Internal and External Sources and the Adoption of Innovations in Organizations

Abstract Research on knowledge sources and innovation has focused mainly on external knowledge sources and the generation of technological innovations. This study contributes by examining the dual role of internal and external sources of knowledge and information on the adoption of managerial innovations, a type of non‐technological innovation deemed essential for organizational effectiveness but not examined sufficiently. It also contributes to the innovation adoption literature by analysing adoption as a process, rather than a dichotomous choice. We investigate how the involvement of stakeholders for the selection of a new programme, and organizational actions for the implementation of that programme, affect its adoption. Regression analyses of privatization of 64 services in 1,512 public organizations provide empirical evidence in support of the influence of internal and external involvement, and internal, but not external, implementation actions. We also find that while the relative influence of internal and external stakeholders’ involvement on innovation adoption does not differ, internal implementation actions have a stronger effect than external implementation actions. We discuss the implications of our findings for the adoption of innovations in organizations and offer research ideas for understanding non‐technological innovations and their effects on organizational conduct and outcomes.