The impact of capacity utilisation on product innovation in emerging economies: The moderating effects of firm ownerships

Abstract

While it is acknowledged that higher capacity utilisation results in efficient resource allocation, which could improve firms' productivity and innovation in emerging markets, research on which firms maximise their capacity to improve their innovation is unexplored. We draw insights from the resource-based view theory to develop and test a theoretical model to examine how various ownership structures (i.e., domestic, foreign, and state) moderate the relationship between capacity utilisation and product innovation. The empirical model is based on a sample of 80,587 firms from numerous emerging markets. Results reveal that capacity utilisation negatively influences product innovation, considering the specific context of emerging economies. Furthermore, we find that (i) domestic ownership positively moderates the relationship between capacity utilisation and product innovation, such that any increase in domestic ownership weakens the negative effect of capacity utilisation; (ii) foreign ownership negatively moderates the relationship between capacity utilisation and product innovation, such that any increase in the extent of foreign ownership strengthens the negative effect of capacity utilisation; (iii) state ownership negatively moderates the relationship between capacity utilisation and product innovation, such that any increase in state ownership strengthens the negative effect of capacity utilisation. Some implications for theory, practice, and policy are further discussed. © 2024 The Authors