Reverse Engineering,Knowledge Creation,and Breakthrough Innovations:The Moderating Role of Institutional Environment
This study aims to investigate the dynamic relationship between reverse engineering and breakthrough inno-vation within late-developing firms.Recognized as a vital tool for technological learning,reverse engineering provides a pathway for firms lacking advanced technology to acquire and internalize external knowledge.However,over-reliance on re-verse engineering can limit firms'innovation potential,potentially leading them into a"low-end imitation"trap that hinders technological progress and competitive advancement.This research seeks to understand how firms can utilize reverse engi-neering to achieve breakthrough innovation and the specific conditions under which it contributes to substantial innovative outcomes.The study focuses on the mediating role of knowledge creation and the moderating effects of different institu-tional environments.This study is based on knowledge creation theory and constructs a theoretical model to explore how reverse engi-neering fosters breakthrough innovation through knowledge creation.The model further incorporates institutional environ-ment factors,specifically government support and economic policy uncertainty,to reveal how external conditions influence the innovation potential of reverse engineering.Using survey data from a representative sample of 515 Chinese manufac-turing firms of varying sizes,industries,and regions,the study employs multiple regression and moderated mediation analysis to validate the mediating role of knowledge creation and assess the moderating effects of institutional factors on the relationship between reverse engineering and innovation.The empirical findings reveal a positive association between reverse engineering and firm-level breakthrough innova-tion,mediated by knowledge creation processes.Results indicate that firms engaging in reverse engineering tend to achieve innovative outcomes by converting externally sourced knowledge into internally generated insights,facilitating break-through innovations.Furthermore,the findings show that the institutional environment significantly influences the effective-ness of reverse engineering in promoting knowledge creation.Specifically,government support strengthens the effect of reverse engineering on knowledge creation,suggesting that policies facilitating resource access and reducing innovation un-certainties positively influence this relationship.Conversely,economic policy uncertainty weakens the positive effect of reverse engineering on knowledge creation,indicating that unpredictable policy environments may constrain the innovation potential of reverse engineering by introducing risks and reducing strategic coherence within firms.These results under-score the importance of aligning reverse engineering practices with effective knowledge creation strategies while adapting to external institutional conditions.In supportive institutional environments,particularly those with strong government back-ing,reverse engineering can serve as a valuable tool for acquiring knowledge,promoting substantial innovative outcomes through enhanced knowledge creation.However,in less stable environments marked by high economic policy uncertainty,the benefits of reverse engineering are likely to be limited,necessitating a more cautious approach.The findings suggest that when combined with effective knowledge creation practices and a supportive institutional framework,reverse engineering serves as a viable pathway for breakthrough innovation in late-developing firms.Unlike previous studies that treat reverse engineering as a singular mechanism for technological learning,this study highlights the critical roles of knowledge creation and institutional conditions in achieving innovation breakthroughs,demonstrating that the impact of reverse engineering varies significantly across different institutional settings.Future research could further explore other institutional or market factors affecting the innovation potential of reverse engineering and assess the role of global market dynamics on firms'innovation pathways,providing insights into innovation strategies for latecomer firms within a globalized context.
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