Knowledge Pathways and Innovation: How do R&D and Skills Enable Knowledge Acquisition from Different Sources?

Notions of open innovation, and increasing empirical evidence, suggest the importance of boundary spanning links to firms’ innovation; while discussion of absorptive capacity has stressed the complementary importance of firms’ internal capabilities. Something of a gap exists, however, in our understanding of the specific pathways through which knowledge from different sources, enabled by aspects of absorptive capacity, impacts on firms’ innovation outputs. Here, using panel data for Ireland we highlight these knowledge pathways for both product and process innovation. Our results confirm the importance of external knowledge sourcing – from customers, suppliers and links to competitors and joint ventures – for innovation. As in other Irish studies, however, we find no positive effect from links to public knowledge sources. Aspects of firms’ capabilities also have positive direct effects on innovation, particularly formal and informal R&D and graduate skills. More surprising is that we find little evidence of complementarities between these two groups of variables in their impact on innovation. For Ireland at least, therefore, the knowledge pathways through which external knowledge sources influence innovation seem largely separate from those of firms’ internal capabilities and vice-versa. Our discussion centres on whether the knowledge economy of Ireland has unique characteristics which are shaping this result.