The Effect of Formal and Informal External Collaboration on Innovation Performance of SMEs: Evidence from China

Abstract

External collaboration is an effective way for small and medium-sized enterprises (SMEs) to improve innovation performance and obtain sustainable competitiveness. This study focuses on the influence of external collaboration on innovation performance of SMEs. Specifically, this study classifies external collaboration into formal and informal external collaboration, and explores their different impacts on innovation performance of SMEs, respectively. Moreover, this study examines the moderating effects of managers’ entrepreneurial orientation and organizational legitimacy on the relationships between formal and informal collaboration and innovation performance of SMEs. Survey data from 213 high-tech manufacturing SMEs in China reveals that: (1) Both formal and informal external collaboration have positive effects on innovation performance of SMEs, and informal external collaboration offers greater benefits than formal external collaboration; (2) managers’ entrepreneurial orientation positively moderates the relationship between informal external collaboration and SMEs’ innovation performance; (3) organizational legitimacy positively moderates the relationships between formal and informal external collaboration and SMEs’ innovation performance. This study enriches the research on the relationship between external collaboration and innovation performance of SMEs, and advances the understanding of the contextual factors between formal and informal external collaboration-SMEs’ innovation performance relationships through elucidating the moderating role of managers’ entrepreneurial orientation and organizational legitimacy.