The asymmetric effects of local and global network ties on firms' innovation performance

Abstract

© 2018, Emerald Publishing Limited. Purpose: The purpose of this paper is to develop and empirically test a theoretical framework examining how local network ties and global network ties affect firms’ innovation performance via their absorptive capacities. Design/methodology/approach: The conceptual framework is empirically tested in a field study with multi-source data collected from a sample of 297 manufacturing firms located in four. Manufacturing clusters in the south-eastern Yangtze River Delta of China. Hypotheses were tested with the use of path analysis with maximum likelihood robust estimates through the structural equation modelling approach. Findings: The asymmetry between local network ties (LNT) and global network ties (GNT) in terms of influences on firms’ innovation performance is confirmed by empirical tests. LNT not only significantly and positively contribute to firms’ innovation performance directly but also enhance it indirectly via absorptive capability, whereas GNT exhibit only marginal influence on innovation performance. GNT are shown to boost innovation performance (IP) only indirectly via firms’ absorptive capacities. Knowledge heterogeneity and the difference between domestic and multinational firms’ institutional environment are considered to be the main causes of the asymmetric effects. Originality/value: While the previous literature either focused on the mediating role of firms’ knowledge absorptive capacities or investigated the effects of social networks separately, this study incorporates both mechanisms into a single analytical framework to better account for the interactions between network effects and absorptive capacities. The results challenge some previous studies positing that GNT are stronger determinants than LNT in shaping a local firm’s innovation capacity in emerging economies, and the findings emphasize the importance of absorptive capacity in helping local enterprises to leverage external linkages to enhance firm’s innovation performance.