Networking, Innovation and Firms' Performance: Portugal as Illustration

The innovation process takes place not only as a result of research and development but also because of specific combinations of knowledge that firms obtain by accessing both internal and external environments. In this paper, the relationship between networking intensity and the innovation process is investigated in order to analyze the effect of these networks on firm performance. The results show that firms that are engaged more intensively in knowledge networks increase the likelihood of obtaining higher levels of innovation, which can lead to better economic performance. Furthermore, informal mechanisms of interaction have proved to be a fundamental dimension of the innovation process, especially in conjunction with formal networks. These conclusions have strong implications for government innovation policies designed to improve firms’ performance and that of the local economy