Whose innovation performance benefits more from external networks: Entrepreneurial or conservative firms?

Abstract

The primary contribution of this research is positing and empirically supporting the proposition that learning through external networks disproportionately benefits conservative, risk-averse firms. The construct, entrepreneurial orientation (EO), is used to discriminate conservative, risk-averse firms from proactive, risk-seeking firms. Organizational learning theory and social capital theory are employed to support our hypotheses. Based on a study of 1978 U.S. firms, the paper suggests that the utilization of external networks (i.e., the process of learning from information, perspectives, and insights embedded in external networks) may act as a primary driver for innovation for those firms that are either not inclined and/or do not have the capabilities to adopt entrepreneurial culture. Specifically, weak EO firms' innovation performance benefits from utilizing external networks more than strong EO firms'. This research also tests for the moderating role of firm size and finds that the negative moderating effect of EO on the external network utilization–innovation performance relationship is more pronounced in small and medium sized enterprises (SMEs) than large firms.