Managing resource constraints through international networks: Capability development and incremental and radical innovation in emerging markets

Abstract

Why do some firms outperform others in technological innovation? This study addresses this question by developing a novel theoretical framework that integrates the extended resource-based view (ERBV) with the organizational capability development perspective. Specifically, we examine how two key attributes of international networks, breadth and depth, influence the development of distinct organizational capabilities: ordinary and dynamic. Using survey data from 198 Chinese manufacturing firms, we find that network breadth significantly contributes to both ordinary and dynamic capabilities, supporting incremental and radical innovations. In contrast, network depth primarily strengthens ordinary capabilities, facilitating incremental innovation but offering limited support for radical innovation. These findings suggest that network breadth is crucial for accessing diverse knowledge and resources to develop both capability types, whereas network depth plays a more specialized role in reinforcing existing capabilities. This study advances theoretical understanding and provides practical guidance for managers seeking to leverage international networks to develop both incremental and radical innovation by elucidating the relationships among international network configuration, capability development, and innovation outcomes, particularly within the resource-constrained and institutionally challenging context of an emerging economy. • We examine how the breadth and depth of international networks enable emerging market firms to develop diverse types of innovation. • Drawing on ERBV and the dynamic capabilities perspective, we highlight how firms build distinct innovation capabilities. • We demonstrate that broader networks support dynamic capabilities that foster radical innovation, whereas deeper networks strengthen ordinary capabilities and drive incremental innovation. • We shed light on how firms in resource-constrained and institutionally challenging environments leverage international networks to pursue diverse types of innovation.