Examining Innovation Capabilities from Internal and External Perspectives

Abstract

While the impact of innovation on the factors that contribute to performance and value is thus acknowledged, the accumulation of innovation and the relation between innovation and firm performance is more complex than what is often believed. Two divergent perspectives on the sources of innovation can be distinguished. From internal and external perspectives, this study examines how internal ownership structure and external cooperation play a potentially important role in stimulating innovation activities. Using the Taiwanese electronics firms for the period 2001-2008, the research results document that institutional ownership (including domestic institution ownership and foreign institution ownership) are significantly associated with external cooperation and innovation performance (including innovation output quantity and innovation output quality). Moreover, the analysis provides support for the argument that the relationship between institutional ownership and innovation performance is mediated by external cooperation.