The dual nature of innovative activity: How entrepreneurial orientation influences innovation generation and adoption Ana Pérez-Luño a, ⁎, Johan Wiklund b,c,1 , Ramón Valle Cabrera a,2 a Universidad Pablo de Olavide, Crtra. Utrera, Km. 1, 41013, Sevilla, Spain b Whitman School of Management, Syracuse University, Syracuse, NY 13244-2450, USA c Jonkoping International Business School, Sweden article info abstract Article history: Received 16 February 2009 Received in revised form 15 March 2010 Accepted 17 March 2010 Available online xxxx This paper analyzes two modes of innovation that differ in their scope of newness — innovation generation and adoption. Building a theoretical model based on the Entrepreneurial Orientation literature and utilizing a unique sample of innovating firms, we find that 54% adopt innovations of other firms, 7% generate innovations internally whereas 39% combine the two. We also find that proactivity and risk taking influence the number of innovations generated and the extent to which firms favor generation over adoption and that environmental dynamism moderates one of these relationships. These findings add to the innovation and Entrepreneurial Orientation literatures. © 2010 Elsevier Inc. All rights reserved. Keywords: Generation and adoption of innovation Proactivity Risk taking Environmental dynamism 1. Executive summary At a time when product and business model life cycles are shortening, the ability of firms to renew their market offers has become essential, and is now a core theme in the management literature (Van de Ven and Poole, 1995). All too often, however, the literature equates the launch of products with the generation of new innovations when, in fact, new market offers are often the result of adopting, and modifying what others have already developed. For example, Apple's mouse-controlled, menu-based operating system was built on Xerox's systems, and Microsoft's first web browser closely resembled that of Netscape. To date, the distinction between innovation generation and innovation adoption processes has not been sufficiently considered in the literature. As a consequence, innovation studies have produced inconsistent results (Damanpour and Wischnevsky, 2006; Wolfe, 1994) and our understanding of the antecedents of innovation is limited. To the extent that previous studies have examined the issue it has approached innovation generation and adoption taxonomically as if firms distinctly fall into one category or the other. While such approaches have the benefit of deriving distinct and suggestive categories, it may erroneously lead to the assumption that firms neatly fall into a bimodal distribution. In this paper, we relaxed this assumption and instead empirically examined factors that influence firms to generate and to adopt innovations, as well as variables that influence how firms balance these two activities. We build on the extensive literature on Entrepreneurial Orientation (EO) to hypothesize that environmental dynamism, risk taking and proactivity influence innovation generation; that environmental dynamism and proactivity influence innovation adoption; and that environmental dynamism influence the tendency to generate or adopt innovations. We also hypothesize that when considering the moderating role of the environmental dynamism in which the firm resides, proactivity and risk taking will have a higher impact on the degree to which firms emphasize innovation generation over innovation adoption. Journal of Business Venturing xxx (2010) xxx–xxx ⁎ Corresponding author. Tel.: 34 954 34 89 77; fax: 34 954 34 83 53. E-mail addresses: anaperezluno@upo.es (A. Pérez-Luño), jwiklund@syr.edu (J. Wiklund), rvalcab@upo.es (R. Valle-Cabrera). 1 Tel.: +1 315 443 3356. 2 Tel.: +34 954 34 92 76; fax: +34 954 34 83 53. JBV-05556; No of Pages 17 0883-9026/$ – see front matter © 2010 Elsevier Inc. All rights reserved. doi:10.1016/j.jbusvent.2010.03.001 Contents lists available at ScienceDirect Journal of Business Venturing ARTICLE IN PRESS Please cite this article as: Pérez-Luño, A., et al., The dual nature of innovative activity: How entrepreneurial orientation influences innovation generation and adoption, J. Bus. Venturing (2010), doi:10.1016/j.jbusvent.2010.03.001