In this paper, we advance and test the idea that innovation and export are complementary strategies for SMEs' growth. We argue that innovation and export positively reinforce each other in a dynamic virtuous circle, and we identify and describe the process through which this complementarity relationship takes place. Participating in export markets can promote firms' learning, and thus enhance innovation performance. At the same time, through innovation, firms can enter new geographical markets with novel and better products, therefore making exports more successful, and, by the same token, they can also improve the quality -and consequently increase the salesof the products sold domestically. We test our theory using an unbalanced panel of Spanish manufacturing firms over the period 1990-1999. We find robust empirical support for our hypothesis: consistent with the presence of complementarity, we show that the positive effect of innovation activity on firms' growth rate is higher for firms that also engage in exports, and vice versa. Furthermore, we show that, Ceteris paribus, firms' adoption of one growth strategy (e.g., entering export markets) positively influences the adoption of the other (e.g., innovation).

One novel implication of the open innovation paradigm is that inflows and outflows of knowledge are complementary. We argue that engaging simultaneously in buying and selling knowledge should allow firms to increase innovation outcomes. At the same time, we identify some of the relevant costs (cognitive, transaction, and organizational costs) that "open" firms can reduce by combining knowledge inflows and outflows. Empirically, however, we find no evidence for such complementarity in a sample of Belgian manufacturing firms. Firms buying and selling knowledge do increase their sales of new products, but at the same time their R&D costs increase more than proportionally. Our findings, therefore, indicate the need for research into a better understanding of the drivers of actual costs of organizing for open innovation.

No abstract

I explore the effect of M&A on the patenting quantity and quality of the firms involved in a deal. Three measures of quality are considered: impact, generality, and originality. The impact of a patent denotes its influence on future inventions. Generality refers to a patent's applicability across technological fields. Finally, the originality of a patent indicates the extent to which an invention synthesizes diverse technological inputs. Applying a matching estimator to data from the U.S. ‘medical devices and photographic equipment’ industry from 1988 to 1996, I find that M&A have a positive effect on patenting output, but decrease patent impact, originality, and generality. Copyright © 2011 John Wiley & Sons, Ltd.

No abstract