The impacts of external network and business group on innovation: Do the types of innovation matter?

This paper proposes a theoretical model to explain the impact of two types of external network (i.e., market network and institutional network) and business group network on product and organizational innovation based on learning theory, which suggests that the knowledge carried by partners, and the scope of appropriability of partners in different networks could be instrumental for different types of innovation. The paper tests the model with two Community Innovation Surveys of Korean manufacturing firms conducted in 2002 and 2005. Largely confirming our theoretical model, our results show that (1) institutional network is more positively related to product innovation than market network, (2) market network is positively related to organizational innovation, but its relationship is not significantly stronger than that of institutional network, and (3) business group affiliation is positively related to both product and organizational innovation after controlling for the effects of institutional and market networks.