Knowledge spillovers or R&D collaboration? Understanding the role of external knowledge for firm innovation

Extant research has established that firms engage in R&D collaboration and access knowledge spillovers to enhance their innovativeness. We aim to take this conversation in a new direction by seeking to answer the question, ‘How does engagement in R&D collaboration with suppliers, customers, and competitors, both domestically and internationally, as well as access to knowledge spillovers from universities and other open sources, influence a firm's innovation?’ This is the primary goal of our study. The study develops a knowledge‐based view on knowledge collaboration and spillovers, explaining how a firm's decision to collaborate, as opposed to accessing knowledge spillovers, shapes its innovation outputs and propensity to innovate. The theoretical utility of this framework lies in elucidating how the distinct types of knowledge (basic or applied) transferred to a firm when accessing external knowledge create different mechanisms that influence innovation output. By analyzing data on knowledge spillovers and R&D collaboration from the innovation survey of firms in the United Kingdom over the period 2002–2014, we demonstrate that in most instances of knowledge combinations, the cost effect of knowledge sourcing exceeds the complementary effect of knowledge, leading to a firm's choice between R&D collaboration and spillovers. The study contributes to the innovation and R&D management literatures by explaining why this pattern emerges and demonstrating that these relationships are contingent upon the degree of collaboration and the level of knowledge spillovers.