External knowledge flows and innovation capacity: the Italian service industries

This work explores the relationship between R&D activities, as well as cooperation agreements, and the innovation capacity of service firms. Accounting for interdependencies among variable, we verify whether external research is complementary or substitute for the internal research activities and whether the combination of external and internal sources of knowledge has a stronger impact on the innovation capacity of the science-based service industries. We also evaluate the gains from performing both internal and external R&D in science-based firms involved in cooperation agreements for innovation. Finally, to our knowledge, this work represents the first attempt to investigate the impact of several sources of knowledge and their combination on firms' innovation intensity. According to our findings, the most important source of innovation is the internal one. Collaborations with public or private institutions seem to be more beneficial for firms involved in more intense innovation activities.