Accumulative and Assimilative Learning, Institutional Infrastructure, and Innovation Orientation of Developing Economy Firms

We examine the role of internationally acquired knowledge and supra-firm institutional infrastructure on developing firms' innovation orientation. Empirical results, based on a panel of 11,048 Indian manufacturing firms during the period 1990 to 2009, show that the macro- and micro-institutional context in which firms are embedded condition the effect of global resource and product market participation on indigenous innovation efforts. In particular, technology imports (accumulative learning) have a stronger effect on inducing investments in innovation when the macro-institutional development is weak and for firms that are affiliated to business groups. However, product market internationalization (assimilative learning) plays a more important role in facilitating innovation efforts as the institutional environment becomes stronger and for independent firms that do not possess the network advantages inherent in business groups.