Innovation performance of Italian manufacturing firms: The effect of internal and external knowledge sources

The purpose of this paper is to explain how internal and external sources of knowledge influence the innovation performance (IP) in Italian manufacturing firms and how different these relationships are for low-technology (LT) and high-technology (HT) firms.

The study proposed a model relating external knowledge, internal knowledge and IP that was tested using Bayesian structural equation modeling with a sample of Italian manufacturing firms of Community Innovation Survey 2010. It was run separately for high-tech firms (including HT and medium-HT aggregations of manufacturing industries of NACE Rev. 2) and low-tech firms (including LT and medium-LT aggregations).

The results showed a difference between high-tech and low-tech manufacturing firms in Italy. The investments to leverage internal knowledge sources are important for high-techs and not significant for low-techs. On the other hand, the level of external KS improves significantly the IP of low-techs and has a negative effect for high-techs. The level of absorptive capacity is central to improve the positive effect of the external knowledge on the IP for all firms, but it is still underdeveloped.

The effects of 2008 economic crisis hit the Italian manufacturing industry specifically hard and are still felt. Innovation is a solution for firms’ growth and Italy is considered a below-average innovator country in Europe. The study could identify important gaps in Italian manufacturing firms that hinder their innovative performance improvement.