INNOVATION IN EMERGING MARKETS: THE ROLE OF ABSORPTIVE CAPACITY AND OF THE INSERTION IN THE LOCAL AND GLOBAL VALUE CHAINS

ABSTRACT Objective: The objective of this study is to identify the effects of the insertion in local and global value chains as a determinant of company innovation, identifying the main characteristics of the nature of the interactions that arise in the value chain, as well as the relationship between innovation, internal resources to the company and their insertion in value chains. Originality/value: This paper combines insights from different streams of literature to develop a more comprehensive framework for the analysis of firms’ innovation in emerging countries. We consider relationships among partners in the local and global value chain and the influence of the internal resources as crucially important for the access to external knowledge. Design/methodology/approach: Econometric analysis were performed using generalized linear models (GLM). The period of analysis covers the years 1998 to 2011. We investigate our hypotheses using different models to relate firms’ innovation capacity to local and global value chains and the ownership of internal and external resources. Findings: Using data from Brazilian firms from 1998 to 2011, we found that the relationship with all partners in global value chain contributed to the increase of the Brazilian firm’s innovation. The internal resources had a positive influence in firm’s innovation, suggesting that the firm’s internal resources are crucially important in the access to external knowledge, which means that the ability of firms to make use of this knowledge depends, in turn, on their absorptive capacity.