The Effect of Innovation Constraints on Search Strategies in the Service Industry

Literature until now has yet to give a full answer for how search strategies change when they experience innovation constraints, though innovation constraints could shape a firm’s search strategies. As an extension of previous literature, this research focuses on firms only belonging to service industries while subdividing innovation constraints by type and intensity to answer the following research question: Which search strategies do firms use in response to innovation constraints? This study also analyzes the moderating role of research and development (R&D) intensity on the relationship between innovation constraints and search strategy. The investigation into the question is performed using Korean service industry data from the 2012 Korean Innovation Survey (KIS) conducted by Science and Technology Policy Institute (STEPI). We find that firms tend to increase both search breadth and depth when they face fund- and capability-related constraints. In addition, R&D intensity negatively moderates the tendency of firms with fund-related constraints to increase search breadth. Meanwhile, R&D intensity positively moderates the relationship between capability-related constraints and search breadth. On the contrary, the moderating effects of R&D intensity on the relationship between innovation constraints and search depth are not verified.