This study examines how firm-level resources interact with regional institutional quality to explain innovation in developing countries. We hypothesize that the institutional environment within which the firm operates moderates the effect of firm-level resources on innovative output. We examine the moderating role of institutions with regards to the transformation of firm-level resources including internal research and development, employee level of education and quality certification into innovative output using firm-level data from the World Bank Enterprise Survey and the Innovation Follow-up Survey that includes the innovation module for the years 2010 through 2012. We test our hypotheses using a multilevel logistic model. We find that the effects of firm-level resources vary depending on the institutional environment and that regional institutional quality positively moderates the effects of the firm-level resources. The positive effects of internal research and development on innovative output are substantially reinforced by regional institutional quality.
Barasa, L.; Kimuyu, P.; Vermeulen, P.; Knoben, J.; Kinyanjui, B. Institutions, Resources and Innovation in Developing Countries: A Firm Level Approach. Radboud University Nijmegen, Nijmegen, Netherlands (2014) 38 pp.