Barriers to innovation and innovation performance: the mediating role of external knowledge search in emerging economies

Using survey data from companies located in the Wuxi (Taihu) international science park in China, we aim to analyze to what extent science park residents experience barriers to innovation and to what extent opening up the innovation process allows them to overcome constraints and increase innovation performance. Findings indicate that surveyed firms that mostly undertake incremental innovation perceive many constraints and that the depth of external knowledge search—that is, the intensity of the relationship with external sources of knowledge—significantly influences innovation performance, mediating the relationships between innovation barriers and innovation performance. Our results allow us to explain how open innovation practices can be used to mitigate existing barriers, and therefore permeate the knowledge filter, and to theorize on the importance of institutional factors for open innovation theory in emerging economies. Plain English summary It is quality not quantity that matters! The intensity of relationships with external knowledge sources helps to mitigate innovation constraints, facilitate the flow of knowledge, and enhance innovation performance in emerging market firms. We surveyed high-tech SMEs located in the Wuxi (Taihu) international science park in China to find out to what extent external firm barriers to innovation have an impact on the innovation performance of science park residents, and how open innovation strategies affect this relationship. There are three key implications: First, for research, institutional factors need to be considered when studying open innovation, particularly in an emerging country context. Results emphasize the importance of deeper external knowledge sources as one mechanism to mitigate institutional barriers. Second, for management, we show human resource constraints are an important barrier for SMEs and managers should stimulate learning through reward systems and training that increase absorptive and innovative capacity ability. Third, for policy, we show that local officials responsible for the management of science parks in China should put more effort into providing financial support by creating specialized venture capital and a better knowledge of risk analysis from the financial system.