Innovation Activities,Knowledge Sourcing and Perception of Innovation Barriers Evidence from China

The aim of our research is to explore the effect of firms’ innovation activity in China. Our research explores the linkage between firms’ knowledge sourcing, innovation output and innovation barrier perception in developing countries. We combine firms’ recursive innovation activity based on the research framework of innovation value chain and innovation barrier analysis. Using a database containing innovation panel data obtained from more than 16,000 Chinese firms over the period 2005-2010, we obtained results that show that there are complementary effects between firms’ internal knowledge sourcing and other external knowledge sourcing but no substitution effects between any two knowledge sourcings in China. In terms of the knowledge transformation process, we find that in-plant R&D has the most strongly positive and significant effect on the probability of undertaking successful product innovation. Our results based on an estimate of Chinese firms’ perception of innovation barriers indicate that profit firms are more likely to perceive government regulation and market information barriers and that Chinese firms perceive government-related innovation barriers as a more important difficulty than other barriers.