Innovation in risky markets: Ownership and location advantages in the UK regions

Gagliardi L.;Iammarino S.

2018-01-01

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Abstract

This article analyses the relationship between firm's perception of market risk and engagement in innovation. We conceptualise this relationship by integrating insights from the management literature on innovation barriers with those derived from the international business and economic geography perspectives on the interplay of ownership and location advantages. By exploiting a firm-level panel dataset based on the UK Innovation Survey for the period 2002-2008, we test the relationship between perception of market risk and innovation behaviour in relation to firm ownership-i.e. multinational enterprises (MNEs) versus single domestic enterprises-and location- across regional contexts characterised by different degrees of technological dynamism. Our main results show that ownership advantages operate as a moderator by fundamentally affecting the direction of the relationship: while MNEs react positively to risk perception, single domestic firms reduce their innovation engagement as a strategy to cope with market uncertainty. Yet, ownership advantages play a pivotal role only in relatively inert or stable contexts, as in technologically dynamic regions differences between domestic firms and MNEs disappear.