STI-DUI innovation modes and firm performance in the Indian capital goods industry: Do small firms differ from large ones?

This paper examines the effect of different innovation strategies followed by small and large firms on their overall performance in the capital goods industry. Following the wider literature on national innovation systems, we categorise the innovation modes as formal Science, Technology and Innovation (STI) and informal learning by Doing, Using and Interacting (DUI) mode. We observe that, in the case of small firms the informal learning and experience based innovation mode is related to improved performance, while the formal STI mode does not have any effect. On the other hand, for large firms, both STI and DUI innovation modes are positively related to its sales growth. Our results indicate that building certain DUI capabilities may act as a pre-condition to enhance the strength of science and technology based innovation strategies.

JEL Classification: O32, O33, L20

Keywords: STI, DUI, Modes of innovation, Capabilities accumulation, Corporate performances, Indian capital goods industry