Learning in Foreign and Domestic Value Chains: The Role of Opportunities and Capabilities

We suggest that the benefits of learning in international value chains for firms’ innovation performance are heterogeneous and depend on the specific source of learning (customers, suppliers, or competitors), whether these sources are based in countries that are technologically advanced or less advanced (learning opportunities), on technology leadership (learning capabilities) on the part of the focal firm, and on the simultaneous learning that occurs from domestic firms. Using direct survey evidence on learning and innovation by German firms, we confirm that technology leaders benefit from advanced foreign customer and supplier learning, that technology laggards benefit from less advanced foreign customer learning and advanced foreign competitor learning, and that both leaders and laggards benefit from domestic customer learning. The findings suggest a tradeoff between the opportunities to learn from foreign or domestic customers.