Cross-border knowledge transfer and the innovation performance of developing economy small and medium enterprises: A moderated mediation effect of industry networks and localization of knowledge

Despite the importance and empirical evidence associated with cross-border knowledge transfer (CBKT) research, there remain scanty explanations of the direct and indirect effects of CBKT on innovation performance (IP) especially within the context of SMEs in the developing economies. Based on the knowledge-based view theorization, this research sought to close this gap by investigating (i) the impact of CBKT on the innovation performance of developing economy SMEs, and (ii) the moderated mediation effect of industry networks (IN) and localization of knowledge (LK) on the CBKT-IN relationship. The data analyzed from 371 SME owners-managers and managers revealed the direct effects of CBKT on IP, CBKT on LK, and LK on IP. The study also confirmed the mediation effect of LK on the CBKT and IP relationship and found that IN has an antecedent effect on CBKT, as well as a moderating role in the CBKT-LK relationship. This research offers a theoretical explanation of IN and LK as mechanisms and structures that support the CBKT-IP relationship in developing economy SMEs. Also, I suggest that SMEs in developing economies must direct their business relationship with their foreign business partners to capture the knowledge that aligns with strategic innovation outcomes.