Firms need to open up their boundaries to attain valuable knowledge from external partners because external partners can support their innovation activities by providing knowledge and resources. In this context, higher education institutions (HEIs) are an important source of innovation. Yet, despite the importance of universities, this topic has received scant academic attention. Thus, this research examines the effect of specific activities supported by universities on the innovation outcomes of firms. The study also investigates the moderating role of a firm’s absorptive capacity in the relationship between universities’ involvement and firm innovation outcomes. The findings show that specific types of HEI activities positively affect a firm’s innovation performance, while absorptive capacity has differential effects on the relationships between HEI activities and firm innovation outcomes.

Introduction

Shorter innovation cycles, the huge cost of research and development (R & D), and a dearth of resources compel firms to search for new innovation sources (Gassmann & Enkel, 2004). Extant research argues that firms need to open up their boundaries to attain valuable knowledge from external partners so that they can extend the innovation function beyond their own walls (Song, Kim, & Kang, 2016). In this context, research identifies universities, or higher education institutions (HEIs), as an important source of innovation (e.g., Lambert, 2003). Indeed, by focusing on technology transfer that underlies the process of the commercialization of science, universities undertake a third mission in addition to their core missions of research and teaching (Etzkowitz, Webster, Gebhardt, & Terra, 2000), benefitting firms by such collaborations. While the risk of opportunism is inherently embedded in relationships with HEIs, the support HEIs provide firms cannot be imitated by competitors because of the novelty and uniqueness of the devised ideas. Despite the important role of universities, academic research does not devote systematic theoretical attention to the topic. Ironically, in terms of knowledge transfer for firm innovation, research examines university and industry links less frequently than those with other sources (e.g., suppliers, customers) and value them less (Hughes, 2011).