, Male, 40, UK) and Customer reviews on website, positive and negative feedback on services and products from customers using platforms such as google reviews, live help etc. These app facilitates the process of getting knowledge on how to make improvements and get benefit. (P34, Female, 23, UK)

4.2.1.2 Internet usage and social media.

Internet usage encourages people to share their expertise and knowledge on the internet (Chow and Chan, 2008; Kaur et al., 2018), which tells about the new technological changes happening in the business world. Social media is considered integral part in today’s business world (Malik et al., 2020). Many organizations provide the solution for everyday production problems in businesses through knowledge sharing (Wu, 2013). Furthermore, Wu (2013) also reported that businesses use the internet to access knowledge and build relations through social media apps. Leonardi et al. (2013) recognized that enterprise social networking sites allow workers to communicate with each other. That helps them to create networks enabling their workers to develop broader and more intensive relationships through knowledge sharing (Nisar et al., 2019). Social media is a two-way process in which both parties involved in the process get benefited through direct communication (Nisar et al., 2019). Furthermore, it is argued that social media tends to change the firm’s existing organizational structure by providing vital information that increases the company’s knowledge and leads it toward success. Social media interactions also help build strong relations that enhance productivity, further stimulating knowledge-sharing practices (Wu, 2013).

This study’s respondents have highlighted the driving role of social media in the process of knowledge arbitrage. The use of social media facilitated our respondents. It helped them to structure their business and provided them with the awareness of what needs to be done to succeed. Moreover, through these platforms, they have been involved with communities to get the knowledge required. Several databases allow them to have information about their clients and keep them up to date. The following responses illustrate the importance of social media and the internet in getting knowledge arbitrage. I use the internet or ask people I know who have more experience (P24, Male, 34, UK) And, I first started as it is a concept that I saw online, and I was curious as to how it worked and if it was a viable opportunity for making money or not. I started following individuals online on social media who promoted this type of work and did my own research through their content and business structure on how this works, why it works and what tools are needed to make it successful. (P29, Female, 23, UK)

4.2.2 Organizational drivers.

Organizations must look for sources to get the knowledge that take them toward innovative new ideas and offer them more opportunities to distinguish themselves from their competitors (Asrar-ul-Haq and Anwar, 2016). Our study identified organizational drivers (knowledge brokers and organizational networks) that aid in the process getting knowledge arbitrage in startups.

4.2.2.1 Knowledge brokers.

Knowledge brokers allow the flow and exchange of knowledge from places where it is abundant to the places where it is required, enhancing businesses' innovative capabilities in their network (Conklin et al., 2013). Knowledge brokers help to create networks with suppliers, distributors, and customers etc. It also helps in this process by identifying the most relevant information needed for enhancing firm performance. It facilitates by keeping owners updated with the latest market trends and increasing innovative capabilities (Conklin et al., 2013). The participants noted the role of knowledge brokers in the process of knowledge arbitrage. They assist in this process by creating networks, helping to improve innovative capabilities, increasing sales and revenues, developing the capacity to work together, and thus act as a driver for knowledge arbitrage process. The following responses provide further insights into the role of knowledge brokers. Yes definitely. We work with knowledge experts who have been supplying catering and bar equipment for a very long time. We utilize that expertise to ensure our customers have access to the best equipment and hands on experience to solve any problems or improve their business requirements and make them more efficient and increase revenue (P35, Male, 60, UK). And Knowledge brokers helped us in creating knowledgeable links and providing them with information needed for improving our services and enhancing innovative capabilities by innovating new products hence increasing sales and our business revenues. (P38, Male, 44, UK)

4.2.2.2 Organizational networks.

Organizational networks are an extension to connect the knowledge workers with the firm and assist it in growing and improving its processes. Effective knowledge networks increase innovation and improve organizational efficiency. Building knowledgeable networks focus on knowledge exchange (Enkel et al., 2005). Interestingly, building networks is considered a central domain that absorbs, creates, transforms, and communicates knowledge (Büchel and Raub, 2002). Knowledge and networks built by accessing the knowledge increase the performance of the organizations (Janhonen and Johanson, 2011). Socialization promotes the exchange of tacit information through collaborative activities being together, living in the same environment, exchanging experiences, thinking, and passing ideas to others (Enkel et al., 2005). Networks that enable knowledge transfer among teams provide opportunities for learning and collaboration while facilitating the generation of new knowledge and improving the organization's ability to innovate (Nahapiet and Ghoshal, 1998). Within this particular process, business incubators assume the role of knowledge transfers, promoting the exchange and dissemination of information among tenants, external partners, and specialists (Lamperti et al., 2023). Expanding individuals' knowledge networks will typically facilitate knowledge development and distribution within an organization by broadening and increasing the number of active communication channels (Hoegl et al., 2003).

Our study's respondents revealed that creating networks with others like suppliers, clients, professionals, and partners, and acquiring knowledge from them leads their businesses to generate the best creative ideas. Moreover, using these ideas helped them increase firms' performance and innovation. This process also allows them to train their employees adequately. The following responses are extracted from the participants’ responses: The knowledge arbitrage can be based on internal sources like knowledge gained from experience, lessons learned from failures and successful projects you completed. All these sources provide comprehensive knowledge that manage a successful Startups of a business by proving helpful in establishing strong knowledge network which help in increasing business efficiency (P38, Male, 44, UK). And The advice from professional consultants helped us to identify which regulations we need to abide by, we also have specialist firms which we employ to provide regular servicing and monitoring of equipment, provide insurance for the more dangerous equipment and to make sure all staff are trained adequately and comply with the regulations. (P37, Male, 60, UK)

4.3 Barriers in the process of knowledge arbitrage

There are several technological and organizational barriers that can hinder the success of knowledge arbitrage initiatives. Following section describes the technological and organizational barriers of knowledge arbitrage process.

4.3.1 Technological barriers.

In the present era of digitalization, technology has been considered a vital source for the businesses including startups to improve their innovation processes and gain competitive advantage. We have recognized the improper utilization of digital platforms and the technological knowledge gap as the factors that impede the knowledge arbitrage process.

4.3.1.1 Improper use of digital platforms.

Knowledge sharing has become a vital resource for companies to acquire expertise, solve issues, boost organizational learning, and initiate new opportunities now and in the future for both the person and the organization (Grant, 1996b). The way knowledge has become an integral part of organizations is astonishing. Technology aids in the knowledge sharing process. Digital platforms, ranging from blogs to social networks, where revolutionized every business operation, they also created some hurdles for organizations (Nisar et al., 2019).

Due to Poor infrastructure, poor network coverage and limited access to digital devices and digital illiteracy firms are unable to use digital platforms properly which become extremely important to use given to technology transformation era (Bakibinga-Gaswaga et al., 2020). Several studies have revealed that firms make little or no use of digital platforms, either they don’t have the expertise to operate technological tools, or they don’t feel these forums are reliable and think because of information received through these platforms they might lose their competitive edge (Anwar et al., 2019). Unfamiliarity with these tools is considered a barrier in acquiring knowledge (Ghobadi and Mathiassen, 2016). Digital media has evolved into a medium for information sharing. However, it would be ineffective if employees lacked technological skills and did not understand how to utilize them in an organizational environment (Paulin and Suneson, 2012). It would be challenging to operate a system if you did not know how to regulate and use it. Damodaran and Olphert (2000) argued that a lack of user-friendliness and technological inadequacy could also lead to low usability and constitute a significant obstacle. Ardichvili (2008) asserted that a lack of technological skills and a probable resistance to adopting technology is a barrier.

The respondents in our study revealed digital illiteracy and unfamiliarity created a barrier for them to improve their business operations, especially at the time of Covid when human interaction and face to face meetings became impossible. They further confirmed that using digital platforms provides them with innovative capabilities. Consider the following insights from participants: I am running my business for 5 years and my business didn't go well because of the lack of knowledge of social media and ignoring the use of social media created a barrier for me to get information available in these platforms. In Covid I realized a need to use technology and digital platforms which could help me in getting knowledge and improving my business performance (P29, Female, 23, UK). And Certain new applications/programs which I was not familiar with were necessary to learn due to the pandemic, such as Microsoft Teams and Zoom. The difference in obtaining the knowledge was that it could not be delivered in person due to restrictions nonfamiliarity with these platforms caused barrier for us in getting knowledge. (P17, Male, 29, UK)

4.3.1.2 Technological knowledge gap.

Prior scholars have identified the “technological knowledge gap” as a fundamental challenge in obtaining knowledge (Anwar et al., 2019; Kwanya, 2019). The technological knowledge gap arises due to the differences in the knowledge acquired through experience and education (Anwar et al., 2019). With the technological advancements, team members are often located at different geographical locations. The difference in the educational level of team members is also identified as one of the barriers (Anwar et al., 2019). People involved in the same project understand different contexts while sharing knowledge. Lack of understanding makes it challenging for them to get appropriate knowledge (Anwar et al., 2019). Some people are sensitive in utilizing the available information because they recognize the opportunities available to them through the knowledge sharing process according to the knowledge or information they already possess (Denrell et al., 2003). Shane (2000) pointed out that three primary elements of prior knowledge are essential to the process of entrepreneurial discovery in the high technology context: first, a person should have prior knowledge of markets, second. Prior knowledge to serve the markets, and third, prior knowledge of solving customer issues. New information about technology may be complementary in combination with prior knowledge. So, if a person doesn’t have any prior knowledge, it creates a hurdle in understanding the context of newly available information (Bereznoy et al., 2021). Consider the following insights from participants: My biggest concern is technology knowledge gap which exists and affects the participation of team members and on their understanding due to difference in educational background. A person working in IT department considers it hard to convey his message to the person who lacks in those skills. (P16, Male, 46)

4.3.2 Organizational barriers.

One of the fundamental factors contributing to organizational effectiveness, innovation and improving business performance is the ability of knowledge sharing (Alavi and Leidner, 2001). We have recognized lack of finances and quality check as organizational barriers in the process of knowledge arbitrage. This have been explained further that how without proper financing and quality check, the accuracy and reliability of shared knowledge gets compromised.

4.3.2.1 Lack of finances.

For startups, finance handling is a major issue in the initial stages. Taking expert advice in the form of information or knowledge involving third parties sometimes requires a high cost (Anwar et al., 2019). Furthermore, obtaining knowledge is associated with higher costs, which are usually unpredictable before time and act as a barrier to getting knowledge, especially during COVID-19. Small firms experience difficulties in the process of acquiring knowledge and innovation due to the limited budget they have. Building extensive networks for getting knowledge is sometimes linked with strong finances, making this process tough (Ghobadi and Mathiassen, 2016). So, lack of financing creates a hindrance in the knowledge sharing process. In our study, respondents revealed that they could not obtain knowledge from professionals because of limited finances. Consider the following insights from participants: Yes, there was a hesitancy to give up information and less people were willing to meet with us to discuss their needs especially during covid. Because of limited finances we were not able to get knowledge from professionals (P28, Male, 36, UK). And I think the cost of living and people generally being short on money is making it a little harder for smaller businesses and side hustles to get knowledge. I and Many people I know who have small businesses have seen reduced footfall and sales over the last 6 months. (P30, Male, 24, UK)

4.3.2.2 Quality check.

The biggest hurdle in getting knowledge is the quality check. For knowledge to be shared effectively, it is extremely important to check the quality and effectiveness of that available knowledge before entirely relying on it (Nisar et al., 2019). Therefore, the effective use of knowledge depends mainly on its quality (Yu et al., 2007). Knowledge quality is considered as the appropriateness of knowledge that organizational members create or share to meet users' expectations and is valuable for a quality management system (Alavi and Leidner, 2001). High levels of quality help organizations in improving their business and business performance, however lack of knowledge quality acts as a big hurdle for firms (Mustapha et al., 2018).

The findings of our study show that for respondents to check the quality of information is a big hurdle in getting knowledge. They doubt that if knowledge is inaccurate, they might end up losing their firm’s competitive advantage, which is a considerable risk. There are also chances of the repetitiveness of the same information. Check the following responses: My biggest concern in getting knowledge is the quality of information we are getting. If not, accurate it may end up getting lost our competitive advantage which is a big risk (P30, Male, 24, UK) and Where we have sourced information from a third party, this information comes from a domain that we don’t know we should believe or not, we face difficulty to judge the quality of the information we have. (P27, Female, 27)

4.4 Effect of pandemic on knowledge arbitrage process

The corona virus outbreak resulted in a global crisis and had unpredictable effects on society and the economy. During this pandemic, startup firms also faced troubles in the process of getting knowledge. Due to high uncertainty and ambiguity resulting from COVID crisis, firms faced many challenges (Harter et al., 2020).

4.4.1 COVID-induced barriers.

A review of prior literature discussing the sources of business crises reveals business crisis come up with certain challenges (Shaluf et al., 2003) such as in case of COVID-19 were disruption of operations, financial issues, hurdle in getting knowledge, low morale on the firms’ employees due to the health risks, national restrictions or limitations, and potentially not efficient management of time (Baradziej and Gkikas, 2021). In knowledge intensive business environment, knowledge management including knowledge sharing seem to be essential for crisis management results. Jensen and Szulanski (2004) reported efficient knowledge sharing practices during crises enhance firms' productivity. As a consequence of this pandemic, the firms had to confront various challenges including uncertainty in business continuity, limited traveling and face to face interaction, resulting in lesser connection with clients, restrictions on working from home and social distancing (PWC, 2021).

While identifying the effect of COVID, our respondents revealed a lack of innovation process, difficulty building networks and knowledge credibility issues hinder obtaining knowledge, thus obstructing the knowledge arbitrage process. The COVID-19 pandemic is one of the most destructive crises in recent history, with its far-reaching consequences for economies, organizations, and employees worldwide (Choudhury et al., 2021). During such time, people were forced to work from home, which led to almost the absence of face-to-face interaction and usage of digital platforms for knowledge sharing (Elia et al., 2020), making network building difficult. Due to a lack of available information, businesses could not innovate new products or services. During pandemic, when many companies started their operations online, some people found it difficult to perform in a digital environment. Numerous platforms such as Zoom, Teams, social media apps were used to share knowledge (Golden, 2006; Choudhury et al., 2021), but the lack of knowledge on how to use such apps created a problem for them. Consider the following insights from participants: Market slowed down significantly in our area so not as much innovation was happening. We were not able to innovate new products in our business. So, our business lacked in innovation process (P16, Male, 46, UK) and During COVID we were forced to stay at home and link via zoom, that I consider a drawback. Because it took away opportunity from us for the building long term relationships which could provide benefits in long term (P38, Male, 44, UK). Also, I missed out on the face to face aspect of gaining information during pandemic, this had a huge impact on getting credible information. A lot of information was available online but there were huge credibility issues for the entrepreneurs to believe on these resources. (P30, Male, 24, UK)

5. Discussion

This study aimed to contribute to the existing body of knowledge regarding knowledge arbitrage by focusing on its significance for startups. Our research unveiled the substantial benefits that knowledge arbitrage brings to startup businesses. Knowledge arbitrage, which has been gaining increasing attention over time, proves its importance as a valuable resource for organizations. Our comprehensive analysis strongly underscores the pivotal role of knowledge arbitrage in providing firms with a competitive edge, fostering innovation, and reducing costs through collaborative efforts and network development (Carayannis and Sipp, 2010; Carayannis and Clark, 2011; Carayannis et al., 2011). Within the startup landscape, knowledge arbitrage takes on particular significance as it aids in deciphering emerging market trends, adapting to evolving customer preferences, mitigating risks and uncertainties, building robust networks and teams, and uncovering untapped profitable markets (Talwar et al., 2023).

While previous literature acknowledges a fundamental link between knowledge arbitrage and startups, it has largely neglected an in-depth exploration of the benefits, drivers and barriers associated with this process within startup contexts. Consequently, there exists a significant knowledge gap in comprehending the unique impact of knowledge arbitrage in the startup ecosystem. Further exploration is required to unveil the implications of the pandemic on the dynamics of knowledge acquisition and sharing, particularly within startups. In line with previous studies, we conducted a qualitative analysis, carefully selecting 40 participants holding executive positions in startups. These participants possess first-hand knowledge of knowledge arbitrage and its associated opportunities and challenges. Data collection was performed using an open-ended essay method, allowing participants to provide detailed insights into the subject. Subsequently, the collected data underwent analysis using the Gioia method.

Regarding RQ1, our study categorizes the benefits of knowledge arbitrage in startups into two key domains: organizational and financial. On the organizational front, knowledge arbitrage contributes to building networks, fostering new product innovation, and enhancing competitive advantage. Financially, it leads to cost reduction and increased sales growth. Actively seeking knowledge from diverse sources, including research institutions, industry experts, strategic alliances, and networks, empowers organizations to acquire new insights, diverse perspectives, and valuable expertise that fuels innovation (Canestrino et al., 2022; Grant, 1996b; Nurhayati et al., 2023). Our findings echo prior research, emphasizing that firms effectively leveraging knowledge can streamline processes, reduce costs and enhance overall performance (Jain et al., 2023; Inkinen, 2016). The dynamic and adaptive nature of knowledge, as demonstrated by previous studies, enables firms to navigate changing market conditions and seize opportunities for product innovation. Our study underscores the role of knowledge arbitrage in building networks and collaborations, aligning with prior literature (Jiang et al., 2023; Nurhayati et al., 2023). Knowledge arbitrage actively fosters network development, allowing organizations to access external knowledge sources and leverage partner resources, thereby expanding their knowledge base, boosting innovation, and increasing competitiveness and overall firm performance (Spender, 2017; Talwar et al., 2023).

In response to RQ2, our study effectively pinpointed the factors that drive and hinder the knowledge arbitrage process within startup enterprises. We uncovered various elements that play a role in this process, stemming from both technology and organization-related aspects. These elements, often referred to as drivers, include the use of online services and product reviews, the utilization of the internet and social media, as well as the presence of knowledge brokers and organizational networks (Powell and Grodal, 2006; Wu and Wang, 2006; Nisar et al., 2019). Some of these findings align with prior research in the field of startups, while others introduce new insights. One aspect that our study highlighted is the significant impact of technology, especially the use of online services and product reviews, the internet, and social media (Wu, 2013). These technological drivers enable startups to tap into a wealth of information from a diverse range of sources. Startups are increasingly capitalizing on platforms such as social media to access and acquire knowledge. Engaging with social media helps startups stay up-to-date with the latest industry trends, market insights, and technological advancements (Martín‐de et al., 2011; Behringer and Sassenberg, 2015). This aligns with previous research that has recognized the positive effects of social media on knowledge acquisition and the overall performance of startups.

Moreover, our study emphasized the importance of organizational factors, particularly the presence of knowledge brokers and organizational networks (Powell and Grodal, 2006; Wu and Wang, 2006; Nisar et al., 2019). These elements serve as vital conduits for the exchange and flow of knowledge within and between organizations. By nurturing and building these organizational networks, startups can broaden their knowledge base by accessing external knowledge sources. The role of knowledge brokers as intermediaries facilitating effective knowledge exchange and sharing has also been documented in previous literature. These individuals bridge gaps and connect different parties with valuable knowledge, thereby promoting knowledge transfer and enhancing the accessibility of critical knowledge resources for startups. Additionally, our research offered a novel insight by identifying online service and product reviews as significant drivers of the knowledge arbitrage process. These online reviews provide startups with valuable insights and feedback related to their products, services and the preferences of their target markets. By actively engaging with online reviews, startups can gather crucial insights, recognize customer needs, and make informed decisions to enhance their offerings. This finding enriches the existing literature and underscores the importance of leveraging online platforms for knowledge acquisition within the context of startups.

Our study delved into both the drivers and barriers associated with knowledge arbitrage in startups. Notably, we illuminated a series of technological and organizational hurdles that hinder the acquisition of knowledge. Foremost among these obstacles were financial constraints, which emerged as a substantial barrier. Limited financial resources curtail startups' ability to invest in invaluable knowledge-enhancing avenues, including conferences, training programs, and research opportunities (Anwar et al., 2019). These platforms offer crucial opportunities for startups to access specialized knowledge and develop essential skills. Training programs and workshops, in particular, provide entrepreneurs and their teams with a platform to enhance their expertise and stay abreast of industry best practices (Alam et al., 2020). Regrettably, the constraints of limited financial resources obstruct startups from accessing these vital knowledge sources, thereby hampering the process of knowledge acquisition and sharing. Another significant barrier, consistent with the existing literature, pertains to the necessity for quality assurance in acquired knowledge. Effective knowledge utilization hinges on the reliability and accuracy of the information (Yu et al., 2007). Startups frequently acquire knowledge from a myriad of sources, including research papers, industry reports, and online platforms. Yet, not all such information is necessarily trustworthy or reliable. Thus, startups are compelled to undertake the critical evaluation and verification of the acquired knowledge, ensuring its quality and relevance to their specific needs and objectives (Asrar-ul-Haq and Anwar, 2016). This process of verifying the quality of knowledge serves as a pivotal barrier along the path of knowledge arbitrage for startups.

Furthermore, our study brought to light novel barriers that had not been consistently addressed in existing literature. These novel challenges encompassed the improper use of digital platforms and knowledge gaps concerning technological advancements. Improper utilization of digital platforms can impede a startup's ability to effectively harness available knowledge resources. Furthermore, knowledge gaps related to technological advancements can hinder a startup's access to cutting-edge knowledge, thereby limiting their capacity to innovate and remain competitive within the market. These unique barriers contribute fresh insights to the existing body of knowledge, thereby enriching our comprehension of the challenges confronted by startups in the knowledge arbitrage process.

In response to RQ3, our study also revealed that the pandemic had affected the process of knowledge arbitrage which is a novel contribution in the existing literature because no prior study has identified it so far. Our respondents revealed lack of innovation process, difficulty building networks, and knowledge credibility issues hinder obtaining knowledge, thus obstructing the knowledge arbitrage process. There was a lack of desired knowledge necessary for innovating new products. Because of social interaction restrictions, firms could not interact face-to-face with others to build networks (Choudhury et al., 2021). Moreover, the only platform available to them was the internet. Due to the availability and free access of information for everyone they have made the source of information doubtful to be reliable. By using such information, startups might end up losing firm performance.

6. Study implications

6.1 Theoretical implications

This study carries significant theoretical implications, primarily by delving into the role of knowledge arbitrage within startup enterprises, a topic that has been relatively underexplored in existing literature. Despite the acknowledged importance of knowledge as a critical resource for startups, there is a noticeable gap in research focused on this specific area. First, our investigation within the distinct context of startups fills this void, making a substantial contribution to the scholarly discourse on knowledge arbitrage. Through our research, we not only enrich the understanding of knowledge arbitrage, how knowledge arbitrage functions in startup environments but also expand the existing body of literature. In this manner, our study advances theoretical comprehension by shedding light on an often-overlooked facet of knowledge arbitrage and its relevance in the startup ecosystem.

Second, this study enhances the theoretical foundations of the field by delineating the drivers and barriers encountered by entrepreneurs in the realm of knowledge arbitrage, spanning both organizational and technological dimensions. These findings prompt the exploration of potential strategies to overcome these barriers. For example, firms can consider establishing strategic alliances with organizations possessing complementary resources, leveraging translation technology, and utilizing digital platforms to enhance knowledge arbitrage. Additionally, focusing on the identified drivers is imperative for achieving improved outcomes. By outlining these prospects, our research contributes to the advancement of knowledge and provides a roadmap for future research endeavors in this domain.

Third, in the context of knowledge arbitrage, this study underscores the significance of knowledge sharing and collaboration, particularly with external sources such as suppliers, clients, partners, government entities, and educational institutions (Canestrino et al., 2022). It highlights the pivotal role of interorganizational networks and collaborations in facilitating knowledge acquisition and fostering creativity. Organizations can leverage these external sources to access specialized information, gain market insights, and cultivate cooperative relationships. By emphasizing the importance of organizational networks and knowledge brokers our study underscores the value of tapping into external knowledge sources and forming strategic alliances. This connection deepens our understanding of the mechanisms through which knowledge arbitrage drives innovation and enhances competitive advantage, ultimately contributing to the innovation and increased firm performance.

Finally, drawn from this study's findings, we have devised a conceptual framework (Figure 2). This framework presents the acquisition of knowledge arbitrage and describe its benefits, drivers and barriers. Prospective scholars can get inspiration from this framework to further investigate the knowledge arbitrage phenomenon benefiting the firms in several ways.

6.2 Managerial implication

This study offers valuable insights for practitioners, enabling them to grasp the concept of knowledge arbitrage and apply it in their decision-making processes effectively. First, the findings underscore the importance of knowledge arbitrage in today's knowledge-oriented era, making it a relevant and valuable tool for organizations. Knowledge arbitrage is shown to create an environment conducive to learning and building interorganizational relations. It enables organizations to access valuable information from both internal and external sources, ultimately enhancing firm performance. Therefore, managers should actively foster a dynamic and innovative environment for knowledge sharing, transformation, and application. Additionally, businesses may consider establishing a dedicated department responsible for the acquisition and transformation of knowledge within the organization.

Second, the paper highlights various challenges that startups may encounter during the knowledge arbitrage process, including technological obstacles, financial constraints, and knowledge quality checks. Managers should address these hurdles by providing necessary resources and training to enhance technical capabilities. Startups encompass approximately 90% of businesses globally and account for over 50% of employment worldwide. In emerging economies their collective impact on the Gross Domestic Product (GDP) reaching up to 40% (World Bank, 2022). Given that startups play a significant role in the global economy, managers must diligently recognize and overcome these obstacles, actively working toward their resolution.

Third, our research explains the process of identifying possibilities for policymakers to discern sectors or industries that delay technology adoption. By understanding the factors that prevent or promote progress, policymakers can formulate specific policies and actions to surmount obstacles and bolster facilitators. This approach may effectively cultivate cooperation and partnerships across diverse stakeholders. A comprehensive understanding of the technical and organizational barriers and facilitators aids policymakers in making well-informed choices and formulating precise plans for knowledge arbitrage. This facilitates the identification of possibilities, formulation of policies, promotion of cooperation, efficient allocation of resources and evaluation and adaptation of actions.

Fourth, the concept of knowledge arbitrage entails the identification and subsequent application of knowledge from one sector or setting to another industry or environment. This phenomenon has the potential to foster the generation of novel concepts, commodities or offerings, hence conferring notable advantages to entrepreneurs seeking to pioneer and engender worth.

Finally, the findings highlight the significance of knowledge arbitrage in strategic decision making and its influence on organizational performance. Managers should incorporate knowledge arbitrage methods into their strategic planning processes to identify opportunities, assess risks, and make informed decisions. Investing in knowledge management systems and techniques for effective knowledge acquisition, storage, retrieval, and distribution is vital for startups. Proper management of knowledge assets empowers startups to gain a competitive advantage, respond promptly to market changes, and support long-term growth.

7. Study limitations and future work

Knowledge arbitrage is a concept that requires scholarly efforts to explore its importance and processes further. Though this study has contributed to the nascent literature on knowledge arbitrage by highlighting its importance for startups, it still needs a few limitations. The main limitations of this study are as follows. First, we have highlighted different drivers and barriers of knowledge arbitrage in startups. Prospective scholars are encouraged to explore such drivers and barriers across hierarchical organizations. Moreover, the drivers and barriers of knowledge arbitrage can be investigated in terms of personal biases, attitudes, and behavior of knowledge sharers and receivers.

Second, this research only focuses on the startups and their effect on innovative capabilities through knowledge arbitrage. There is little prior evidence of knowledge arbitrage in other business setups such as incumbent firms. Future research efforts may delve into this phenomenon throughout various phases of development within established companies, generating comprehensive sector-specific insights. This would enable future cross-sectoral comparisons and facilitate the assessment of disparities in knowledge arbitrage processes.

Third, we utilized a sample of participants from the UK and USA which are a developed economy. That limits the generalizability of the study in other contexts of developing economies. Nevertheless, prospective scholars are encouraged to investigate this phenomenon to identify the importance of knowledge arbitrage for startups in developing economies. Likewise, our sample may not represent startups in other countries because operational managers or owners in other countries may interpret knowledge arbitrage differently. To address these concerns, it is recommended that future investigations be conducted to ascertain the validity of our findings in different geographical contexts.

Fourth, as stated earlier, the study of knowledge arbitrage research entails two main outcomes for the organization's open innovation portfolio: the occurrence of unexpected knowledge arbitrage in external networks and the increase of bi-directional ability to extract value across corporate boundaries (Hughes and Wareham, 2010). The realm of open innovation has evolved from a niche area of inquiry to a generally acknowledged and thoroughly examined topic of study (Chesbrough, 2019; Gassmann et al., 2010). The notion of open innovation has been cited in scholarly literature concerning strategy, overall management, and organizational behavior (Bigliardi et al., 2021). Therefore, this topic may be further examined to have a deeper understanding of the concept of knowledge arbitrage within an open innovation portfolio.

Finally, our study used a qualitative research design. It may allow future scholars to investigate this phenomenon with a quantitative research design and verify our study findings. Despite these limitations, the study's key findings regarding knowledge arbitrage and related barriers and benefits are imperative for scholars and practitioners to consider.

Figures

Figure 1

Research design

Figure 2

Theoretical framework

Table 1

Data structure details

First-order concepts	Second-order themes	Aggregate dimensions
Building networks	Organizational benefits	Benefits of using knowledge arbitrage
New product innovation
Competitive advantage
Cost reduction	Financial benefits
Sales growth
Online service and product review	Technological drivers	Drivers of knowledge arbitrage process
Usage of internet and social media
Knowledge brokers	Organizational drivers
Organizational networks
Improper use of digital platforms	Technological barriers	Barriers of knowledge arbitrage process
Technological gap
Lack of finances	Organizational barriers
Quality check
Lack of innovation	COVID-induced barriers	Effect of pandemic on the process
Difficulty in building networks
Knowledge credibility issues

Source:

Authors’ own creation

Table A1

Participant details

Person	Gender	Age	Country	Company
P1	Male	25	UK	Clothing
P2	Male	34	UK	Financial services
P3	Female	53	UK	Soaps and wax melts
P4	Female	26	UK	Clothing
P5	Male	22	UK	Selling tech products
P6	Female	40	UK	Powder coating
P7	Male	35	Seychelles	Media house
P8	Female	56	UK	Dentist surgery
P9	Female	23	UK	Candles
P10	Male	36	UK	Property rentals
P11	Female	59	UK	Entertainment performing arts
P12	Male	33	UK	Nutritional therapy
P13	Male	22	UK	Food
P14	Female	32	UK	Cosmetic
P15	Female	24	UK	Makeup company
P16	Male	46	UK	Leisure activity
P17	Male	29	UK	Contracting work for a bank
P18	Male	29	USA	IT services
P19	Female	22	UK	Food
P20	Female	26	Ireland	Bath bombs
P21	Female	21	UK	Biotech startups
P22	Male	46	UK	Music industry
P23	Male	41	UK	Accountancy services
P24	Male	34	UK	Candles
P25	Male	40	UK	Local honey producer
P26	Male	44	UK	Recycling industry
P27	Female	27	UK	Financial services
P28	Male	36	UK	Social care enterprise
P29	Female	23	UK	Marketing
P30	Male	24	Ipswich	Trading cards
P31	Male	23	UK	Financial services
P32	Female	28	UK	Cake service
P33	Female	28	UK	Cosmetic
P34	Female	23	UK	Tuition company
P35	Male	60	UK	Catering and bar equipment
P36	Female	52	UK	Fashion goods
P37	Male	43	UK	Trading advisory
P38	Male	44	UK	Accountancy services
P39	Male	28	UK	Toys for adults
P40	Male	46	USA	Architectural precast products

Source:

Authors’ own creation