To what extent do external sources of knowledge affect the innovative performance of knowledge intensive entrepreneurial firms? The effects of depth and breadth of openness on manufacturing and service innovations

Paper in proceeding, 2015

This paper examines the effects of breadth and depth of external knowledge sourcing on the innovativeness of a specific classification of organization, the knowledge intensive entrepreneurial (KIE) firm. This type of firm has been observed as being critically important to growth and development in modern economies, yet how it uses external knowledge sources for innovation has received little direct attention in the literature. Using data from the EU?s recent AEGIS project, investigating knowledge intensive entrepreneurship in Europe covering just over 4000 entrepreneurial firms, this paper uses fractional logit models, as well as an OLS model based on alternating least squares optimal scaling (ALSOS), to estimate the relationship between breadth and depth of external knowledge sourcing and that of innovative performance of the KIE firm. We find that breadth is curvi-linearly related to innovative performance in KIE firms, but that depth, while related to innovativeness, does not assume this functional form. Additionally, a principal components analysis reveals that non-industry sources of knowledge in the form of state, national, or regional research-based or academic entities, as well as knowledge in the form of academic and trade publications, are statistically significant/relevant as external sources of knowledge for innovation in KIE firms. Industry sources of knowledge such as clients, customers, and supplier are statistically significant sources only for innovation in goods, not in terms of innovation in services, or novelty of innovations produced. Recommendations for future research and policy implications are provided based on these findings.