The impact of formal and informal network linkages on firm innovation

Abstract

This study explore the linkages or partnerships that companies across the EU and a defend set of emerging market economies have in either a formal or informal manner. The research aims to understand the correlation of these linkages and a firm’s ability in innovate. Empirically this research is set out to determine if there are differences in a firm’s ability to innovate based on the structure of the linkage, i.e. formal or informal. The study extends to understand the impact that the economic downturn had had on these linkages and what impact, if any has filtered through to the firm’s ability to innovate.The central argument is that firms with linkages benefit but being more nimble innovators and therefore both formal and informal linkages are very good for business and an organizations ability to innovate.Chi squared and t-tests were run on the responses of the firms belonging to the export or domestic categories. The results overwhelmingly suggest that in respect of innovativeness, the domestic suppliers do not differ from those that opt to export into the developed world. However the firms belonging to the domestic group differ considerably with regards to who they collaborate with for their innovations when compared to the export group.