Specialized search and innovation performance – evidence across Europe

Searching for external knowledge has frequently been characterized as crucial for firm success. However, little is known about how the direction of search strategies influences innovation performance. In this paper, we argue that firms need to specialize their search strategy and that its effectiveness is moderated by research and development (R&D) investments and potential knowledge spillovers from a firm's environment. Based on a sample of >5,000 firms from five European countries, our results show that being open for innovation generally pays off. However, both moderating factors have a crucial role to play: on the one hand, in‐house R&D investments are most effective when combined with a market‐oriented search strategy. On the other hand, a technologically advanced environment requires firms to reach out to sources of scientific knowledge in order to access highly novel knowledge and to enhance innovation performance. We develop targeted management recommendations based on these results.