PRIME Series on Research and Innovation Policy in Europe
Edited by Massimo G. Colombo, Luca Grilli, Lucia Piscitello and Cristina Rossi-Lamastra
Chapter 7: The Role of Public Policy in Strengthening Innovation through Internationalization
Celeste Amorim Varum and Lucia Piscitello INTRODUCTION There is a consensus among academia, policy makers and practitioners that innovation and internationalization are becoming increasingly important for the survival, growth and long-term viability of business organizations. Although it is difficult to disentangle the directions of causality, innovation is clearly important to compete internationally (e.g. Karagozoglu and Lindell 1998; Wakelin 1998; Roper and Love 2002; Lachenmaier and Wößmann 2006), but firms may also innovate as a result of learning by internationalization (e.g. Chuang 1998; Branstetter 2006; Fletcher 2009; Huang and Wang 2009).1 In fact, innovation increasingly depends on the international sourcing of resources and capabilities as well as on permanent contact with new markets and new technology trends worldwide. Through internationalization, firms may not only exploit ownership advantages generated at home in other countries, but also gain access to technology internationally and tap into worldwide centres of knowledge (Kotabe 1990; Cantwell and Piscitello 1999; Kuemmerle 1999; Frost 2001; Boekholt et al. 2009; European Commission 2010). From a country point of view it is now recognized that own firms’ internationalization is critical for competitiveness through its effects on home country innovation performance, employment, exports structure, balance of payments, technology and knowledge (Lipsey 2002; Kokko 2006; Filippetti et al. 2009). Reflecting the recognition of both the importance of the presence of internationally active firms, and the barriers to internationalize, there has evolved a rather well-established tradition by governments to support the internationalization of their firms (Wright et al. 2007). On the one...
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