Using the resource‐based view and knowledge spillover, this study investigates the direct effects of Internet capabilities (communication, platform, and connection capabilities) on product and process innovation across 10 Balkan countries from 2007 to 2019. The study examines the role of foreign technology licensing in moderating these relationships. In line with findings from developed countries, the empirical results show that Internet capabilities positively influence product and process innovation. Surprisingly, foreign technology licensing was unable to enhance the positive effects of Internet capabilities on process and product innovation due to the overlapped benefits and the potential costs and risks involved in the Balkan countries. As a result, our study enhances the literature's understanding of Internet capabilities' effects on innovation and the role of foreign technology licensing, enriching current knowledge and providing practical implications for the developing context of the Balkan countries.