International Entrepreneurship and Management Journal 1, 313–333, 2005 c  2005 Springer Science + Business Media, Inc. Manufactured in The United States. Corporate Innovation and Competitive Environment MORTEN HUSE mhuse@online.no Norwegian School of Management, BI, Oslo, Norway, & Bocconi University, Milan, Italy DONALD O. NEUBAUM don.neubaum@bus.oregonstate.edu Oregon State University, College of Business, USA JONAS GABRIELSSON * jonas.gabrielsson@circle.lu.se CIRCLE, Lund University, Lund, Sweden, & Norwegian School of Management, BI, Oslo, Norway Abstract. Empirical studies have shown that the characteristics of the competitive environment influence the corporate innovation activities of U.S. firms. This study attempts to internationalize these studies in two ways. First, it examines the environment-corporate innovation relationship in Norwegian manufacturing firms. Second, it examines how the firms’ corporate innovation activities are influenced by their international activities. Results indicate that environment and internationalization are positively related to corporate innovation, but models developed using U.S. firms may not be generalizable to firms from other countries. Keywords: corporate innovation, internationalization, environment Authors have long argued for the importance of understanding entrepreneurship from the perspective of a firm’s behavior (Covin and Slevin, 1991; Guth and Ginsberg, 1990; Slevin and Covin, 1994; Wiklund, 1999; Zahra and Covin, 1995; Zahra, Jennings and Kuratko, 1999). Corporate innovation (CI) is an important dimension when this per- spective is used. CI consists of product, process and organizational forms of innovation (Butler, 1988; Knight, 1967; Zahra, 1991) that stem from incubative, acquisitive and imitative sources (Burgelman and Sayles, 1986; Link, 1988; Pisano, 1990). CI is increas- ingly becoming the key to success in today’s globally competitive markets (Zahra and Garvis, 2000). Emerging global markets and rapid technological development make strong demands on the ability of companies to develop and utilize its resources and ca- pabilities. By being engaged in CI, the company can meet these pressures and compete vigorously, renew its operations, create new revenue streams and improve shareholders’ value. The relationship between a firm’s external environment and CI has long been a sub- ject of interest in the management literature, and several studies have shown that the characteristics of the external environment influence the type and source of firms’ CI activities (Covin and Slevin, 1989; Guth and Ginsberg, 1990; Lumpkin and Dess, 2001; * Corresponding author. Jonas Gabrielsson, CIRCLE, Lund University, P.O. Box 117, S- 221 00 Lund, Sweden. Tel.:+46 (0) 709 95 64 47.