Effects of firm-, industry-, and country-level innovation on firm performance

Marketing strategists seek to identify drivers of firm performance and their relevant boundaries. To date, most research evidence would tell them that competition is a negative force, but this study challenges that conventional wisdom by drawing on network externalities theory and related strategy research. In particular, resources that exist outside the organization may benefit the performance of firms in a network, through positive spillover effects. For example, innovation efforts at the industry and country levels can have positive impacts on a focal firm’s performance, with influences that are even more prominent than the effect of its firm-level innovation. Due to their distinctions from firm-level innovation, these innovation efforts should be leveraged strategically and uniquely, according to the specific business environment. This research therefore broadens understanding of drivers of firm performance beyond the firm level; it also provides important implications for marketing practice.