Purpose The purpose of this paper is to simultaneously test the association between three different sources of knowledge (internal, collaborative and regional) and innovation. This study aims to expand the insights by assessing these associations in the context of a rapidly developing and liberalizing economy; Vietnam. By conducting this study with Vietnamese data, the authors can assess whether the association between different sources of knowledge and innovation shows systematic differences to those in advanced economies. Design/methodology/approach In this study, the authors utilize data from two main sources: The World Bank Enterprise Survey and the Innovation Capabilities Survey. These firm-level surveys comprise non-agricultural formal and private sector firms. For Vietnam, 300 manufacturing firms have been included in the sample. The authors use a series of binary logistic regression models to analyze the data. Findings The analyses reveal that internal R&D has a strong positive association with product innovation. In contrast to findings in Western economies, not all kinds of collaborative knowledge sources have a significant association with innovation. Only collaborative knowledge gained from inside the supply chain is positively related to product innovation. Unexpectedly, negative effects from using too much external knowledge were also found. Research limitations/implications Due to the cross-sectional nature of the data causality could not be inferred from the study. Moreover, a relatively large number of the measures were dichotomous due the large number of missing observations for more detailed measurements of the variables. Practical implications When developing their innovation strategy firms in developing countries should take into account that collaborating with partners useful, but only if they collaborate within the supply chain. As such, firms should increase their interaction with suppliers and customers and put their efforts on the development of customized solutions for them. Social implications The Vietnamese Government could implement policies that help to enhance the quality of universities and research institutes. In most developed countries, universities and research institutes are vital sources of knowledge for innovation whereas they are not in Vietnam. Originality/value This paper contributes to the growing body of literature on firm-level innovation in developing countries. It identifies several core differences between the drivers of innovation in developed and developing contexts. Surprisingly, a feature that was expected to differ, the negative effect of over-search of external knowledge on innovation, was also found in Vietnam.
