UNU-MERIT Working Papers Series
Complementarity between internal knowledge creation and external knowledge sourcing in developing countries
Jun Hou & Pierre Mohnen #2013-010In developing countries, innovation is to a large extent a matter of
adoption of advanced technologies but also of conducting internal R&D to
be able to better assimilate existing technologies. This paper, based on
firm level data from 24 developing countries, examines the roles of
internal R&D efforts (MAKE) and external technology sourcing (BUY) in
fostering productivity in manufacturing firms. Is MAKE a substitute for
BUY or are the two strategies complementary as evidenced in some
developed countries? Our empirical investigation highlights the critical
role of external technology acquisition in manufacturing industries in
low-income countries and exhibits signs of complementarity only in
middle-income countries.
Keywords: innovation, make and buy, complementarity, developing
countries
JEL classification: O13, O33, D22
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