National business systems and firm innovation: A study of developing economies

While prior research recognizes the significant impact of innovation on the economic development of developing and emerging economies, the systemic role of national institutions in fostering firm innovation remains unclear. This study addresses this issue by introducing an institutional framework of national business systems shaping firm innovation within a country, and conducts a configurational analysis of 47 developing and emerging economies to uncover how state, human capital, financial, and informal institutions combine to influence firm innovation. The analysis identifies three distinct institutional configurations associated with high firm innovation. This study highlights the usefulness of a configurational approach to better understand how complementary and substitutable institutions may facilitate firm innovation within a country. The findings offer guidance to policy makers interested in encouraging economic development through firm innovation activities and to managers seeking to establish subsidiaries in innovative developing and emerging economies. (C) 2016 Elsevier Inc. All rights reserved.