The Effect of Firms' Innovation Modes on Novelty of Innovation: The Moderating Role of Dysfunctional Competition
32 Pages Posted: 12 Jul 2021 Last revised: 20 May 2022
Date Written: July 8, 2021
Weak institutions leading to a dysfunctional competitive environment affect firms' innovation. Drawing on innovation modes approach and institutional theory, we suggest that STI (science and technology-based innovation) and DUI mode (learning by doing, using, and interacting) are contingent to a perceived dysfunctional competition. Using a robust standard error logistics model on a firm-level innovation survey, we find that dysfunctional competition prevailing in emerging markets weakens the positive effect of firms' STI and DUI modes on novelty of innovation. We explain this finding based on managers' perceptions of value appropriability. While intellectual property rights affect the innovation of STI firms, DUI firms' innovation is affected by information exposure. The results contribute to the innovation modes literature by showing that an appropriability regime influences managers' perception in STI and DUI firms which weakens firms' innovations. In practice, firms need mechanisms to protect innovation against competitors' opportunistic or unlawful behavior, whereby governments could foster means of appropriability associated to STI and DUI modes.
Keywords: innovation modes institutions, dysfunctional competition, appropriability regime, emerging market
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