Interactive learning, informal networks and innovation: Evidence from electronics firm survey in the Pearl River Delta, China

Learning by interacting defines the endogenous path of economic development in modern innovation studies. In this paper, we aim to investigate the way that firms undertake interactive learning in the Chinese context by introducing the role of informal Guanxi network. In this way, this paper tries to bridge the gap between studies on firm innovation activities and those on the role of informal network for business performance. Based on an electronics firm survey in the Pearl River Delta, China, this article demonstrates that firms undertaking the highest intensity of interactive learning with the widest scope of business partners, such as foreign customers, domestic customers, parent companies, universities and sales agents, tend to achieve better innovation outcomes. It also verifies a more important role of interactive learning in incremental product innovation than in discontinuous innovation as electronics firms operate in highly modularized value chains. Furthermore, the intensive interactive learning firms have a much higher tendency to apply informal Guanxi networks with long-term business partners as a complement to deficient formal institutions in interactive learning than other firms. Overall, this paper contributes to the understanding of the form and effect of interactive learning in the Chinese context. Finally, the paper addresses the possible lock-in issue and points out further research questions on the changing pattern of interactive learning within a maturing institutional framework.

► We survey on 359 product-innovating electronics firms in the Pearl River Delta, China.
► We examine the form and effect of interactive learning in product innovation.
► Wide scope and high intensity of interactive learning fosters incremental innovation.
► Informal networks through business partners are applied in interactive learning.