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Are all innovation modes beneficial to firms’ innovation performance? New

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DOI: 10.1108/CMS-06-2019-0214

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New findings
Are all innovation modes from an
beneficial to firms’ innovation emerging
market
performance? New findings
from an emerging market 1015
Shilei Hu and Xiaohong Wang Received 11 June 2019
Revised 30 December 2019
School of Management, Harbin Institute of Technology, Harbin, China, and 16 March 2020
Accepted 17 April 2020
Ben Zhang
School of Management, Harbin University of Science and Technology,
Harbin, China

Abstract
Purpose – This paper aims to examine the influence of individual and combined effects of the mode focused
on scientific and technological-based innovation (STI) and the mode based on learning by doing, by using and
by interacting (DUI) on firms’ innovation performance and whether information technology (IT) moderates
the relation between different innovation modes and firms’ innovation performance.
Design/methodology/approach – A conceptual model linking innovation modes, IT (including IT
infrastructure and the frequency of IT usage) and firms’ innovation performance was developed, and the
proposed hypotheses were tested empirically using World Bank’s micro survey data collected from
manufacturing firms in an emerging market (China).
Findings – The results show that individually both STI mode of innovation and DUI mode of innovation
have a significant positive effect on firms’ innovative performance, whereas the combined STI and DUI mode
of innovation has a negative impact. IT infrastructure moderates the relation between STI (or STI and DUI)
mode of innovation and firms’ innovation performance, while the frequency of IT usage has no moderating
effects on the relationship between any kind of innovation modes and firms’ innovation performance.
Research limitations/implications – Although some results are quite different from what is expected,
these are insightful for both academics and policymakers. The use of cross-sectional data has its limitations.
Therefore, future studies based on longitudinal data should be conducted. This study points toward the need
to conduct the meta-analysis to better explain the existing inconsistencies in the findings of relevant
quantitative studies.
Practical implications – This study provides firm managers with practical implications. The
conclusions of this study imply that the impact of the combined STI and DUI mode of innovation is likely to
be contextual, so firms should make contingent decisions on whether to engage in STI mode of innovation and
DUI mode of innovation simultaneously according to their own organizational conditions. Moreover, face-to-
face contacts are particularly important when a firm engages in DUI mode of innovation. In addition, the
focus of IT strategy of firms engaged in STI mode of innovation should be on perfecting their IT
infrastructure rather than increasing the frequency of IT usage.
Originality/value – This paper provides new evidence for the relation between business innovation
modes and firms’ innovation performance, and it is one of the few empirical studies that focus on emerging
markets. More importantly, this paper proposes a persuasive explanation framework for understanding the
heterogeneous impacts of the combined STI and DUI mode of innovation on firms’ innovation performance.

Chinese Management Studies

Vol. 14 No. 4, 2020
This research was supported by the National Natural Science Foundation of China (NSFC) (Grant No. pp. 1015-1034
71874042) and China Association for Science and Technology High-end Science and Technology © Emerald Publishing Limited
1750-614X
Innovation Think Tank Doctoral Program (Grant No. CXY-ZKQN-2019-002). DOI 10.1108/CMS-06-2019-0214
CMS This is the first study that examines the moderating effect of IT on the relationship between business
innovation modes and a firm’s innovation performance.
14,4
Keywords Innovation performance, Emerging markets, IT infrastructure, Frequency of IT usage,
Innovation modes, STI&DUI
Paper type Research paper

1016
1. Introduction
The debate on the most effective mode of innovation (i.e. approaches to producing effective
innovation outputs) has aroused widespread interest in academia ever as it was introduced
by Jensen et al. (2007). Despite being extensively studied (Apanasovich et al., 2016; Fitjar and
Rodríguez-Pose, 2013; González-Pernía et al., 2012; González-Pernía et al., 2015; Isaksen and
Karlsen, 2010; Parrilli and Elola, 2012; Parrilli and Heras, 2016), the relationship between
innovation modes and a firm’s innovation performance still remains unclear. For example,
Parrilli and Heras (2016) demonstrate that the combined scientific and technological-based
innovation and doing, using and interacting (STI and DUI) mode of innovation has a
stronger impact on firms’ innovation output than the two separate individual modes.
However, González-Pernía et al. (2012) show that the combined STI and DUI mode of
innovation does not contribute to firms’ product and process innovation but rather plays a
negative role on a firm’s innovation.
Previous studies on the modes of innovation have mainly focused on developed countries
such as Denmark, Norway and Spain (Apanasovich et al., 2016) while emerging market
countries have received much less attention. Because the effects of innovation modes on
firms’ innovation might be contextual (Apanasovich et al., 2016), it is necessary to bridge the
research gap. It is imperative to conduct studies based on data from these emerging
countries because firms in these countries are faced with ever-changing competitive
environments, less developed national innovation systems (NISs) and weaker regimes of
intellectual property rights (IPRs) (Zhou, 2012).
While firms these days attach greater importance to information technology (IT) in the
context of digitalization, it is not yet clear what impact IT has on the effects of innovation modes
on firms’ innovation performance. Thus, further research is needed to have a clarity on how IT
affects the relationship between business innovation modes and firms’ innovation performance.
This study focuses on the aforementioned debate and attempts to verify whether different
modes of innovation are confirmed as effective drivers for firms’ innovation performance or
whether there are some new findings in the relationship between innovation modes and firms’
innovation performance. Following previous research (Apanasovich et al., 2016; Fitjar and
Rodríguez-Pose, 2013; Parrilli and Heras, 2016), we distinguish two types of innovation modes:
namely, the mode that is focused on STI and the mode that is based on DUI. This study intends
to test the moderating effect of IT infrastructure and the frequency of IT usage on the relationship
between innovation modes and firms’ innovation performance.
The paper contributes to the technology and innovation management literature by
providing new knowledge on the ongoing debate on how innovation modes influence a
firm’s innovation. More specifically, one contribution of this paper lies in the new findings
on the effectiveness of different innovation modes and the effects of IT infrastructure and
the frequency of IT usage on this effectiveness. Another contribution of this paper is that it
proposes an explanation framework to understand the inconclusive results of existing
studies on the impact of the combined STI and DUI mode of innovation on firms’ innovation
performance. The paper sheds some light on a firm’s “innovation black box” and leads to a
reflection on the effectiveness of different modes of innovation in different institutional
contexts. From a managerial perspective, the paper provides new insights to managers of New findings
enterprises about how they should perform innovation-related activities to achieve high from an
innovation performances. Additionally, the findings of this study might also offer some
inspiration for policymakers.
emerging
market
2. Theory and hypotheses
2.1 scientific and technological-based innovation and by doing, by using and by interacting 1017
innovation modes and firms’ innovation performance
According to Jensen et al. (2007), there are two modes of innovation, namely, STI mode and
DUI mode. The former refers to the production and use of codified scientific and
technological knowledge in the development of new technologies, while the latter involves
on-the-job problem-solving through the exchange of experiences and know-how (Fitjar and
Rodríguez-Pose, 2013). The STI mode of innovation emphasizes that innovation is based on
science and technology (S&T) drivers such as research and development (R&D)
expenditures, human capital and research collaborations (Apanasovich, 2016; Jensen et al.,
2007). The DUI mode of innovation stresses that innovation in the firm is mostly generated
by the capacity of the firm to repeat the same operations, to find solutions to existing
problems and to develop mainly informal interactions between people, both within and
outside the firm (Apanasovich, 2016; Fitjar and Rodríguez-Pose, 2013).
The STI mode of innovation supports connections with agents producing new
knowledge – mainly universities, research institutes and consultancy firms, while the DUI
mode of innovation implies close connections with clients, competitors and suppliers. The
STI and DUI modes of innovation are related to different forms of interaction both within
the firm and with external agents concerning the firm (Fitjar and Rodríguez-Pose, 2013).
More specifically, the STI mode of innovation requires interaction that leads to “know-what”
and “know-why” types of knowledge, which are mainly associated with formal relationships
(Fitjar and Rodríguez-Pose, 2013). The DUI mode of innovation, by contrast, relies mainly on
“know-how” and “know-who” types of knowledge, which are mainly gained through
repeated informal interaction (Jensen et al., 2007). The STI mode of innovation aims at
developing more radical innovations, while the DUI mode of innovation is often associated
with more incremental innovations (Fitjar and Rodríguez-Pose, 2013; Jensen et al., 2007). The
STI mode of innovation prevails in research-oriented industries such as pharmaceuticals
and chemicals manufacturing, aeronautics and biotechnology, whereas the DUI mode of
innovation dominates in engineering-based industries, such as machine tools making, ship
building, car manufacturing and energy (Apanasovich et al., 2016; Parrilli and Heras, 2016).
Table 1 summarizes some main aspects of the STI and DUI modes of innovation.
The knowledge-based view (KBV) highlights the role of knowledge in organizational
innovation (Grant, 1996). The two modes of innovation reflect the different views about
where firms get the knowledge to generate and implement innovation. Those scholars who
favor STI mode of innovation argue that investments in R&D and S&T and interaction with
agents promoting new knowledge (e.g. universities, research centers, consultancies)
generates the codified and explicit knowledge which can produce innovations (Fitjar and
Rodríguez-Pose, 2013). Then those in favor of the DUI mode of innovation argue that
constant and repeated informal interaction within and between organizations generates the
tacit knowledge that facilitates the response to market demands and improves the capacity
of staff members to find solutions to existing problems, thus driving a firm’s innovation
(Fitjar and Rodríguez-Pose, 2013; Jensen et al., 2007). Although the STI and DUI modes of
innovation are linked to different forms of interaction (Jensen et al., 2007), both contribute to
CMS Criteria STI Mode DUI Mode
14,4
Dominant knowledge type Explicit, analytical, codified, know- Tacit, synthetic, know-how and
what and know-why know-who
Main external innovation Universities, R&D institutions and Customers, suppliers and
partners other research-intensive firms competitors
Learning type Made mostly from formal R&D Informal interaction processes:
1018 processes learning based on experience, by
doing, using, and interacting
Innovation type Radical Incremental
Main output of the New products and processes Modification of existing products
innovation activity and processes to meet the needs of
individual customers
Examples of industries Pharmaceuticals and chemicals Machine tools making, ship
manufacturing, aeronautics and building, car manufacturing and
biotechnology energy
Table 1.
Conceptual aspects of Source: Authors’ own compilation based on Apanasovich (2016), Fitjar and Rodríguez-Pose (2013), Isaksen
innovation modes and Karlsen (2010), Jensen et al. (2007), Nunes and Lopes (2015) and Parrilli and Heras (2016)

innovation as interaction fosters learning processes through sharing of knowledge and

information (Tracey and Clark, 2003).
Sometimes firms tend to combine the two types of innovation modes rather than
applying individual modes (i.e. STI mode of innovation or DUI mode of innovation). Many
scholars believe that STI mode of innovation and DUI mode of innovation are not mutually
exclusive and these complement each other in promoting a firm’s innovation
(Apanasovich et al., 2016; Jensen et al., 2007; Parrilli and Heras, 2016). According to
González-Pernía et al. (2015), the contribution of STI and DUI partnerships toward product
innovation is significantly higher than that of collaborating with STI partners only or DUI
partners only. This finding was confirmed by other empirical studies. For instance, Parrilli
and Heras (2016) show that the combined STI and DUI mode of innovation has a stronger
impact on a firm’s innovation output than the two separate individual modes. Apanasovich
et al. (2016) also indicate that firms that combine the STI and DUI modes of innovation are
more likely to generate technological innovation than firms that rely on STI or DUI modes
alone. Therefore, we suggest the following hypotheses:

H1. The STI mode of innovation is positively associated with firms’ innovation
performance.
H2. The DUI mode of innovation is positively associated with firms’ innovation
performance.
H3. The combined STI and DUI mode of innovation is positively associated with firms’
innovation performance.

2.2 The moderating role of information technology

IT refers to any system, product or process whose underlying technological base comprises
of computer or communications hardware and software (Cooper and Zmud, 1990).
Nowadays, firms use various information technologies to support their business activities,
such as phone and fax, e-mail and software systems (e.g. enterprise resource planning (ERP)
systems, supply chain management (SCM) systems, customer relationship management New findings
(CRM) systems). from an
A number of studies have been conducted on IT and most of these studies have
concentrated on two aspects of IT, namely, IT infrastructure and the frequency of IT usage
emerging
(Barczak et al., 2007; Barczak et al., 2008; Mauerhoefer et al., 2017). IT infrastructure refers to market
the computer hardware, software and people necessary to support the distribution of IT
tools within an organization (Barczak et al., 2008), while the frequency of IT usage is the
extent to which IT tools are used by an organization (Mauerhoefer et al., 2017). IT 1019
infrastructure includes the variety of IT tools used within an organization, whereas the
frequency of IT usage captures how often IT tools are used by an organization.
Although IT infrastructure and the frequency of IT usage are considered major factors
influencing a firm’s innovation performance, there is little research focusing on the effects of
IT infrastructure and the frequency of IT usage on the relation between business innovation
modes and firms’ innovation performance.
In this study, we propose that IT infrastructure will strengthen the positive impact of
business innovation modes on a firm’s innovation performance. In the light of the KBV, both
STI and DUI innovation can be seen as the process of knowledge acquisition, assimilation,
exploitation and creation, while promoting knowledge acquisition, assimilation, exploitation
and creation forms a key part of organizational roles of IT (Zand, 2011). IT infrastructure
has proven to be a critical enabler of collaborative innovation by providing an important
information exchange channel with external agents (Kleis et al., 2012). For instance,
technological systems for ERP, SCM or CRM make it possible for firms to integrate
knowledge resources through backward linkage with suppliers and forward linkage with
customers. In addition, IT infrastructure opens new opportunities for collaborative
innovation at a distance (Werker and Ooms, 2019). IT infrastructure facilitates interactions
between a firm and its external innovation partners, thus strengthening the positive impact
of innovation modes on a firm’s innovation performance. This is especially true concerning
the STI mode of innovation because the dominant knowledge base of STI mode is explicit or
codified (Apanasovich et al., 2016).
Besides knowledge acquisition, KBV scholars believe that IT infrastructure can
strengthen external knowledge assimilation by supporting the storage and transfer of
external knowledge, the creation of new knowledge through integration of internal and
external knowledge and the application of new knowledge (Trantopoulos et al., 2017; Zand,
2011). For example, it is found that firms that use data access systems can assemble and
transform new and existing codified knowledge into organizational knowledge more
efficiently (Nonaka et al., 1996). This happens because data access systems can serve as
digital knowledge repositories to efficiently access, store and integrate knowledge from
external sources, thereby augmenting organizational memory (Alavi and Leidner, 2001;
Huber, 1990). As another example, enterprises using network connectivity (e.g. local area
networks) are expected to have stronger knowledge absorption capacity (Trantopoulos et al.,
2017) because network connectivity enables the assimilation of external knowledge by
disseminating new ideas, best practices and solutions among manufacturing personnel by
reducing communication barriers (Bloom et al., 2014; Gold et al., 2001). On the basis of these
arguments, we propose the following hypotheses:

H4a. IT infrastructure moderates the relationship between STI mode of innovation and
firms’ innovation performance such that the impact of STI mode on firms’
innovation performance will be stronger when there is a higher level of IT
infrastructure.
CMS H4b. IT infrastructure moderates the relationship between DUI mode of innovation and
14,4 firms’ innovation performance such that the impact of DUI mode on firms’
innovation performance will be stronger when there is a higher level of IT
infrastructure.
H4c. IT infrastructure moderates the relationship between STI and DUI mode of
innovation and firms’ innovation performance such that the impact of STI and DUI
1020 mode on firms’ innovation performance will be stronger when there is a higher
level of IT infrastructure.
We believe that the frequency of IT usage will also strengthen the positive impact of
business innovation modes on a firm’s innovation performance. Frequent IT usage can
enhance a firm’s ability to acquire more information from both inside and outside the firm.
Firms gain access to specialized knowledge, market demands or other innovation
components that can be integrated into innovation process to the greatest extent (Chan et al.,
2007). Moreover, frequent IT usage enables firms’ innovation by obtaining useful
information in time in an inherently uncertain and fluid environment (i.e. an environment
where information is imperfect and rapidly changing) (Werker and Ooms, 2019).
Apart from information acquisition, frequent IT usage is also instrumental in creating an
effective partnership between a firm and its external innovation partners (Kleis et al., 2012).
Specifically, frequent IT usage has a positive effect on trust and shared understanding (Kleis
et al., 2012) and, hence, helps to strengthen the ties between a firm and its external partners
(Werker and Ooms, 2019) and lowers the possibility of opportunism (Brynjolfsson et al.,
1994). This may be particularly important when a firm engages in innovation modes
concerning external collaboration such as collaboration with universities because the nature
and organization culture between firms and universities are quite different (Ankrah and AL-
Tabbaa, 2015). Thus, we propose the following hypotheses:

H5a. The frequency of IT usage moderates the relationship between STI mode of
innovation and firms’ innovation performance such that the impact of STI mode
on firms’ innovation performance will be stronger when there is a higher IT usage
frequency.
H5b. The frequency of IT usage moderates the relationship between DUI mode of
innovation and firms’ innovation performance such that the impact of DUI mode
on firms’ innovation performance will be stronger when there is a higher IT usage
frequency.
H5c. The frequency of IT usage moderates the relationship between STI and DUI mode
of innovation and firms’ innovation performance such that the impact of STI and
DUI mode on firms’ innovation performance will be stronger when there is a higher
IT usage frequency.
Figure 1 depicts the conceptual model of this paper.

3. Sample, measures and model

3.1 Data and sampling
The source of this empirical analysis is the China-Enterprise Survey carried out by the
World Bank in 2012 and early 2013. It is a cross-sectional data set with most of the variables
reflecting a firm’s operating situation in 2011; however, it does include some other variables
with information that covers three years (2009-2011). This data is freely accessible to public
and is available at www.enterprisesurveys.org/. To make this data more balanced and New findings
representative, the survey covered 25 cities from eastern, central and western China. The from an
survey used the stratified sampling method and a total of 2,848 sample enterprises emerging
(including 2,700 privately owned enterprises and 148 state-owned firms) were investigated.
We processed the original data according to the following standards: First, the state-owned
market
firms were excluded because of their peculiarity. Then, service industry firms were
discarded because these normally do not engage in formal R&D activities (Miles, 2007). 1021
Because data was missing for some variables, the final sample for the analysis consisted of
1,309 firms. A profile of these firms is presented in Table 2.

3.2 Measurement of variables

3.2.1 Dependent variable. Following past research (Chen et al., 2011; Inauen and Schenker-
Wicki, 2011), we operationalized the dependent variable “innovation performance” as the
percentage share of annual sales of new products or services. The question was phrased as

IT

IT infrastructure The frequency of IT usage

Innovation modes

STI mode of innovation

DUI mode of innovation Firmsÿinnovation performance

STI & DUI mode of innovation Figure 1.

The control variables Conceptual model

Frequency
Characteristics of firms Category (N = 1,309) Proportion (%)

Number of employees 1-49 366 28.0

(including managers) 50-500 843 64.4
More than 500 100 7.6
Firm age Less than 5 years 39 3.0
5-10 years 512 39.1
More than 10 years 758 57.9
Industry classification by Medium-high and high-technology 473 36.1
technological intensity Medium-technology 305 23.3
Low-technology 531 40.6
Regional distribution Pearl river delta 231 17.6
Yangtze river delta 439 33.5
Surrounding areas of the Bohai Bay 444 33.9
Inland areas 195 14.9
Table 2.
Note: The classification of manufacturing sectors by technological intensity (ISIC Revision 4) (Galindo- Profile of sample
Rueda and Verger, 2016) is used as the criterion for industry classification firms
CMS follows: “In fiscal year 2011, what per cent of this establishment’s total annual sales was by
14,4 products or services that were introduced in the past three years?”
3.2.2 Independent variables. As mentioned earlier, STI mode of innovation is manifested
by investments in R&D and S&T and interaction with centers producing new knowledge (e.
g. universities, research centers, consultancies), whereas DUI mode of innovation is
manifested by informal interaction within and between organizations. In accordance with
1022 prior critical studies (González-Pernía et al., 2015; Parrilli and Heras, 2016), we used different
types of external collaboration in introducing new products or services to determine the
innovation modes for convenience. More precisely, three independent variables (STI mode of
innovation, DUI mode of innovation, STI and DUI mode of innovation) were developed
around three different types of partnerships, respectively, namely:
(1) the STI mode of cooperation (the firm collaborates only with at least one of the
following science-based partners: universities, research institutions and
consultants);
(2) the DUI mode of cooperation (the firm collaborates only with at least one of the
following interactive-and practice-based partners: suppliers and client firms); and
(3) the STI and DUI mode of cooperation (the firm collaborates with both science-
based partners and interactive- and practice-based partners).

It should be noted that although competitors are regarded as one of the interactive- and
practice-based partners in some related studies, they fall outside the scope of this study. The
main reason for this is that interactions with competitors are likely to have the least impact
on firms’ innovation performance because a competitor will actively block access for a firm
to gain new knowledge and a firm has a similar knowledge base with its competitors (Un
et al., 2010). The restriction of data availability being another reason. We created three
dummy variables to capture three different modes of innovation in which a firm may be
involved. These variables take the value of 1 if the firm was involved in corresponding
cooperation type and take 0 otherwise.
3.2.3 Moderator and control variables. The variable of IT infrastructure (ITI), following
prior research (Trantopoulos et al., 2017), was built based on the responses in the China-
Enterprise Survey about whether or not (1 or 0) the firm used information technologies
including phone and fax, e-mail, electronic data interexchange (EDI), online Web-based
systems (internet based) and software such as ERP systems, SCM systems and CRM
systems. These information technologies are normally regarded as key mediums for inter-
organizational relationships and transactions in the manufacturing sector (Sher and Lee,
2004; Trantopoulos et al., 2017). We then calculated the sum of these Yes-No items and
transformed the value into an ordinal scale to get the moderating variable of IT
infrastructure. The value of IT infrastructure ranges from 0 to 5. The higher the value of this
variable, the higher is the level of a firm’s IT infrastructure.
The variable of the frequency of IT usage (FITU), following prior studies (Mauerhoefer
et al., 2017; Silva et al., 2016), was built based on the responses in the China-Enterprise
Survey about how often (1 = never, 2 = rarely, 3 = sometimes, 4 = frequently and 5 = all the
time) the firm used information technologies for supporting partner and customer relations.
We averaged the answers to these two questions to get the value of the moderating variable
of the frequency of IT usage. The value of the frequency of IT usage ranges from 1 to 5. The
higher the value of this variable, the more frequently information technologies are used by a
firm.
 Several variables that may influence a firm’s innovation performance were included as New findings
control variables and these variables have been commonly used in previous studies (Fitjar from an
and Rodríguez-Pose, 2013; González-Pernía et al., 2015; Lee and Huh, 2016; Parrilli and
Heras, 2016). To begin with, we controlled whether the firm carried out in-house R&D
emerging
activities (in-house R&D). Second, we controlled whether the firm contracted external R&D market
activities (external R&D). Third, we controlled the size of the firm (firm size) because larger
firms may have more resources to generate high innovation performance. Firm size was
measured by taking the natural logarithm of the total number of permanent, full-time 1023
employees (including managers). Fourth, the age of the firm (firm age) was controlled for
reasons similar to that for firm size, and it was measured as the number of years as a firm’s
inception. Fifth, we controlled firm export intensity (export intensity), which was measured
as the proportion of a firm’s export sales (including indirect exports and direct exports)
relative to its total sales. Finally, we included two dummy variables (i.e. “medium-high and
high”; “medium”) to account for the effects of industry (Jensen et al., 2007). Table 3 shows the
descriptive statistics for all variables.

3.3 The model

We used the Tobit model because the dependent variable, which is measured as a
percentage of sales from new products or services, is a limited dependent variable. In this
case, the residuals of ordinary least squares (OLS) regression will not satisfy the assumption
that the error term has a zero mean, and therefore, OLS regression may produce biased
estimates. In contrast, Tobit models are more suitable for censored data. We can obtain
consistent and unbiased estimates by using Tobit modes (Greene, 1997).

4. Data analysis and results

4.1 Empirical analysis
To analyze the impact of innovation modes on a firm’s innovation performance, the Tobit
regression was applied. The variance of inflation (VIF) was examined before conducting the
regression analysis to ensure that there was no multicollinearity problem. The VIF values
ranged from 1.05 to 3.50, which are far below the critical value of 10 (Hair et al., 1998),
indicating that there were no serious multicollinearity problems in the models.
Table 4 presents the results of the models. Following the procedure suggested by
Dawson (2014), several regressions were performed to verify our hypotheses. Model 1

Variable Obs. Mean SD Min. Max.

Innovation performance 1,309 0.12 0.184 0 1

STI 1,309 0.28 0.449 0 1
DUI 1,309 0.42 0.494 0 1
STI and DUI 1,309 0.18 0.388 0 1
ITI 1,309 3.36 1.389 0 5
FITU 1,309 3.40 1.251 1 5
Firm size 1,309 4.51 1.272 1.61 10.31
Firm age 1,309 13.11 8.206 0 125
In-house R&D 1,309 0.45 0.498 0 1
External R&D 1,309 0.13 0.333 0 1
Export intensity 1,309 0.15 0.267 0 1
Medium-high and high 1,309 0.36 0.481 0 1 Table 3.
Medium 1,309 0.23 0.423 0 1 Summary statistics
CMS Variable Model 1 Model 2 Model 3 Model 4 Model 5
14,4
Constant
0.005
0.007
0.008
0.010
0.006
Firm size 0.006 0.003
0.009
0.008
0.009
Firm age
0.018*
0.018*
0.016*
0.017*
0.016*
In-house R&D 0.134*** 0.123*** 0.109*** 0.108*** 0.108***
External R&D 0.037*** 0.022** 0.021** 0.022** 0.022**
1024 Export intensity 0.010 0.007 0.003 0.002 0.003
Medium-high and high 0.015 0.014 0.013 0.013 0.013
Medium 0.017* 0.017* 0.019** 0.018* 0.019**
STI 0.087*** 0.063*** 0.039** 0.068***
DUI 0.080*** 0.059*** 0.060*** 0.060***
STI and DUI
0.094***
0.077***
0.051***
0.082***
ITI 0.057*** 0.058*** 0.055***
FITU 0.028*** 0.027** 0.028***
STI  ITI 0.042**
DUI  ITI
0.001
STI and DUI  ITI
0.045**
STI  FITU
0.015
DUI  FITU
0.012
STI and DUI  FITU 0.018
Number of observations 1,309 1,309 1,309 1,309 1,309
Log likelihood
467.855
428.437
403.072
399.083
402.324
LR x 2 (sig.) 313.41*** 392.24*** 442.98*** 450.95*** 444.47***
Table 4. Pseudo R2 0.2509 0.3140 0.3546 0.3610 0.3558
The coefficients of
Tobit regressions Note: *denotes p < 0.10; **denotes p < 0.05 and ***denotes p < 0.01

includes the controls; Model 2 adds the independent variables, namely, three kinds of
innovation modes. Model 3 includes the effects of IT infrastructure and the frequency of IT
usage. Models 4 and 5 are full models and introduce the interaction term of innovation
modes and IT infrastructure and the interaction term of innovation modes and the frequency
of IT usage, respectively. It should be noted that all predictor, moderator and control
variables in these models were standardized before starting the analysis process to reduce
any potential multicollinearity problems (Aiken and West, 1991) and to make the predicted
values easy to calculate (Dawson, 2014).
H1, H2 and H3 predict that STI mode of innovation, DUI mode of innovation and STI
and DUI mode of innovation will positively affect firms’ innovation performance,
respectively. As shown in Table 4, the coefficients of STI and DUI in Models 2 to 5 are both
positive and significant, while the coefficients of STI and DUI are negative and significant,
suggesting that individually both STI mode of innovation and DUI mode of innovation have
a significant positive effect on firms’ innovative performance, whereas the combined STI
and DUI mode of innovation has a negative impact. These results provided support for H1
and H2, but H3 was not supported.
The findings in this study demonstrated that both STI and DUI modes of innovation
matter for firms’ innovation performance. This finding is consistent with the earlier
literature addressing the nexus between innovation modes and firms’ innovation
performance (Fitjar and Rodríguez-Pose, 2013; González-Pernía et al., 2015; Jensen et al.,
2007; Parrilli and Heras, 2016). We found that the combined STI and DUI mode of
innovation has a negative impact on firms’ innovative performance, which is contrary to
some existing literature (González-Pernía et al., 2015; Jensen et al., 2007; Parrilli and Heras,
2016) but is consistent with the findings of González-Pernía et al. (2012) and Haus-Reve et al. New findings
(2019). In fact, the findings of existing studies on the relationship between innovation modes from an
and firms’ innovation performance remain inconclusive. For instance, Parrilli and Heras
(2016) demonstrated that the combined STI and DUI mode of innovation has a stronger
emerging
impact on firms’ innovation output than the two separate individual modes. Runhede (2018) market
and Amara et al. (2008), however, found that the effect of the combined STI and DUI mode of
innovation on firms’ innovation performance is outperformed by that of the individual DUI
mode. On the other hand, González-Pernía et al. (2012) showed that the combined STI and 1025
DUI mode of innovation does not contribute to firms’ product and process innovation but
rather plays a negative role on a firm’s innovation.
According to Runhede (2018), the explanation for these diverse findings is not entirely
clear, but the findings of our research and that of González-Pernía et al. (2012) show that the
combined STI and DUI mode of innovation does have a negative impact on firms’
innovation performance. We propose that the reason may be that the impact of the combined
STI and DUI mode of innovation on firms’ innovation performance is highly contextual
(Apanasovich et al., 2016), determined by firm-specific factors that influence firms’ resources
and capabilities directly. For example, as small firms are more likely to have a low level of
slack resources (i.e. resources that are left uncommitted in ordinary operational activities,
including financial and human resources) (Nohria and Gulati, 1996; Voss et al., 2008) and low
absorptive capacity [i.e. a firm’s ability to recognize the value of new external knowledge, as
well as assimilate and apply it; Cohen and Levinthal (1990)] to successfully absorb external
knowledge, they might find it difficult to reconcile STI and DUI modes of innovation and
reap the benefits of these two innovation modes. Another example can be that new ventures
may also find it difficult to reap the benefits of two innovation modes due to the lack of
external cooperation experience and managements skills given that reconciling STI and
DUI modes of innovation is a complex and risky task (González-Pernía et al., 2012). This
means that a firm’s organizational conditions play a key role in reaping the benefits of the
combined STI and DUI mode of innovation, and thus it could influence the nexus between
innovation modes and firms’ innovation performance.
Besides the firm-specific factors, measurement heterogeneity can also moderate the
relation between innovation modes and firms’ innovation performance. That is, the
discrepancies in the impact of the combined STI and DUI mode of innovation on firms’
innovation performance could be due to the variation in measurement factors (e.g.
definitions and operationalization of variables, time and sites of data collection, methods of
collecting data and study methodologies) (Runhede, 2018). One obvious difference between
this research and prior studies that show a positive relationship between the combined STI
and DUI mode of innovation and firms’ innovation performance is that this study is
conducted in an emerging market, while most of the previous studies were conducted in
developed markets (Apanasovich et al., 2016). Given the particularity of emerging markets
(e.g. less developed NISs and weaker regimes of IPRs) (Zhou, 2012), the difference in data
sources might be part of the reason why the combined STI and DUI mode of innovation
impacts firms’ innovation performance negatively.
To verify the interpretation (i.e. the possible reason for the negative effect of the
combined STI and DUI mode of innovation on firms’ innovation performance) proposed
above, we further performed regression analysis separately for each of the two following
categories of firms, depending on firm size: large and medium-sized firms (having 50 or more
employees) and small firms (having less than 50 employees). The cutoff value of 50
employees was used as the size criterion for small firms following previous research studies
(Gray, 2002; Spence, 1999). The results of these grouping regressions are shown in Table 5.
CMS Following prior work (Cleary, 1999), we used a bootstrap method (Efron and Tibshirani,
14,4 1993) to determine the significance of differences in coefficients between the two groups. As
shown in Table 5, both the coefficients of STI and DUI in small firms (SF) group and large
and medium-sized firms (LMF) group are significantly negative, but the absolute value of
the coefficient of STI and DUI is greater in the SF group. The empirical p-value obtained by
the bootstrap method further confirms the statistical significance of such differences. The
1026 empirical p-value (0.095) is statistically significant at the 10% level, thus rejecting the null
hypothesis that there is no significant difference in coefficient estimates between the two
groups. These results indicate that the STI and DUI mode of innovation has a greater
negative impact on small firms than on large and medium-sized firms. Reconciling STI and
DUI modes of innovation is a difficult task, but because small firms are more likely to have a
low level of slack resources and managerial capabilities, they are in a relatively inferior
position to avoid the negative effects of STI and DUI mode of innovation on firms’
innovation performance when compared to large and medium-sized firms.
H4a, H4b and H4c examine the moderating effects of IT infrastructure. As Model 4
shows, the coefficient of the interaction term of STI mode with IT infrastructure is positive
and significant ( b = 0.042, p # 0.05), indicating that a high level of IT infrastructure
strengthens the relationship between the STI mode of innovation and firms’ innovative
performance. This finding is in line with other researchers’ finding that modern
communication tools play an important role in firm – university collaboration (Werker and
Ooms, 2019). The coefficient of the interaction term of STI and DUI mode with IT
infrastructure is negative and significant ( b =
0.045, p # 0.05), indicating that a high level
of IT infrastructure strengthens the relationship between STI and DUI mode of innovation
and firms’ innovative performance. This can be explained by the attention-based view (ABV)
of the firm (Ocasio, 1997). According to this theory, a firm is a system that structurally
distributes attention (Ocasio, 1997) and the term attention here refers to the ability to process
information from various sources and extract information that is useful for specific tasks
(Dong and Netten, 2017; Garcia et al., 2000). Because it is already impossible for most firms to
make proper use of the STI mode of innovation and DUI mode of innovation simultaneously,
a high level of IT infrastructure can bring abundant information from external knowledge
sources to firms, leading to information overload (Dong and Netten, 2017) and thus
strengthening the negative impact of STI and DUI mode of innovation on firms’ innovative
performance. Moreover, the coefficient of the interaction term of DUI mode with IT

Variable Model 6 (large and medium-sized firms) Model 7 (small firms) Empirical p-values

STI 0.064*** 0.073* 0.375

DUI 0.056*** 0.065*** 0.338
STI and DUI
0.070***
0.113*** 0.095
Moderator variables Included Included —
Control variables Included Included —
Constant
0.003 0.038 0.014
Number of observations 943 366 —
Log likelihood
252.853
138.733 —
Table 5. LR x 2 (sig.) 343.64*** 101.31*** —
Grouping regression Pseudo R2 0.4046 0.2675 —
results without Notes: The empirical p-values were obtained by the bootstrap sampling which was repeated 1,000 times;
considering *denotes p < 0.10; ** denotes p < 0.05 and ***denotes p < 0.01; @E(yjx)/@xj 5 b jU(x b /s ), 0 < U(x b /s ) <
moderating effects 1 (Greene, 1997); The values of U(x b /s ) for LMF group and SF group are 0.529 and 0.388 respectively
infrastructure is not significant. Hence, H4a and H4c were supported, whereas H4b was not New findings
supported. This could reflect the fact that the STI mode of innovation mainly involves from an
explicit and codified knowledge and thus the positive effects of STI mode of innovation on a
firm’s innovative performance could be better promoted by IT infrastructure.
emerging
In contrast, because the dominant knowledge type of DUI mode of innovation is tacit market
knowledge, the role of IT infrastructure in strengthening the positive effects of DUI mode is
less effective. The DUI mode of innovation requires constant and repeated interactions and
these interactions should be face-to-face contacts rather than interactions based merely on 1027
IT tools. According to media richness theory (Oke and Idiagbon-Oke, 2010), face-to-face
communication can convey information more effectively in comparison to using IT tools
such as telephone and e-mail. More importantly, face-to-face contacts are of great
significance in overcoming cognitive and organizational distance (Werker and Ooms, 2019).
H5a, H5b and H5c examine the moderating effects of the frequency of IT usage. As
Model 5 shows, the coefficient of the interaction term of STI mode with the frequency of IT
usage is negative and insignificant ( b =
0.015, p > 0.1), showing that the frequency of IT
usage has no moderating effects on the relationship between the STI mode of innovation
and firms’ innovative performance. Similarly, the coefficient for the interaction term of DUI
mode with the frequency of IT usage is negative but insignificant ( b =
0.012, p > 0.1),
indicating that the frequency of IT usage does not moderate the relationship between the
DUI mode of innovation and firms’ innovative performance. In addition, the coefficient of
the interaction term of STI and DUI mode with IT usage frequency is also not significant.
Hence, H5a, H5b and H5c were not supported. One reason for this could be that the
tasks between firms and external innovation partners are mainly unanalyzable tasks [i.e.
tasks that require individuals to think about, create or find satisfactory solutions to
problems outside of the domain of facts, rules or procedures; Rice (1992)] rather than
analyzable tasks (i.e. tasks for which predetermined responses to potential problems, and
well-known procedures, are available and useful; Rice (1992)). According to Rice (1992),
unanalyzable tasks require lots of interactions, negotiations and socializations, and thus
lead to the need to process equivocal information, which requires media that can convey
multiple cues, the joint construction of meaning and rapid feedback. Frequent interactions
based on information technologies (e.g. facsimile, voice messaging, e-mails, telephones) may
be helpful in dealing with minor practical matters such as setting up meetings or
exchanging documents because these tasks involve more rules, routines and procedures and
can be more readily analyzed and are less emotional (Oke and Idiagbon-Oke, 2010).
However, frequent interactions based on information technologies may not be conducive to
implement major constituents of firms’ cooperation with external agents (e.g. reporting and
discussing process, dealing with complex problems) because such tasks involve more
ambiguity and predetermined responses to potential problems are unavailable. In fact, the
interactions between firms and external agents on major constituents of their cooperation
almost exclusively rely on face-to-face contacts (Trevino et al., 1987; Werker and Ooms,
2019).
One important reason for the different moderating effects of IT infrastructure and the
frequency of IT usage on the relationship between innovation modes and firms’ innovation
performance is that different information technologies have different organizational roles
(Zand et al., 2015). In this paper, the frequency of IT usage refers to the frequency that
information technologies are used to support partner or customer relations which depend
mainly on communication technologies and enterprise systems (e.g. SCM systems, CRM
systems). Hence, improving the frequency of IT usage can better achieve information,
communication, coordination and integration roles while perfecting IT infrastructure can
CMS better achieve all roles (including information, communication, automation, coordination,
14,4 integration, transformation and innovation) (Zand, 2011; Zand et al., 2015).
With regard to the effects of the moderator variables, the results show that the
coefficients of IT infrastructure and the frequency of IT usage in Models 3 to 5 are both
positive and significant, indicating that both IT infrastructure and the frequency of IT usage
have a significant positive effect on firms’ innovative performance. This is in line with the
1028 findings of prior studies (Heim et al., 2011; Mauerhoefer et al., 2017; Silva et al., 2016).
When it comes to the effects of the control variables, the results show that both in-house
R&D and external R&D have a significant positive effect on a firm’s innovative
performance, confirming the findings of González-Pernía et al. (2015) that firms carrying out
in-house and external R&D activities have a higher innovative performance in comparison
to firms that do not carry out R&D activities. The industry dummy variable “medium” has a
positive and significant effect on a firm’s innovation performance, while the industry
dummy variable “medium–high and high” has no significant effect on a firm’s innovation
performance. Firm age has a significant negative effect on a firm’s innovative performance.
It is worth noting that firm size and export intensity have no significant influence on firms’
innovative performance.

4.2 Robustness checks

We also performed further analyzes to examine the robustness of estimated results. First, we
performed an OLS regression analysis (to save space, we report only the two full models)
and contrasted its results with the results of Tobit models. As shown in Table 6, the main
conclusions are robust to the econometric methods used in this paper. Furthermore, we tried
to change the measurement of the dependent variable to conduct robustness tests. Because
firms’ innovative performance could be measured in various ways, for instance, using

Variable Model 8 Model 9 Model 10 Model 11

Constant 0.119*** 0.123*** 0.017 0.026

Firm size
0.004
0.005 0.024 0.012
Firm age
0.006
0.006
0.078
0.074
In-house R&D 0.047*** 0.048*** 0.853*** 0.864***
External R&D 0.017*** 0.017*** 0.230*** 0.230***
Export intensity 0.001 0.001 0.030 0.025
Medium-high and high 0.007 0.007 0.121 0.118
Medium 0.007 0.007 0.188** 0.194***
STI 0.026*** 0.039*** 0.402*** 0.476***
DUI 0.025*** 0.025*** 0.499*** 0.501***
STI and DUI
0.030***
0.045***
0.544***
0.651***
ITI 0.034*** 0.033*** 0.203** 0.191**
FITU 0.001
0.000 0.345*** 0.342***
STI  ITI 0.032*** 0.329**
DUI  ITI 0.008 0.076
STI and DUI  ITI
0.031***
0.422***
STI  FITU
0.001 0.076
DUI  FITU 0.001
0.000
STI and DUI  FITU 0.007
0.094
Number of observations 1,309 1,309 1,309 1,309
Table 6. R2 (or Pseudo R2) 0.2284 0.2212 0.2555 0.2514
The results of
robustness checks Notes: *Denotes p < 0.10; **denotes p < 0.05 and ***denotes p < 0.01
dummy variable (e.g. whether a firm introduced any technological innovation in a specific New findings
period) to measure corporate innovative performance (Chang, 2003; Fudickar and from an
Hottenrott, 2019), we used the variable “whether the firm introduced any new products or
services” to measure firms’ innovation performance. Considering the characteristics of this
emerging
dependent variable, we used the binary logit model to conduct the empirical analysis. The market
results are shown in Table 6. As it turns out, the main conclusions are robust to the prior
results of Tobit regression on the dependent variable “percentage share of annual sales
derived from new products or services” (Table 4). 1029

5. Discussion and conclusion

Although the debate on the effects of different business innovation modes has always
been the focus of academic research studies, prior studies have paid little attention to
the practices of innovation modes in emerging markets compared with developed
markets. In this study, we developed a conceptual model for linking business
innovation modes, IT (including IT infrastructure and the frequency of IT usage) and
firms’ innovative performance, and the corresponding hypotheses were tested by
using Chinese manufacturing firms’ data from the World Bank’s China-Enterprise
Survey.
This study yields some intriguing findings. First, our findings suggest that individually
STI mode of innovation and DUI mode of innovation have a significant positive effect on
firms’ innovative performance, that is, both STI and DUI modes of interaction matter for
firms’ innovation performance, confirming the results of previous studies (Fitjar and
Rodríguez-Pose, 2013; González-Pernía et al., 2015; Jensen et al., 2007; Parrilli and Heras,
2016). Second, the combined STI and DUI mode of innovation has a significant negative
impact on firms’ innovation performance. This result is consistent with that of González-
Pernía et al. (2012), but it is very different from some existing research studies (González-
Pernía et al., 2015; Jensen et al., 2007; Parrilli and Heras, 2016). The finding of this paper
suggest that the STI mode of innovation and DUI mode of innovation may be substitutes in
some cases, thus providing new evidence for Haus-Reve et al.(2019), which suggests that
STI mode of innovation and DUI mode of innovation are substitutes rather than
complements. It is worth noting that even though Jensen et al. (2007) suggest that STI mode
of innovation and DUI mode of innovation may be complements, they do not think that this
applies to all situations. Just as Jensen et al. (2007) argued, “The two modes of learning co-
exist and can be made to complement each other does not imply that they are always
operating in harmony with each other. Sometimes there may be contradictions between
them, which have to be tackled before potential benefits can be reaped.” Third, the findings
of this study suggest that IT infrastructure indeed moderates the relationship between STI
mode of innovation and firms’ innovative performance and the relation between STI and
DUI mode of innovation and firms’ innovative performance, respectively. However, IT
infrastructure has no moderating effects on the relation between DUI mode of innovation
and firms’ innovative performance. Moreover, the frequency of IT usage has no moderating
effects on the relationship between any kind of innovation modes and firms’ innovation
performance.
This study makes several contributions to the literature on business innovation modes.
First, our findings show the importance of STI mode of innovation and DUI mode of
innovation to firms’ innovation performance, confirming the conclusions of previous studies.
Second, this study demonstrates that the combined STI and DUI mode of innovation can
negatively influence the innovation performance of firms in emerging markets, and, hence,
contributes empirical evidence to the innovation modes and firms’ innovative performance
CMS literature by expanding research in new institutional contexts. Third, the study provides a
14,4 new persuasive explanation framework for understanding the heterogeneous impacts of the
combined STI and DUI mode of innovation on firms’ innovation performance. Specifically,
the reason may be that the impact of the combined STI and DUI mode of innovation on
firms’ innovation performance is highly contextual, determined by firm-specific factors and
measurement factors. Fourth, this study provides the first attempt to examine the
1030 moderating effects of IT on the relation between business innovation modes and firms’
innovation performance and the finding extends the existing research studies by showing
that IT infrastructure is a vital complementary resource for STI mode of innovation for
firms in China.
Our findings also provide some managerial and policy implications. First, this study
indicates that reconciling STI and DUI modes of innovation is indeed a complex and
risky task and that simultaneously adopting two modes of innovation (i.e. STI mode of
innovation and DUI mode of innovation) is not a wise choice for Chinese firms. The
conclusions of this study and prior studies imply that the impact of the combined STI and
DUI mode of innovation on firms’ innovation performance is likely to be contextual, and
accordingly, firms’ adoption of innovation modes should be contingent. Before engaging
in any innovation activity, firm managers should analyze their organizational conditions,
most notably resources and capabilities. The findings of this study lead to a reflection on
the most suitable innovation mode of firms in different institutional contexts and imply
that the policies in emerging markets should not blindly encourage enterprises to adopt
more innovation modes. Second, a high level of IT infrastructure does not strengthen the
positive impact of DUI mode of innovation on firms’ innovation performance, and
therefore, constant and repeated face-to-face contacts are particularly important when a
firm engages in DUI mode of innovation. Moreover, although an increase in IT usage
frequency can promote a firm’s innovation performance, it does not strengthen the
positive impact of STI (or DUI) mode of innovation on a firm’s innovation performance,
while a high level of IT infrastructure can not only promote firm innovation but also
strengthen the positive impact of STI mode of innovation on firms’ innovation
performance. This implies that the focus of IT strategy of firms engaged in STI mode of
innovation should be on perfecting their IT infrastructure rather than increasing the
frequency of IT usage.
This research is not exempted from limitations. First, this study relies on cross-sectional
data due to the limitation in data availability. A large longitudinal data set could provide
greater exploratory power (Berchicci, 2013). Second, we used several dichotomous variables
to describe different innovation modes (i.e. STI mode of innovation, DUI mode of innovation
and STI and DUI mode of innovation); however, it is obvious that using continuous
variables can provide a more accurate measure of the intensity of the concepts (González-
Pernía et al., 2015). Another limitation is that only product innovation performance is
considered in the analysis, whereas it is generally believed that firms’ innovation can be
divided into several types such as product innovation, process innovation, technical
innovation and administrative innovation.
This study reveals that there are substantial cross-country differences in the impact of
the combined STI and DUI mode of innovation on firms’ innovation performance. Hence,
more studies should be conducted in emerging markets to make cross-country comparisons
because most of the prior studies are focused on developed markets. Moreover, given the
advantage of meta-analysis in addressing inconclusive empirical results that yield different
effect sizes across different empirical settings and research designs (Sarooghi et al., 2015),
this study points toward the need to conduct the meta-analysis to better explain the
heterogeneity of different studies’ results. Finally, the study calls for more in-depth analyzes New findings
to have a clearer understanding of the underlying mechanism of how innovation modes from an
impact a firm’s innovation performance.
emerging
market
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About the authors

Shilei Hu is a PhD student major in Administration Management at the School of Management,
Harbin Institute of Technology, China. His current research interests include firm strategy and
innovation, university-industry collaboration and knowledge management.
Xiaohong Wang is a professor in Administration Management at the School of Management,
Harbin Institute of Technology, China. Her research focuses on R&D management and knowledge
management. She has published in the Scientometrics, Management Decision, Chinese Management
Studies and International Journal of Environmental Research and Public Health. Xiaohong Wang is
the corresponding author and can be contacted at: wangxh@hit.edu.cn
Ben Zhang is a lecturer at the School of Management, Harbin University of Science and
Technology, China. His research interests are in the areas of university-industry collaboration and
knowledge management.

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