Complementarity effect in the innovation strategy: internal R&D and acquisition of capital with embodied technology

For scale-intensive industries and science-based industries in Germany, we investigate the question whether firms combining internal R&D and acquisition of capital with embodied technology demonstrate better product and process innovation performance than companies using only one of those innovation strategies. Our approach comprises both indirect and direct complementarity tests between those two innovation activities. The empirical results suggest that the combination strategy provides a distinct advantage to companies both in producing product and process innovations. In particular, in product innovations, firms demonstrate a higher novelty degree of their goods, while in process innovations they provide a higher quality improvement (in the science-based industries only) and a significant cost reduction (in the science-based and scale-intensive industries).