Generative capability

How do firms leverage existing innovation for the next round of innovation? We develop a novel concept of generative capability in product innovation to address this question. As a high-level organizational routine, generative capability applies the mechanisms of iteration and rapid knowledge integration to guide ordinary innovation activities. Based on panel data from 2001 to 2009 of 56,333 firm-year observations in China, we find that institutional complexity and internationalization are positively related to generative capability; that state-owned enterprises (SOEs) have lower levels of generative capability than do firms with other ownership structures; and that generative capability improves firms' performance significantly. We conclude with a discussion of the implications of generative capability for theoretical development and point to a number of fruitful areas for future research‥