Firms' innovation modes and novelty of innovation: the moderating role of dysfunctional competition

Weak institutions leading to a dysfunctional competitive environment affect firms’ innovation. Drawing on the 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 moderated by perceived dysfunctional competition. Based on the Colombian innovation survey (EDIT) and using logistic regression modelling, we find that perceived dysfunctional competition prevailing in emerging markets weakens the positive effect of firms’ STI and DUI modes on innovation novelty. 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 appropriability influences managers’ perception in STI and DUI firms, weakening firms’ innovations. In practice, firms need mechanisms to protect innovation against competitors’ opportunistic or unlawful behaviour, and governments could foster means of appropriability associated with STI and DUI modes.