Generative Capability.

How do firms leverage existing innovations for the next round of innovations? We develop a novel concept of generative capability in product innovation to address this question. Generative capability applies the mechanisms of iteration and rapid knowledge integration to guide innovation activities. Based on panel data from 2001 to 2009 of 56 344 manufacturing firm-year observations in China, we find that institutional complexity and internationalization are positively related to generative capability, that state-owned enterprises (SOEs) have lower levels of generative capability than do firms with other ownership structures, and that generative capability improves firms’ performance significantly. We conclude with a discussion of the implications of generative capability for theoretical development and point to a number of fruitful areas for future research. [ABSTRACT FROM AUTHOR]

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