Sustaining innovation of information technology service providers: focus on the role of organisational collectivism

Purpose: How do knowledge-intensive technology-based offshore information technology service providers (ITSPs) in developing countries sustain their innovation and remain competitive? The purpose of this paper is to answer this question by drawing from the knowledge-based view of firm innovation to argue that organisational collectivism (COLL) plays a crucial role in influencing the effects of knowledge-based capabilities on innovation of ITSPs. Design/methodology/approach: The study develops a model which shows that learning mediates the effects of knowledge sharing on innovation and that COLL moderates the effects of knowledge sharing on both innovation and learning. A moderated-mediation model is tested using structural equation modelling techniques and data (n=388) from a survey of ITSPs in the Philippines. Findings: The results show that knowledge sharing capability is positively related to innovation and that organisational learning capability fully mediates the effects of knowledge sharing on innovation. Moreover, COLL is found to significantly and positively moderate the effects of knowledge sharing on both organisational learning and innovation. The results indicate that organisational learning serves as the mechanism that transforms knowledge into innovation, but this effect is contingent on COLL of ITSPs. Practical implications: The findings suggest that ITSPs from developing countries can look beyond costly investments in research and development activities to invigorate their innovative capabilities. ITSPs can focus on the development of their intangible assets such as COLL to enhance the effects of knowledge-based resources on innovation for sustaining their competitiveness. Originality/value: The moderated-mediation analytical approach to assessing the joint effects of knowledge sharing, organisational learning and collectivism on innovation is novel. The significant effects of the moderator suggest that the mediation mechanisms might differ depending on the levels of development of COLL in the organisation.