Knowledge-Based Innovation: Emergence and Embedding of New Practice Areas in Management Consulting Firms

How do innovative knowledge-based structures emerge and become embedded in organizations? We drew on theories of knowledge-intensive firms, communities of practice, and professional service firms to analyze multiple cases of new practice area creation in management consulting firms. Our qualitative analysis identified four critical generative elements: socialized agency, differentiated expertise, defensible turf, and organizational support. We demonstrate that these elements must be combined in specific pathways for knowledge-based innovative structures to emerge and embed. These pathways emerge from practitioner networks, markets for knowledge-based services, and professional firms’ hierarchies. Our findings have important implications for studying innovation in the knowledge-based economy.