IDEAS home Printed from https://ideas.repec.org/a/wsi/ijimxx/v23y2019i07ns1363919619500695.html
   My bibliography  Save this article

The Importance Of Internal Knowledge Generation And External Knowledge Sourcing For Sme Innovation And Performance: Evidence From Ireland

Author

Listed:
  • JUSTIN DORAN

    (Spatial and Regional Economics Research Centre, Department of Economics, Cork University Business School, University College Cork, Cork, Ireland)

  • NOIRIN McCARTHY

    (Spatial and Regional Economics Research Centre, Department of Economics, Cork University Business School, University College Cork, Cork, Ireland)

  • MARIE O’CONNOR

    (Spatial and Regional Economics Research Centre, Department of Economics, Cork University Business School, University College Cork, Cork, Ireland)

Abstract

This paper analyses the knowledge sourcing, transformation, and exploitation stages of the innovation value chain for a sample of Irish small to medium sized enterprises (SMEs) using Community Innovation Survey data. It explores the role of internal research and development (R&D) and external knowledge on SMEs’ innovation and performance. The open innovation paradigm, which stresses the importance of external linkages, is used to examine the impact of different external knowledge sources on SMEs’ innovation. The consideration of external linkages in the innovation performance of SMEs is crucial as these firms may be constrained in their ability to perform R&D due to their size. The analysis expands the traditional CDM methodology beyond the consideration of research and development as the sole source of knowledge for innovation by also considering a range of potential external knowledge sources. The findings indicate that SMEs generate knowledge internally through the performance of R&D, while also exploiting linkages to external agents. However, the impact of external sources of knowledge is not uniform. The results suggest that backward linkages have a positive impact on SME product innovation, but negatively affect SME process innovation, while public knowledge sources are positively related to the probability of product innovation occurring. This may have important policy implications. Finally, process innovation is also found to be a key determinant of SME productivity, while product innovation has no impact on SME performance.

Suggested Citation

  • JUSTIN DORAN & NOIRIN McCARTHY & MARIE O’CONNOR, 2019. "The Importance Of Internal Knowledge Generation And External Knowledge Sourcing For Sme Innovation And Performance: Evidence From Ireland," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 23(07), pages 1-30, October.
    • Handle: RePEc:wsi:ijimxx:v:23:y:2019:i:07:n:s1363919619500695
    DOI: 10.1142/S1363919619500695
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S1363919619500695
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S1363919619500695?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Eric von Hippel, 1986. "Lead Users: A Source of Novel Product Concepts," Management Science, INFORMS, vol. 32(7), pages 791-805, July.
    2. Lee, Sungjoo & Park, Gwangman & Yoon, Byungun & Park, Jinwoo, 2010. "Open innovation in SMEs--An intermediated network model," Research Policy, Elsevier, vol. 39(2), pages 290-300, March.
    3. Aija Leiponen, 2005. "Organization of Knowledge and Innovation: The Case of Finnish Business Services," Industry and Innovation, Taylor & Francis Journals, vol. 12(2), pages 185-203.
    4. G. M.P. Swann, 2009. "The Economics of Innovation," Books, Edward Elgar Publishing, number 13211.
    5. Romijn, Henny & Albaladejo, Manuel, 2002. "Determinants of innovation capability in small electronics and software firms in southeast England," Research Policy, Elsevier, vol. 31(7), pages 1053-1067, September.
    6. Erica Mazzola & Manfredi Bruccoleri & Giovanni Perrone, 2012. "The Effect Of Inbound, Outbound And Coupled Innovation On Performance," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 16(06), pages 1-27.
    7. Cohen, Wesley M & Klepper, Steven, 1996. "A Reprise of Size and R&D," Economic Journal, Royal Economic Society, vol. 106(437), pages 925-951, July.
    8. Roper, Stephen & Du, Jun & Love, James H., 2008. "Modelling the innovation value chain," Research Policy, Elsevier, vol. 37(6-7), pages 961-977, July.
    9. Bruno Crepon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation And Productivity: An Econometric Analysis At The Firm Level," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 7(2), pages 115-158.
    10. Weterings, Anet & Boschma, Ron, 2009. "Does spatial proximity to customers matter for innovative performance?: Evidence from the Dutch software sector," Research Policy, Elsevier, vol. 38(5), pages 746-755, June.
    11. Peters, Bettina & Lööf, Hans & Janz, Norbert, 2003. "Firm Level Innovation and Productivity: Is there a Common Story Across Countries?," ZEW Discussion Papers 03-26, ZEW - Leibniz Centre for European Economic Research.
    12. Toke Reichstein & Ammon Salter, 2006. "Investigating the sources of process innovation among UK manufacturing firms," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 15(4), pages 653-682, August.
    13. Meric S. Gertler, 2003. "Tacit knowledge and the economic geography of context, or The undefinable tacitness of being (there)," Journal of Economic Geography, Oxford University Press, vol. 3(1), pages 75-99, January.
    14. Rachel Griffith & Elena Huergo & Jacques Mairesse & Bettina Peters, 2006. "Innovation and Productivity Across Four European Countries," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 22(4), pages 483-498, Winter.
    15. Hee‐Jae Cho & Vladimir Pucik, 2005. "Relationship between innovativeness, quality, growth, profitability, and market value," Strategic Management Journal, Wiley Blackwell, vol. 26(6), pages 555-575, June.
    16. Nooteboom, Bart & Van Haverbeke, Wim & Duysters, Geert & Gilsing, Victor & van den Oord, Ad, 2007. "Optimal cognitive distance and absorptive capacity," Research Policy, Elsevier, vol. 36(7), pages 1016-1034, September.
    17. Oerlemans, L.A.G. & Meeus, M.T.H. & Boekema, F.W.M., 1998. "Do networks matter for innovation? The usefulness of the network approach in analysing innovation," Other publications TiSEM b5b01e96-86f7-4fdf-95c0-4, Tilburg University, School of Economics and Management.
    18. Popa, Simona & Soto-Acosta, Pedro & Martinez-Conesa, Isabel, 2017. "Antecedents, moderators, and outcomes of innovation climate and open innovation: An empirical study in SMEs," Technological Forecasting and Social Change, Elsevier, vol. 118(C), pages 134-142.
    19. Patricia Hemert & Peter Nijkamp & Enno Masurel, 2013. "From innovation to commercialization through networks and agglomerations: analysis of sources of innovation, innovation capabilities and performance of Dutch SMEs," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(2), pages 425-452, April.
    20. Jaider Vega-Jurado & Antonio Gutiérrez-Gracia & Ignacio Fernández-de-Lucio, 2009. "Does external knowledge sourcing matter for innovation? Evidence from the Spanish manufacturing industry," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 18(4), pages 637-670, August.
    21. James Love & Mica Ariana Mansury, 2007. "External Linkages, R&D and Innovation Performance in US Business Services," Industry and Innovation, Taylor & Francis Journals, vol. 14(5), pages 477-496.
    22. Bronwyn Hall & Francesca Lotti & Jacques Mairesse, 2009. "Innovation and productivity in SMEs: empirical evidence for Italy," Small Business Economics, Springer, vol. 33(1), pages 13-33, June.
    23. George Van Leeuwen & Luuk Klomp, 2006. "On the contribution of innovation to multi-factor productivity growth," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(4-5), pages 367-390.
    24. Tsai, Kuen-Hung, 2009. "Collaborative networks and product innovation performance: Toward a contingency perspective," Research Policy, Elsevier, vol. 38(5), pages 765-778, June.
    25. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    26. Freel, Mark S., 2003. "Sectoral patterns of small firm innovation, networking and proximity," Research Policy, Elsevier, vol. 32(5), pages 751-770, May.
    27. Crepon, B. & Duguet, E. & Mairesse, J., 1998. "Research Investment, Innovation and Productivity: An Econometric Analysis at the Firm Level," Papiers d'Economie Mathématique et Applications 98.15, Université Panthéon-Sorbonne (Paris 1).
    28. Dahlander, Linus & Gann, David M., 2010. "How open is innovation?," Research Policy, Elsevier, vol. 39(6), pages 699-709, July.
    29. Veugelers, Reinhilde & Cassiman, Bruno, 1999. "Make and buy in innovation strategies: evidence from Belgian manufacturing firms," Research Policy, Elsevier, vol. 28(1), pages 63-80, January.
    30. Hans Loof & Almas Heshmati, 2006. "On the relationship between innovation and performance: A sensitivity analysis," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(4-5), pages 317-344.
    31. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
    32. Love, James H. & Roper, Stephen, 2001. "Location and network effects on innovation success: evidence for UK, German and Irish manufacturing plants," Research Policy, Elsevier, vol. 30(4), pages 643-661, April.
    33. André Spithoven & Wim Vanhaverbeke & Nadine Roijakkers, 2013. "Open innovation practices in SMEs and large enterprises," Small Business Economics, Springer, vol. 41(3), pages 537-562, October.
    34. Nola Hewitt-Dundas, 2006. "Resource and Capability Constraints to Innovation in Small and Large Plants," Small Business Economics, Springer, vol. 26(3), pages 257-277, April.
    35. Parisi, Maria Laura & Schiantarelli, Fabio & Sembenelli, Alessandro, 2006. "Productivity, innovation and R&D: Micro evidence for Italy," European Economic Review, Elsevier, vol. 50(8), pages 2037-2061, November.
    36. Bernd Ebersberger & Carter Bloch & Sverre J. Herstad & Els Van De Velde, 2012. "Open Innovation Practices And Their Effect On Innovation Performance," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 9(06), pages 1-23.
    37. Bruno Cassiman & Reinhilde Veugelers, 2006. "In Search of Complementarity in Innovation Strategy: Internal R& D and External Knowledge Acquisition," Management Science, INFORMS, vol. 52(1), pages 68-82, January.
    38. Ron Boschma, 2005. "Proximity and Innovation: A Critical Assessment," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 61-74.
    39. Luuk Klomp & George Van Leeuwen, 2001. "Linking Innovation and Firm Performance: A New Approach," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(3), pages 343-364.
    40. Johansson, Börje & Lööf, Hans, 2009. "Innovation, R&D and Productivity - assessing alternative specifications of CDM-models," Working Paper Series in Economics and Institutions of Innovation 159, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Omar Carrasco-Carvajal & Mauricio Castillo-Vergara & Domingo García-Pérez-de-Lema, 2023. "Measuring open innovation in SMEs: an overview of current research," Review of Managerial Science, Springer, vol. 17(2), pages 397-442, February.
    2. Aristovnik, Aleksander & Yang, Guo-liang & Song, Yao-yao & Ravšelj, Dejan, 2023. "Industrial performance of the top R&D enterprises in world-leading economies: A metafrontier approach," Socio-Economic Planning Sciences, Elsevier, vol. 89(C).
    3. Puertas, Rosa & Carracedo, Patricia & Garcia−Mollá, Marta & Vega, Virginia, 2022. "Analysis of the determinants of market capitalisation: Innovation, climate change policies and business context," Technological Forecasting and Social Change, Elsevier, vol. 179(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. J Doran & G Ryan, 2016. "The effectiveness of R&D and external interaction for innovation: Insights from quantile regression," Economic Issues Journal Articles, Economic Issues, vol. 21(1), pages 47-65, March.
    2. Doran, Justin, 2012. "Are different forms of innovation complements or substitutes?," MPRA Paper 44580, University Library of Munich, Germany.
    3. Justin Doran & Declan Jordan & Eoin O'Leary, 2012. "The Effects of National and International Interaction on Innovation: Evidence from the Irish CIS: 2004--06," Industry and Innovation, Taylor & Francis Journals, vol. 19(5), pages 371-390, July.
    4. Mairesse, Jacques & Mohnen, Pierre, 2010. "Using Innovation Surveys for Econometric Analysis," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1129-1155, Elsevier.
    5. Justin Doran & Eoin O'Leary, 2011. "External Interaction, Innovation and Productivity: An Application of the Innovation Value Chain to Ireland," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(2), pages 199-222.
    6. Justin Doran & Geraldine Ryan & Jane Bourke & Frank Crowley, 2019. "In-House Or Outsourcing Skills: How Best To Manage For Innovation?," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 24(01), pages 1-25, February.
    7. Justin Doran & Declan Jordan & Eoin O’Leary, 2012. "The effects of the frequency of spatially proximate and distant interaction on innovation by Irish SMEs," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 24(7-8), pages 705-727, September.
    8. Bronwyn Hall & Francesca Lotti & Jacques Mairesse, 2009. "Innovation and productivity in SMEs: empirical evidence for Italy," Small Business Economics, Springer, vol. 33(1), pages 13-33, June.
    9. Bourke, Jane & Roper, Stephen, 2017. "Innovation, quality management and learning: Short-term and longer-term effects," Research Policy, Elsevier, vol. 46(8), pages 1505-1518.
    10. Pellegrino, Gabriele & Piva, Mariacristina & Vivarelli, Marco, 2012. "Young firms and innovation: A microeconometric analysis," Structural Change and Economic Dynamics, Elsevier, vol. 23(4), pages 329-340.
    11. Burcu Fazlıoğlu & Başak Dalgıç & Ahmet Burçin Yereli, 2019. "The effect of innovation on productivity: evidence from Turkish manufacturing firms," Industry and Innovation, Taylor & Francis Journals, vol. 26(4), pages 439-460, April.
    12. Pierre Mohnen & Bronwyn Hall, 2013. "Innovation and Productivity: An Update," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(1), pages 47-65, June.
    13. Doran, Justin & Ryan, Geraldine, 2012. "Regulation and Firm Perception, Eco-Innovation and Firm Performance," MPRA Paper 44578, University Library of Munich, Germany.
    14. Doran, Justin & O'Leary, Eoin, 2013. "The Roles of R&D and networking for innovation by Irish and foreign-owned firms: evidence from the Irish CIS 2006-08," MPRA Paper 47291, University Library of Munich, Germany.
    15. Son Thi Kim Le, 2019. "Innovation efforts in developing countries: The case of Vietnamese small and medium-sized enterprises," WIDER Working Paper Series wp-2019-7, World Institute for Development Economic Research (UNU-WIDER).
    16. Justin Doran & Eoin O'Leary, 2016. "The Innovation Performance of Irish and Foreign-owned Firms: The Roles of R&D and Networking," The World Economy, Wiley Blackwell, vol. 39(9), pages 1384-1398, September.
    17. Justin Doran & Geraldine Ryan, 2016. "The Importance of the Diverse Drivers and Types of Environmental Innovation for Firm Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 25(2), pages 102-119, February.
    18. Hall, B.H., 2011. "Innovation and productivity," MERIT Working Papers 2011-028, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    19. Bettina Peters & Rebecca Riley & Iulia Siedschlag & Priit Vahter & John McQuinn, 2018. "Internationalisation, innovation and productivity in services: evidence from Germany, Ireland and the United Kingdom," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(3), pages 585-615, August.
    20. A. Lasagni, 2011. "European SMEs, external relationships and innovation: some empirical evidence," Economics Department Working Papers 2011-EP04, Department of Economics, Parma University (Italy).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijimxx:v:23:y:2019:i:07:n:s1363919619500695. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijim/ijim.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.