Managing innovation through co-production in interfirm partnering☆

a r t i c l e i n f o Innovation is a key source of knowledge-based competitive advantage. However, research on how firms' co-production enhances innovation is scarce. Thus, this study not only integrates the three dimensions of social capital and examines these dimensions' separate effects on co-production but also incorporates the roles of absorptive capacity and self-efficacy, analyzing their effect on innovation. This study uses a random sampling method to select 221 firms in Taiwan and employs structural equations modeling to test the relationships. The findings indicate that absorptive capacity and self-efficacy enhance innovation. Co-production positively affects innovation, absorptive capacity, and self-efficacy. The findings also support positive relationships between social capital and co-production. This study contributes to the little research that explores partnership co-production in innovation. Innovation in the era of knowledge economy becomes increasingly important for firms to sustain competitive advantage (Huarng, 2010; Subramaniam & Youndt, 2005). Innovation may come from outside the firms; such firms intensively develop partner relationships to increase new product development opportunity and improve innovation Recent research emphasizes that co-production emerges from the reciprocal interaction processes in the inter-organizational context (Ballantyne & Varey, 2006). Specifically, co-production enhances the collaborative nature of value co-creation and shows the both parties' This study contributes to filling this gap by addressing how firms integrate their partners as co-creators into the innovation process. Co-production with partners can co-create value at a level that individual firms would struggle to achieve. In other words, co-production is a complex process that involves integrating resources from diverse networks (Vargo, 2009). This study proposes a framework for co-production that stems from social capital approaches to organization. Indeed, social capital is an important part of co-production in which firms discover new opportunities and obtain new knowledge. Thus, social capital, as a strategic resource, may affect the determinants of co-production. Studies on collaborative innovation suggest that co-production enhances innovation (Chen et al., 2011). On the one hand, firms with an adequate level of absorptive capacity tend to be sensitive to technological opportunities in innovation and proactive in exploiting such opportunities (Nicholls-Nixon & Woo, 2003; Rothaermel & Hill, 2005). On the other hand, building self-efficacy is an important first step toward developing a skill (Bandura, 1997). Firms with high confidence in their ability to provide valuable knowledge are more likely to accomplish specific tasks (Chen, Greene, & Crick, 1998). Therefore, co-production may operate through absorptive …