Complementarity between internal knowledge creation and external knowledge sourcing in developing and least developed countries

In order to catch up with the technological frontier, firms in developing countries have been striving hard to promote technological advancement through internal R&D effort (make) as well as through external sourcing (buy). The adoption and learning process requires firms to set up effective strategies to catalyze the speed of their catching-up. This study uses the complementarity approach to investigate the intricate relationship between in-house R&D and external technological sourcing. Our empirical evidences exhibit the existence of complementarity between these two innovation strategies in developing countries. However, we also discover that the synergic effect is mainly due to the association of unobserved characteristics. The results also highlight the significant role of external technological acquisition, particularly for firms in least developed countries.