Accumulative and Assimilative Learning, Institutional Infrastructure, and Innovation Orientation of Developing Economy Firms

We examine the role of internationally acquired knowledge and supra‐firm institutional infrastructure on developing firms' innovation orientation. Empirical results, based on a panel of 11,048 Indian manufacturing firms during the period 1990 to 2009, show that the macro‐ and micro‐institutional context in which firms are embedded condition the effect of global resource and product market participation on indigenous innovation efforts. In particular, technology imports (accumulative learning) have a stronger effect on inducing investments in innovation when the macro‐institutional development is weak and for firms that are affiliated to business groups. However, product market internationalization (assimilative learning) plays a more important role in facilitating innovation efforts as the institutional environment becomes stronger and for independent firms that do not possess the network advantages inherent in business groups.