Disentangling the relationship between internationalization, incremental and radical innovation, and firm performance

Abstract

This study examines the impact of firm internationalization on incremental and radical product innovation, and the effects of these innovation facets on sales growth. We use a sample of 1,064 Spanish manufacturers over the period 2008-2014. We find a positive relationship between higher international scope and greater ex-post radical innovation output, and an inverted U-shape relationship between export intensity and both innovation forms. We also find a positive relationship between incremental innovation and sales growth for performance leaders, and negative for performance laggards. Conversely, radical innovation boosts performance laggards' sales growth, but reduces that of performance leaders. The study supports and qualifies the learning-by-exporting effect, by identifying some firm-specific factors that shape the relationship between internationalization, innovation, and firm performance. Managerial Summary: In this study, we examine the effect of a more intense and more geographically spread out international expansion in a firm's incremental and radical innovation performance. We argue that more internationalized firms may benefit from new knowledge and learning, which they may leverage to increase their incremental and radical product

Innovation, trade barriers and exports: evidence from manufacturing firms in ASEAN countries

“…At the same time, reviews and meta-analyses suggest there may be differences in the potential positive effects of innovation activities, depending on the innovation type considered (Freixanet and Rialp, 2021; Rosenbusch et al , 2011). We distinguish between technological and non-technological innovation (Damanpour, 2014; Kahn, 2018).…”

“…They pursue these goals with the understanding that innovation may lead to building a globally competitive industry; meanwhile, removing formal restrictions significantly facilitates firms’ exports. However, both exporting and innovation are multifaceted activities, with important differences in their requirements and consequences for firms (Freixanet and Rialp, 2021; Rosenbusch et al , 2011; Slater et al , 2014). Hence, for managers needing to allocate resources among different innovation activities and for governments seeking to support the most effective and efficient innovation types, it is necessary to determine the links between the different dimensions of innovation (technological and non-technological) and exports (propensity and intensity).…”

Actionable and enduring implications of Oliver Williamson’s transaction cost theory

“…There have been many attempts over the last four decades to test empirically whether a firm's multinationality -measured by the ratio of its foreign sales to total sales, foreign assets to total assets, the number of foreign countries where it operates, and the geographic dispersion of its foreign sales -has an impact on its profitability -usually measured by return on assets or sales. Schmuck, Lagerstro ¨m and Sallis ( 2022) identify 115 such studies, with the most recent, Freixanet and Rialp (2022). Researchers with a background in finance have generally posited that multinationality depresses profitability, while those in IBS have generally argued the reverse.…”

The complex interplay of firm innovation, internationalization and learning capability in driving firm performance: a configurational analysis

“…Finally, learning capability involves an organization's capacity to adapt or modify the way it views things and to change its mental models and knowledge, with the goal of maintaining or enhancing performance (Brown and Duguid, 1991; Liang and Frösén, 2020). Hence, these three activities are key for enabling firms to evolve and cumulate knowledge, thus adapting to the present context of dynamism, contextual uncertainty and shortened product life cycles (Freixanet and Rialp, 2022). For example, Anthony et al.…”

“…Finally, learning capability involves an organization's capacity to adapt or modify the way it views things and to change its mental models and knowledge, with the goal of maintaining or enhancing performance (Brown and Duguid, 1991;Liang and Fr€ os en, 2020). Hence, these three activities are key for enabling firms to evolve and cumulate knowledge, thus adapting to the present context of dynamism, contextual uncertainty and shortened product life cycles (Freixanet and Rialp, 2022). For example, Anthony et al (2019) describe how 52 major worldwide players from different industries, such as Fujifilm, Dell or Alibaba, were able to transform and adapt to quick and major changes in their business environments, by developing processes of innovation, internationalization and/or organizational learning.…”