External knowledge acquisition and innovation performance: The roles of intra-firm communication and innovation incentives

In the era of open innovation, external knowledge acquisition and exploitation have been a strategic choice for improving the innovation of firms. Existing literatures have discovered a complicated relationship between external knowledge acquisition and a firm's innovation but it has failed to explain the mechanism behind this relationship. This study, based on the perspective that external knowledge needs to be internalized by internal firm practices, explores the effect of information communication and innovation incentives on the transformation from an external knowledge acquisition to firm innovation. Hierarchical regression is used to investigate this question through 489 large and medium-sized companies in China and the results show that the positive impact of external knowledge acquisition on firm innovation is partially mediated by within-firm communication and an innovation incentive policy.