Toward a Theory of Innovation in Emerging Economies

Georgia Tech Research Corporation, Atlanta GA

Investigators

Abstract

Existing theories of innovative organizations have been based on the experience of firms in developed economies. Consequently, these theories take certain "minimal" institutional environments as given, and build their insights and explanations upon the framework of these assumptions. Some theorists go so far as to claim that without these pre-conditions, innovation is not possible. Thus the institutional characteristics of developed nations are described as necessary -- if not sufficient -- ingredients for innovation. In contrast, evidence from high technology firms in developing countries demonstrates not only that firms operating without such institutions can innovate, but also that innovative organizations can thrive in environments considered hostile to innovation and entrepreneurship. Despite their obvious innovative accomplishments, the institutional environments, uncertainty, and risks faced by these organizations differ greatly from those in the developed countries. This research project will develop a theory that explains the rise, behavior, and capability development of innovative organizations in a particular emerging economy: China. The aim is to build a theory useful for understanding and better predicting: i) the innovative output of high technology organizations given their set of firm-level capabilities and the institutional structure of their operating environment; ii) the types of capabilities these firms are likely, and unlikely, to develop; iii) the relationship of these capabilities to their innovative performance; and iv) given a set of capabilities and institutions, their likely development trajectory. The latter can be better used to aggregate from the firm level to the national or regional level, adding to a more accurate understanding of innovative and economic performance in emerging economies. In addition to the intellectual contributions described above, the data and findings from this project should be of use to managers and policy makers seeking to ensure innovation and competitiveness in the context of rapidly globalizing supply chains.