Did the global financial crisis impact firms' innovation performance? The role of internal and external knowledge capabilities in high and low tech industries

Abstract

This paper examines the role exerted by internal innovation efforts and external knowledge assets as dynamic capabilities to overcome adverse economic conditions. Additionally, we examine the differential impacts of the financial crisis in high and low-tech industries. Using panel data of manufacturing firms in Spain for the period 2006–2013, our results show that maintaining strong internal and external knowledge capabilities enables firms to mitigate the effects of the financial crisis. Findings emphasize the value of human capital, by enabling internal capabilities, as a coping mechanisms in low-tech sectors during the financial downturn. Similarly, open innovation allows firms to minimise the resources limitations and risk surrounding innovation, particularly during the financial crisis. This study provides valuable insights to managers aiming to develop strong internal knowledge bases to remain competitive under uncertain financial conditions.