How to Benefit from Balancing External Knowledge Acquisition? A Chinese EIT Industry Case

This paper develops an integrated framework and examines how the implicit property-knowledge heterogeneity, acquisition costs and interactivity embedded in external knowledge acquisition (EKA) affect firms’ innovation performance. This is done by distinguishing three forms of EKA, including patent backward citations, patent collaboration and patent purchase. This research contributes to the existing EKA and open innovation literatures by studying whether EKA and internal R&D serve as substitutes or complements for firms’ innovation performance. Using a sample of 77 publicly listed firms in the electronic and information technology (EIT) industries of mainland China, with panel data collected from 2004 to 2016, this study has reached the following new findings: First, EKA both through patent backward citations and patent collaboration have significantly positive effects on firms’ innovation performance; the effect of patent purchase is not significant. Second, EKA through patent backward citations complements firms’ internal R&D, but EKA both through patent collaboration and patent purchase act as substitutes for internal R&D. Third, an inverted U-shaped relationship exists between the level of balance among the three different forms of EKA and firms’ innovation performance. Finally, contingent interaction effects exist between the level of balance among the three different forms of EKA and internal R&D on firms’ innovation performance. A complementary relationship exists with the internal R&D when firms have a high level of balance among three different forms of EKA. However, a substitution relationship exists with the internal R&D when firms have a low level of balance among the three different forms of EKA.