Make and buy in innovation strategies: evidence from Belgian manufacturing firms

This paper characterizes the innovation strategy of manufacturing firms and examines the relation between the innovation strategy and industry-, firm- and innovation-specific characteristics using Belgian company data from the Eurostat Community Innovation Survey (CIS). In addition to important size effects explaining innovation, we find that high perceived risks and costs and low appropriability of innovations do not discourage innovation, but rather determine how the innovation sourcing strategy is chosen. With respect to the determinants of the decision of the innovative firm to produce technology itself (Make) or to source technology externally (Buy), we find that small firms are more likely to restrict their innovation strategy to an exclusive make or buy strategy, while large firms are more likely to combine both internal and external knowledge acquisition in their innovation strategy. After controlling for this size effect, companies for which internal information is an important source for innovation are less likely to source exclusively, but rather combine internal and external sources of technology. The strength of the appropriation regime and the internal organisational resistance to change affect negatively the decision to source exclusively externally. (C) 1999 Elsevier Science B.V. All rights reserved.