Does institutional diversity promote global innovation networks?

Recent literature stresses the increasing importance of global innovation networks as a new mechanism to organize innovation across geographical space. This paper investigates if institutional diversity, defined at the level of the firm, influences firms’ engagement in GINs. Institutional diversity provides knowledge about the institutional context of other countries, increased capabilities to deal with institutional differences, larger social networks to build GINs and a broader search space. Further, the paper examines how the absorptive capacity of firms mediates the relationship between institutional diversity and global innovation networks. The empirical study is based on a linked employee-employer dataset with 8,573 innovative firms in Sweden. It provides strong evidence that the engagement in GINs is positively related to institutional diversity and that the relation is particularly strong for global innovation networks, depending, however, on the absorptive capacity of firms.