Technological upgrading of a country’s manufacturing sector requires the enhancement of firm-level capabilities. Knowledge flows within firms and those between firms and other entities are important aspects of this process. The nature and significance of such knowledge flows for innovation-related activities (such as in-house R&D, acquisition of technology-embedded investments and training) are likely to differ for each type of activity.
The links between innovation and knowledge flows are particularly important for innovation activities in the form of acquisition of machinery, equipment and software. There is also some weak evidence that globalization-related variables such as foreign direct investment and exporting can affect certain types of innovation activities such as training and acquisition of machinery, equipment and software.
This study also finds that firm-level organizational dimensions and innovations are related to both internal and external knowledge flows. However, there is evidence that the links between innovative firms in Malaysia and other firms abroad in terms of co-operative activities are relatively weak. This raises the issue of whether such firms are able to tap the global technological-pool effectively.