Firm Capabilities, Technological Dynamism and the Internationalisation of Innovation: A Behavioural Approach

26 Pages Posted: 24 Apr 2018 Last revised: 6 Sep 2018

See all articles by Torben Schubert

Torben Schubert

Fraunhofer Institut für Systemtechnik und Innovationsforschung

Christian Rammer

ZEW – Leibniz Centre for European Economic Research - Industrial Economics and International Management Research

Date Written: September 2017

Abstract

We develop a behavioural framework of bounded rational decision-making under uncertainty to analyse the role of technological dynamism in the firm’s environment for its decision to internationalise innovation. Applying prospect theory, we argue that technological uncertainty in the firm’s environment affects its risk preferences differently depending on its technological capabilities. A key prediction is that firms with low capabilities will internationalise innovation when faced by technological uncertainty while firms with high capabilities will concentrate their innovation at the home-base. We also argue that our behavioural approach based on prospect theory is not a stand-alone programme but benefits from the integration with traditional concepts in IB. In particular, we make a case that organisational measures fostering absorptive capacity, such as intensive personnel exchange between headquarters and subsidiaries, can help to attenuate the high-capability firms’ tendency to concentrate innovation at the home-base when faced by high uncertainty. We corroborate the predictions of our framework based on data from the German part of the Community Innovation Survey.

Keywords: internationalisation of innovation, speed of technological change, bounded rationality, prospect theory, uncertainty, technological capabilities, limited dependent variable regression

Suggested Citation

Schubert, Torben and Rammer, Christian, Firm Capabilities, Technological Dynamism and the Internationalisation of Innovation: A Behavioural Approach (September 2017). Journal of International Business Studies, Vol. 49, Issue 1, 2017. Available at SSRN: https://ssrn.com/abstract=3160774 or http://dx.doi.org/10.1057/s41267-017-0101-0

Torben Schubert (Contact Author)

Fraunhofer Institut für Systemtechnik und Innovationsforschung ( email )

Breslauer Str. 48
Karlsruhe, 76139
United States

Christian Rammer

ZEW – Leibniz Centre for European Economic Research - Industrial Economics and International Management Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

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