How Contraints Trigger Firms’ Innovation. Evidence From China

This paper focuses on how market and knowledge constraints trigger firms’ innovation. Based on the analysis of a sample of over 1400 firms in the manufacturing sector in China, We find that, through stimulating firms enhancing internal knowledge recombination and external knowledge sourcing, resource constraints can trigger firms’ development of both product and process innovation. More specifically, external knowledge sourcing partially mediates the relationship between knowledge constraint and process innovation. Internal knowledge recombination and external knowledge sourcing fully mediate the relationship between knowledge constraint and product innovation and the relationship between market constraint and product innovation. The research contributes to exploring the mechanism through which market and knowledge constraints trigger firms’ innovation.