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The Relationships Between Foreign Competition, Absorptive Capacity And Pioneering Innovation: An Empirical Investigation In Canada


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    (Hasselt University, Department of Business Studies, Campus Diepenbeek — Building D, Diepenbeek, Belgium)


    (Hasselt University, Department of Business Studies, Campus Diepenbeek — Building D, Diepenbeek, Belgium)


The relationship between competition and innovation has drawn great attention from economists and strategic management researchers. However, the empirical evidence for this relationship remains inconsistent. On the one hand, the Schumpeterian viewpoint credits that the large firms with substantial monopoly market power have resources and incentives to innovate. On the other hand, it is also possible for a monopolist to have incentives to suppress subsequent innovations. It is suggested by Baldwin and Scott (1987) and Tang (2006) that the relationship between competition and innovation is dependent on the competition context and specific type of innovation activities. In this study, we investigate the relationship between foreign competition and pioneering innovation and consider the moderating role of absorptive capacity for this relationship, using the Canadian Innovation Data. We find a U-shaped relationship between foreign competition and pioneering innovation: when foreign competition increases from a low to a moderate level, the likelihood of pioneering innovation decreases. However, the likelihood of pioneering innovation increases when foreign competition continues to increase from a moderate to a high level. We also found evidence that absorptive capacity may positively moderate the relationship between foreign competition and pioneering innovation.

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Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Innovation Management.

Volume (Year): 13 (2009)
Issue (Month): 01 ()
Pages: 105-137

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Handle: RePEc:wsi:ijimxx:v:13:y:2009:i:01:p:105-137

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Keywords: Competition; foreign competition; pioneering; innovation; absorptive capacity;


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Cited by:
  1. Yuandi Wang & Zhao Zhou & Jason Li-Ying, 2013. "The impact of licensed-knowledge attributes on the innovation performance of licensee firms: evidence from the Chinese electronic industry," The Journal of Technology Transfer, Springer, vol. 38(5), pages 699-715, October.
  2. Habiyaremye, Alexis & Raymond, Wladimir, 2013. "Transnational corruption and innovation in transition economies," MERIT Working Papers 050, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  3. Liu, Xiaohui & Hodgkinson, Ian R. & Chuang, Fu-Mei, 2014. "Foreign competition, domestic knowledge base and innovation activities: Evidence from Chinese high-tech industries," Research Policy, Elsevier, vol. 43(2), pages 414-422.


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