IDEAS home Printed from https://ideas.repec.org/p/zbw/zewdip/4279.html
   My bibliography  Save this paper

Global Idea Sourcing: An Empirical Investigation into the Mechanisms Behind the Usage of Foreign Business Sources for Innovation

Author

Listed:
  • Sofka, Wolfgang

Abstract

Globalization has set new paradigms, especially in the business world. Breakthroughs in technology (telecommunications, logistics, the internet) and ideology (most notably economic and political trends in China and India) are creating exciting opportunities as well as crucial challenges. This paper analyses one of the core aspects of competitiveness: a firm?s ability to innovate in a globalized environment. We question whether it is universally advantageous to directly invest abroad and argue instead that a company may use its international value chain (customers, suppliers and competitors) to utilize foreign sources for innovation at home. We suggest a combination of three factors to identify and explain such innovation strategies: access, need and absorptive capacities. Our empirical analysis rests upon a broad data sample of almost 2,300 German companies for which we devised a trivariate probit model. In essence, we find a market-seeking strategy for using foreign customers as a source for innovation that is more beneficial to standardized products and becomes more feasible if the lead status of domestic customers is limited. What is more, internalizing this link with foreign customers becomes preferable as their importance as a driver of sales increases. For foreign suppliers we identify a risk-sharing and technologyseeking strategy as a reaction to more dynamic domestic markets and a less favorable domestic environment in both research and regulation. Hence, companies optimize or augment their innovation activities by invoking ideas from foreign suppliers. Then again, companies rely on foreign competitors for technology-seeking as those sources become more readily available and crucial in international competition.

Suggested Citation

  • Sofka, Wolfgang, 2005. "Global Idea Sourcing: An Empirical Investigation into the Mechanisms Behind the Usage of Foreign Business Sources for Innovation," ZEW Discussion Papers 05-53, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:4279
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/24145/1/dp0553.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Walter Kuemmerle, 1999. "The Drivers of Foreign Direct Investment into Research and Development: An Empirical Investigation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(1), pages 1-24, March.
    2. Bas, Christian Le & Sierra, Christophe, 2002. "'Location versus home country advantages' in R&D activities: some further results on multinationals' locational strategies," Research Policy, Elsevier, vol. 31(4), pages 589-609, May.
    3. Daniel Sullivan, 1994. "Measuring the Degree of Internationalization of a Firm," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 25(2), pages 325-342, June.
    4. Michael D Lord & Annette L Ranft, 2000. "Organizational Learning About New International Markets: Exploring the Internal Transfer of Local Market Knowledge," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 31(4), pages 573-589, December.
    5. Cassiman, Bruno & Veugelers, Reinhilde, 1999. "Importance of International Linkages for Local Know-How Flows: Some Econometric Evidence From Belgium," CEPR Discussion Papers 2337, C.E.P.R. Discussion Papers.
    6. K Ojah & L Monplaisir, 2003. "Investors' valuation of global product design and development," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 34(5), pages 457-472, September.
    7. Sofka, Wolfgang & Schmidt, Tobias, 2004. "I Like The Way You Move: An Empirical Investigation into the Mechanisms Behind First Mover and Follower Strategies," ZEW Discussion Papers 04-87, ZEW - Leibniz Centre for European Economic Research.
    8. Alan M. Rugman & Alain Verbeke, 2005. "Multinational Enterprises and Public Policy," Chapters, in: Analysis of Multinational Strategic Management, chapter 24, pages 413-434, Edward Elgar Publishing.
    9. Peter J. Lane & Michael Lubatkin, 1998. "Relative absorptive capacity and interorganizational learning," Post-Print hal-02311860, HAL.
    10. Shawna O'Grady & Henry W Lane, 1996. "The Psychic Distance Paradox," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 27(2), pages 309-333, June.
    11. Miller, Stewart R. & Richards, Malika, 2002. "Liability of foreignness and membership in a regional economic group: Analysis of the European Union," Journal of International Management, Elsevier, vol. 8(3), pages 323-337.
    12. Gerard J. Tellis & Stefan Stremersch & Eden Yin, 2003. "The International Takeoff of New Products: The Role of Economics, Culture, and Country Innovativeness," Marketing Science, INFORMS, vol. 22(2), pages 188-208, October.
    13. Mezias, John M., 2002. "How to identify liabilities of foreignness and assess their effects on multinational corporations," Journal of International Management, Elsevier, vol. 8(3), pages 265-282.
    14. Martha L. Maznevski & Katherine M. Chudoba, 2000. "Bridging Space Over Time: Global Virtual Team Dynamics and Effectiveness," Organization Science, INFORMS, vol. 11(5), pages 473-492, October.
    15. Frank Wolter, 1977. "Factor proportions, technology and West German industry’s international trade patterns," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 113(2), pages 250-267, June.
    16. Edwin Mansfield & Anthony Romeo, 1980. "Technology Transfer to Overseas Subsidiaries by U. S.-Based Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(4), pages 737-750.
    17. Michael E. Porter & Scott Stern, 2000. "Measuring the "Ideas" Production Function: Evidence from International Patent Output," NBER Working Papers 7891, National Bureau of Economic Research, Inc.
    18. Giovanni Peri, 2005. "Determinants of Knowledge Flows and Their Effect on Innovation," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 308-322, May.
    19. Peter W Liesch & Gary A Knight, 1999. "Information Internalization and Hurdle Rates in Small and Medium Enterprise Internationalization," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(2), pages 383-394, June.
    20. repec:bla:scandj:v:104:y:2002:i:4:p:531-45 is not listed on IDEAS
    21. Per Botolf Maurseth & Bart Verspagen, 2002. "Knowledge Spillovers in Europe: A Patent Citations Analysis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 531-545, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rainer Frey & Katrin Hussinger, 2011. "European market integration through technology-driven M&As," Applied Economics, Taylor & Francis Journals, vol. 43(17), pages 2143-2153.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. W. Sofka, 2008. "Globalizing Domestic Absorptive Capacities," Management International Review, Springer, vol. 48(6), pages 769-792, December.
    2. Tobias Schmidt & Wolfgang Sofka, 2005. "Lost in Translation - Empirical Evidence for Liability of Foreignness as Barriers to Knowledge Spillovers," Industrial Organization 0512012, University Library of Munich, Germany.
    3. Rammer, Christian & Schmiele, Anja, 2008. "Drivers and Effects of Internationalising Innovation by SMEs," ZEW Discussion Papers 08-035 [rev.], ZEW - Leibniz Centre for European Economic Research.
    4. Wolfgang Sofka & Joerg Zimmermann, 2005. "There is no Place Like Home: A Strategic Framework to Overcome Liability of Foreignness in the German Car Market," Industrial Organization 0512003, University Library of Munich, Germany.
    5. Schmidt, Tobias & Sofka, Wolfgang, 2009. "Liability of foreignness as a barrier to knowledge spillovers: Lost in translation?," Journal of International Management, Elsevier, vol. 15(4), pages 460-474, December.
    6. Anja Schmiele, 2008. "Drivers and Effects of Internationalising Innovation by SMEs," Working Papers id:1547, eSocialSciences.
    7. Schmidt, Tobias & Sofka, Wolfgang, 2009. "Knowledge sourcing: legitimacy deficits for MNC subsidiaries?," Discussion Paper Series 1: Economic Studies 2009,09, Deutsche Bundesbank.
    8. Aldieri, Luigi & Vinci, Concetto Paolo, 2015. "R&D Migration: a cross-national analysis," MPRA Paper 62541, University Library of Munich, Germany.
    9. Blomkvist, Katarina & Kappen, Philip & Zander, Ivo, 2017. "Gone are the creatures of yesteryear? On the diffusion of technological capabilities in the ‘modern’ MNC," Journal of World Business, Elsevier, vol. 52(1), pages 1-16.
    10. Jane W. Lu & Hao Ma & Xuanli Xie, 2022. "Foreignness research in international business: Major streams and future directions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(3), pages 449-480, April.
    11. Gu, Yiwen (Jenny) & Filatotchev, Igor & Greg Bell, R. & Rasheed, Abdul A., 2019. "Liability of foreignness in capital markets: Institutional distance and the cost of debt," Journal of Corporate Finance, Elsevier, vol. 57(C), pages 142-160.
    12. Chen, Victor Zitian & Li, Jing & Shapiro, Daniel M., 2012. "International reverse spillover effects on parent firms: Evidences from emerging-market MNEs in developed markets," European Management Journal, Elsevier, vol. 30(3), pages 204-218.
    13. Miller, Stewart R. & Lavie, Dovev & Delios, Andrew, 2016. "International intensity, diversity, and distance: Unpacking the internationalization–performance relationship," International Business Review, Elsevier, vol. 25(4), pages 907-920.
    14. Anja Schmiele, 2012. "Drivers for international innovation activities in developed and emerging countries," The Journal of Technology Transfer, Springer, vol. 37(1), pages 98-123, February.
    15. Jérôme Danguy, 2014. "Who collaborates with whom: the role of technological distance in international innovation," Working Papers TIMES² 2014-010, ULB -- Universite Libre de Bruxelles.
    16. Sofka, Wolfgang, 2007. "What Makes Foreign Knowledge Attractive to Domestic Innovation Managers?," ZEW Discussion Papers 07-055, ZEW - Leibniz Centre for European Economic Research.
    17. Wolfgang Sofka & Joerg Zimmermann, 2007. "Regional Dimensions of Liability of Foreignness: Between a Rock and a Hard Place?," Jena Economics Research Papers 2007-023, Friedrich-Schiller-University Jena.
    18. de Jong, Gjalt & van Houten, Jerry, 2014. "The impact of MNE cultural diversity on the internationalization-performance relationship," International Business Review, Elsevier, vol. 23(1), pages 313-326.
    19. Sofka, Wolfgang & Zimmermann, Jörg, 2008. "Regional economic stress as moderator of liability of foreignness," Journal of International Management, Elsevier, vol. 14(2), pages 155-172, June.
    20. Marina Papanastassiou & Robert Pearce & Antonello Zanfei, 2020. "Changing perspectives on the internationalization of R&D and innovation by multinational enterprises: A review of the literature," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 623-664, June.

    More about this item

    Keywords

    innovation strategy; globalization; external sources;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:4279. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zemande.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.