NOT-INVENTED-HERE SYNDROME AND INNOVATION PERFORMANCE: THE CONFOUNDING EFFECT OF INNOVATION CAPABILITIES AS ORGANISATIONAL ROUTINES IN SERVICE FIRMS JOSE ARIAS-PÉREZ Department of Administrative Sciences Universidad de Antioquia, P.O. Box 1226, Colombia jenrique.arias@udea.edu.co GEOVANNY PERDOMO-CHARRY School of Management, CEIPA P.O. Box 055450, Medellín, Colombia gperdomocharry@gmail.com CARLOS CAST  AO R  AOS CARLOS CASTAÑO-RÍOS, Department of Accounting Sciences Universidad de Antioquia, P.O. Box 1226, Medell  {n eduardo.castano@udea.edu.co Published 28 November 2016 Currently, it is commonly accepted that the not-invented-here syndrome (NIHS) refers to internal resistance against external knowledge, and that it has devastating consequences on innovation performance (IP). Nevertheless, studies on organisational practices that neu- tralise NIHS are incipient. Moreover, it is accepted that innovation capabilities (ICs) are perhaps the organisational routines with the highest positive influence on IP. In this study, based on the organisational routine framework and agency theory, we propose a model in which ICs (i.e., client-focused, marketing-focused, and technology-focused ICs) have a confounding effect on an NIHS–IP relation. Structural equation modelling (SEM) was used to test the proposed model with survey data from a sample of 161 service firms. We find that (1) NIHS influences IP negatively, and (2) ICs weaken NIHS–IP relation, practically turning it null. Finally, this paper provides insights for researchers and managers regarding a possible overestimation of the negative effects of NIHS on the literature. Keywords: Not-invented-here syndrome; innovation performance; innovation capabilities; confounding effect; service innovation; emerging economies. International Journal of Innovation Management Vol. 21, No. 6 (August 2017) 1750036 (20 pages) © World Scientific Publishing Europe Ltd. DOI: 10.1142/S1363919617500360 1750036-1 Int. J. Innov. Mgt. Downloaded from www.worldscientific.com by UNIVERSITY OF OTAGO on 11/30/16. For personal use only.