How global and national institutions interactively shape firms’ commitment to innovation regimes in latecomer countries

Abstract

We investigate how the duality of innovation regimes in latecomer countries is institutionally shaped. We first specify the firm-level mechanism of commitment to both knowledge use and knowledge generation regimes with reference to the allocation of government grants across investments in machinery and equipment, and in research and development. Then, we theorize the interactive effects of global and national institutional systems on firms’ commitment to these innovation regimes. Our analysis of firm-level data from 16 latecomer countries classified as either hierarchical or collaborative national institutional systems indicates that, although firms are committed to both innovation regimes, the effect of global cultural rationalization steers firms toward the knowledge generation regime and away from the knowledge use regime. However, this movement away from the knowledge use regime due to rationalization is weaker in hierarchical systems. We contribute to the innovation regime literature by elucidating the firm-level duality in innovation regimes subject to global and national institutional effects.