Firm's strategic choices and network knowledge dynamics: how do they affect innovation?

Purpose This paper aims to explain how the evolution of knowledge networks and firms' strategic choices affect innovation. Endogenous factors associated with a path-dependent evolution of the knowledge network are jointly considered with a firm's development of international relationships and increasing internal absorptive capacity over time. Design/methodology/approach In a biotech cluster, the authors gathered data on the firms' characteristics and network relationships by asking about the technological knowledge they received in the cluster in 2007 and 2012 - roster-recall method. Estimation results were obtained using moderated regression analysis. Findings Firms that increase their involvement in knowledge networks over time also tend to increase their innovative capacity. However, efforts devoted to building international links or absorptive capacity negatively moderate the impact of network growth on innovation. Practical implications Practitioners have two alternative ways of increasing innovation inside knowledge networks: they can increase their centrality by developing their knowledge network interactions or invest in developing their internal absorptive capacity and new international sources of knowledge. Investing in both of these simultaneously does not seem to improve a firm's innovative capacity. Originality/value Coupling firms' strategic options with knowledge network dynamics provide a more complete way of explaining how firms can improve their innovative capacity.