New evidence and evolution on the regional and global competitiveness of multinational enterprises

Oh C.H.; Kim Y.U.; Lim D.S.K.; Anh D.Q. Competitiveness Review. DOI: 10.1108/CR-01-2026-0053.

Purpose – This paper aims to assess the international competitiveness of large multinational enterprises (MNEs) through the lens of the firm-specific advantages (FSAs) and country-specific advantages (CSAs) framework. Design/methodology/approach – The authors extend Rugman et al.’s (2012) data set to cover an expanded time horizon that includes the post–global financial crisis decade. Using Fortune Global 500 firms from 1999 to 2017, the authors analyze how their regional and global competitiveness has evolved across this period. Findings – The updated 2017 FSA–CSA matrix shows a rise in “hybrid” regional–global patterns in which firms increasingly recombine domestic strengths with globally sourced locational advantages to compete both regionally and internationally. The authors find that North American and European MNEs have modestly increased their global reach by leveraging strong FSAs, whereas Asia-Pacific firms, particularly those from China, have become more regionally embedded even as they tap into global CSAs to better serve domestic and intraregional markets. Research limitations/implications – The authors outline strategic and policy implications for competing in an era of multipolar globalization and propose a future research agenda focused on the dynamic coevolution of FSAs and CSAs, the emergence of digital and green competitiveness and the resilience of regional value chains amid ongoing global supply-chain reconfigurations. Originality/value – This study offers a comprehensive and longitudinal analysis of the world’s largest firms, providing new insights into how their international competitiveness has evolved over the past two decades. © 2026 Chang Hoon Oh, Young Un Kim, Dominic S.K. Lim and Dao Quynh Anh.

Enabling Factors for the Shift From ESG Scores to ESG Performance Management System in SMEs: An Interventionist Approach

Rigolini A.; Presti C.; Corsi K. Business Strategy and the Environment. DOI: 10.1002/bse.71074.

This study examines how small and medium-sized enterprises (SMEs) transition from a symbolic, disclosure-oriented ESG logic toward a substantive ESG-oriented performance management system (PMS) grounded in actionable KPIs. Drawing on evidence from the Apuan-Versilian Stone Industrial District through an interventionist research design, we identify five enabling factors: institutional pressures, district-level dynamics, qualified intermediaries, participation in funded sustainability initiatives, and the reinforcing role of organizational culture. Rather than operating independently, these factors form an interdependent configuration. Institutional pressures act as antecedent triggers, while district infrastructures, intermediaries, and funded projects translate external demands into operational capability. Cultural embedding reinforces and stabilizes ESG integration over time. By conceptualizing ESG integration as a cumulative and systemically reinforced process embedded within PMS, the study clarifies the mechanisms through which ESG shifts from compliance-oriented reporting to strategic performance management in SMEs. © 2026 The Author(s). Business Strategy and the Environment published by ERP Environment and John Wiley & Sons Ltd.

Unpacking the nuances of industrial agglomerations and their impact on manufacturing firm performance in emerging economies

Villavicencio N.; Puig F.; Debón A. Management Research. DOI: 10.1108/MRJIAM-05-2025-1724.

Purpose – This paper aims to analyze how different types of location (industrial clusters, urban agglomerations and isolated areas) shape firm performance in emerging economies. It also examines whether innovativeness, understood as a firm’s capability to adapt and transform its activities, mediates the location–performance relationship. Design/methodology/approach – The authors use firm-level data from 190 Ecuadorian textile and apparel SMEs (2014–2019). Locations are classified through location quotients, and innovativeness is operationalized via a composite index derived from principal component analysis. Hypotheses are tested using analysis of variance and regression models. Findings – Results indicate that firms in industrial clusters outperform those in other locations, but the location alone does not guarantee superior performance. Innovativeness strengthens profitability, particularly in industrial clusters, while isolated firms rely more on efficiency-driven strategies. Interaction effects are weak, reflecting both data imbalance and the contingent nature of location–innovation linkages. Practical implications – Managers should adopt innovation-oriented business models to capitalize on agglomeration benefits. Policymakers, in turn, must design territorially sensitive instruments for industrial clusters, urban agglomerations and isolated areas. Social implications – Supporting innovativeness outside major agglomerations can foster regional development and reduce inequality. Originality – To the best of the authors’ knowledge, this study offers one of the first systematic analyses linking agglomeration typologies and innovativeness to firm performance in Latin America. It refines distinctions between industrial clusters, urban agglomeration and isolated areas and conceptualizes innovativeness as a dynamic capability in institutionally weak environments. © 2026 Emerald Publishing Limited

The Impact of Emissions Trading Systems on Corporate Productivity and Competitiveness Through Green Technology Innovation: A Systematic Literature Review

Kim J.; Choi J. Business Strategy and the Environment. DOI: 10.1002/bse.71026

Emissions trading systems (ETS) represent key market-based instruments for mitigating greenhouse gas emissions and influencing corporate performance. Empirical evidence on the impact of ETS on corporate productivity, profitability, and competitiveness (CPPC) and the role of green technology innovation (GTI) remains mixed. Following the PRISMA guidelines, this systematic literature review synthesizes evidence from 75 peer-reviewed research articles published between 2016 and 2025. The literature is organized into four pathways: direct response effects, innovation activation effects, innovation outcome effects, and strategic avoidance behaviors. The review shows that the direct response effect of ETS exhibits heterogeneity and is mixed in the short run, whereas more consistent performance improvements emerge when GTI is activated and realized. The findings suggest that ETS impacts are better understood as a multistage, adaptive process rather than a static, causal relationship. This study offers an integrative framework linking ETS, GTI, and CPPC, with implications for both policy design and corporate sustainability strategy. © 2026 ERP Environment and John Wiley & Sons Ltd.

The university versus region effect: A variance decomposition of academic spin-off performance

Mokhtar J.; Knockaert M.; Vanacker T.; Bliese P. Strategic Management Journal. DOI: 10.1002/smj.70095

Research Summary: Academic spin-off (ASO) performance has been studied in relation to either specific university-level or regional-level characteristics. However, ASOs originate from universities, which are embedded in regional ecosystems. This nested structure can create an attribution problem when either level is studied in isolation. Consequently, the relative importance of these two different levels for ASO performance has remained ambiguous. To address this ambiguity, we rely on multi-level modeling and use a novel, hand-collected dataset of 3164 ASOs founded between 2010 and 2019 from 212 universities nested within 99 European regions. We find that the region effect matters for about 27% for Return on Assets and 16% for Sales, whereas the university effect is negligible. Our study contributes to research at the nexus of academic entrepreneurship and variance decomposition in strategy. Managerial Summary: Academic spin-offs (ASOs) bring innovations from the university to the market, thereby potentially generating new sales, employment, and value. However, once formed, their performance prospects vary significantly, and understanding this variance is important for entrepreneurs and policymakers alike. Our findings from a new European dataset reveal that the region effect matters for ASO performance, but the university effect is negligible. This evidence does not imply that universities lack importance; rather, it suggests that universities in a region may have a collective impact that diffuses into regional resources and networks. Our evidence highlights the importance of fostering a supportive regional ecosystem. © 2026 John Wiley & Sons Ltd.

Turning green. Mapping environmental technology transition readiness in Italy

Belfanti F.; Alberti F.G.; Riva M. Competitiveness Review. DOI: 10.1108/CR-01-2026-0022.

Purpose – This paper aims to develop a scalable, patent-based framework to map clusters’ repositioning towards environmental technologies and to distinguish current green technological specialisation from transition readiness. Design/methodology/approach – The framework is applied to Italy by combining PATSTAT patent data with the Italian Cluster Mapping Project. Green technologies are identified through CPC-Y tagging. The authors compute cluster-level Revealed Technological Advantage (RTA) in environmental technologies (2000–2019) and estimate Potential RTA (pRTA) as a forward-looking indicator based on technology relatedness networks at CPC subclass level. The authors compare alternative predictive strategies (zero-inflated beta regression, Artificial Neural Networks, Random Forests) and retain the best-performing model to generate pRTA for 2020–2024. Finally, the authors classify clusters into a four-quadrant typology combining RTA and pRTA. Findings – Green inventive activity is geographically concentrated in a small set of regions, while it is more dispersed across cluster categories. Current green specialisation (RTA) varies substantially across region–cluster combinations and does not fully overlap with transition readiness (pRTA). The combined mapping reveals four profiles: green pioneers, emerging green clusters, mature green and green laggards, enabling a trajectory-oriented interpretation beyond static rankings. Originality/value – The study offers one of the first cluster-level, forward-looking measures of environmental-technology transition readiness in Italy, combining cluster mapping with relatedness-based prediction to support more differentiated research and place-based policy design. © 2026 Emerald Publishing Limited

How digital transformation and ESG practices shape competitive efficiency in manufacturing firms?

Faizulayev A.; Taikulakova G.; Verbovaya O.; Bazarhanova G. Journal of Manufacturing Technology Management. DOI: 10.1108/JMTM-09-2025-0870.

Purpose – This study investigates the determinants of firm competitiveness and financial performance in the Asian manufacturing sector by integrating environmental, social and governance (ESG) practices and artificial intelligence (AI) adoption into behavioral competition models. Design/methodology/approach – Drawing on panel data from 4, 028 manufacturing firms across Asia between 2014 and 2024, we apply both the Boone indicator and return on equity (ROE) as core measures. Methodologically, we employ static multi-way fixed effects panel with Driscoll–Kraay standard errors (MWFE-DR) and dynamic two-step system GMM estimators to ensure robust results. Findings – The findings reveal that liquidity, efficiency, firm size, AI-related imports and environmentally related tax revenues significantly enhance competitiveness and performance, while ESG variables strengthen explanatory power and improve model robustness. Originality/value – Theoretically, the study develops and empirically validates a digital sustainability competitiveness framework (DSCF), extending the New Empirical Industrial Organization (NEIO) and resource-based view (RBV) traditions by demonstrating that digitalization and sustainability are central behavioral drivers of competition. Practically, the results provide actionable insights for policymakers, investors and industry leaders seeking to foster sustainable competitiveness and long-term financial resilience in emerging economies. © Emerald Publishing Limited

Locked in Transition: Examining the Role of Paradoxical Tensions in the Transition From Industrial Cluster to Eco-Clusters

Dzhengiz T.; Henry L.A.; Smith S.M. Business Strategy and the Environment. DOI: 10.1002/bse.71009

Industrial clusters are central to the circular economy transition, yet how they develop into eco-clusters and the paradoxical tensions this transformation fuels remain underexplored. Drawing on 48 in-depth interviews and secondary data from a Turkish textile-recycling cluster, we develop an empirically grounded model of eco-cluster transition showing three intertwined paradoxical tensions: ambidexterity (mass recycling vs. circular innovation), coopetition (solidarity vs. rivalry) and identity (rag recycler vs. circular pioneer). These tensions reinforce one another and are amplified by contextual conditions such as economic volatility, fragmented governance and cultural-material realities, which collectively produce multiple, mutually reinforcing lock-ins that challenge the eco-cluster transformation journey. Our study extends paradox theory to the cluster level by specifying how ambidexterity, coopetition and identity tensions manifest and interact at the meso level. It also advances eco-cluster research by theorizing eco-cluster transitions as paradoxical and elevating the active role of contextual boundary conditions. © 2026 The Author(s). Business Strategy and the Environment published by ERP Environment and John Wiley & Sons Ltd.

Environmental transition in clusters: empirical insights from the benchmarking study in Poland

Mackiewicz M.; Kowalski A.M. Competitiveness Review. DOI: 10.1108/CR-03-2026-0194.

Purpose – This study aims to investigate the key determinants of green transformation in Polish clusters and examine the extent to which cluster-level environmental activities translate into perceived benefits at the member-firm level. Design/methodology/approach – The analysis draws on matched survey data from 42 cluster coordinators and 733 member organisations. The dependent variable is the Green Transformation Index (GTI, 0–6), constructed as the sum of six binary environmental actions reported by coordinators. Non-parametric tests, Spearman correlations and negative binomial regression models with bootstrap standard errors (1, 000 replications) were used to identify robust predictors while accounting for the count nature of the GTI and the small sample size. Member-level responses were aggregated to the cluster level and analysed using mixed-effects models to assess alignment between coordinator actions and member perceptions. Findings – National Key Cluster (KKK) status emerged as the strongest predictor, with KKK clusters expected to implement over four times more green actions than non-KKK clusters. Formal green transformation strategy and ESG strategy were also strongly associated with higher GTI scores. Innovation capacity, cooperation intensity and available budget further positively influenced green transformation, while cluster size showed no independent effect. From the member perspective, higher GTI was linked to greater utilisation of green services and more positive evaluations of the coordinator’s efforts. However, an implementation gap was identified: member organisations did not report tangible improvements in their own environmental performance despite higher service utilisation and favourable assessments. Research limitations/implications – The cross-sectional design and modest sample size (N = 42 clusters) limit causal inference. Future research should use longitudinal or larger-scale designs and incorporate objective measures of environmental performance at the firm level. Practical implications – Policymakers and cluster managers should prioritise institutional recognition (e.g. expansion of the KKK programme with explicit green criteria) and support for the development and implementation of formal green and ESG strategies. Special attention is needed to bridge the implementation gap through targeted knowledge diffusion, practical support tools and monitoring of member-level outcomes. Originality/value – To the best of the authors’ knowledge, this study is among the first to combine coordinator and member perspectives in a matched sample within the context of cluster-based green transformation in a Central and Eastern European economy. It provides robust evidence on the drivers of green actions at the cluster level while highlighting the persistent gap between cluster initiatives and firm-level outcomes, contributing to both cluster theory and the literature on sustainability transitions. © 2026 Marta Mackiewicz and Arkadiusz Michał Kowalski.

Navigating dead ends: the role of organization-level search strategies in general-purpose technology ecosystems

Bucaioni V.; Kelchtermans S.; Murgia G. Journal of Technology Transfer. DOI: 10.1007/s10961-026-10350-x.

The development of emerging General-Purpose Technologies (GPTs) is fraught with uncertainty, particularly in identifying promising knowledge recombinations and application areas. Technological progress can stall when firms, universities, and independent inventors pursue “dead ends” in their search strategies, disrupting the trajectory of follow-up innovations. While prior research has largely examined GPT evolution at a macro level, this study investigates how organizational search strategies influence these trajectories. Focusing on Wearable Haptics Technology (WHT) as an emerging GPT, we analyze 1,261 patent-applicant pairs to explore the impact of knowledge recombination strategies. Our findings reveal that patents exploring entirely new technological domains are less likely to catalyze follow-up inventions. In contrast, patents that incorporate novel knowledge within the existing WHT ecosystem are more likely to drive subsequent innovation. A supplementary analysis further shows that university involvement is more beneficial in explorative and domain-pushing projects than in exploitative ones. Our findings contribute to research on entrepreneurial ecosystems by clarifying how different actors and search strategies shape knowledge dynamics in early-stage GPTs. © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2026.

Mapping business ecosystems using AI: A case study on energy transition

Ribeiro T.F.; Nogueira R.; Chimenti P.; da Fonseca A. Journal of Cleaner Production. DOI: 10.1016/j.jclepro.2026.148546.

This study explores the application of artificial intelligence (AI) for mapping business ecosystems, particularly in the context of the energy transition, a phenomenon of global significance that requires the interaction of multiple industries, nations, technologies, innovations, and regulatory frameworks. An AI-driven method is introduced to process large-scale textual data and construct business ecosystems as social networks. By analyzing datasets from academic papers, online news, regulatory documents, and a combined dataset, the scalability and accuracy of these ecosystems were assessed. The validity of the method was tested through an expert survey involving 90 professionals across 9 countries, multiple industries, and diverse roles. Regression analysis revealed a statistically significant relationship between network centrality scores and expert assessments, demonstrating the robustness of the method. The combined dataset provided the highest model fit but required significant computational effort. In contrast, academic papers offered a more efficient and interpretable alternative, achieving similar accuracy with significantly lower processing demands and noise. The findings suggest that AI-driven methods can standardize, automate, and enhance real-world ecosystem mapping, reducing analyst subjectivity and improving scalability. This type of mapping is useful in both theory and practice because it enables scholars and decision-makers to identify structural dependencies, coordination patterns, and bottlenecks that may not be visible through manual analysis, thereby informing strategic positioning, diversification, scenario planning, and policy design. Future research should explore alternative AI models and validation methods, higher levels of functional aggregation, and longitudinal analyses to advance the study of energy ecosystems. © 2026 The Authors.

Complement or substitute? Productive and sustainable entrepreneurship in the innovation ecosystem

Civera A.; Marchesani F.; Audretsch D.B. Technovation. DOI: 10.1016/j.technovation.2026.103601.

Innovation ecosystems are increasingly expected to foster entrepreneurial activity that simultaneously supports economic growth and addresses pressing societal and environmental challenges. Yet, while prior research has examined productive and sustainable entrepreneurship largely in isolation, little is known about whether innovation ecosystems can enable both forms of venture creation and how their underlying logics interact. This study explores how innovation ecosystems enable two distinct entrepreneurial outcomes: productive entrepreneurship and sustainable entrepreneurship. Drawing on a unique dataset of 30 Italian smart city projects spanning 2011–2023, we examine ecosystem-level factors influencing each type and investigate whether the two forms can coexist and reinforce one another. Our findings suggest that innovation ecosystems could conducive to both forms of entrepreneurship, albeit through different mechanisms. Industry structure plays a stronger role in fostering productive entrepreneurship, while digital and technological infrastructure is more supportive of sustainability-oriented ventures. Moreover, we identify an asymmetric relationship between the two forms of entrepreneurship. Productive entrepreneurship is positively associated with sustainable entrepreneurship, but not the reverse. These results contribute to the innovation ecosystem literature by showing how economic and societal value creation interact within the same ecosystem. The study offers insights for scholars and policymakers interested in designing ecosystems that support both innovative and sustainability-driven entrepreneurship. © 2026 The Authors

Enabling degrowth through entrepreneurial ecosystems: Exploring key factors influencing degrowth decisions for SMEs

Rosa J.G.; Mejia Morelos J.; Agredano F.; Theodoraki C.; Cisneros L.; Kariv D. Journal of Cleaner Production. DOI: 10.1016/j.jclepro.2026.148528.

While entrepreneurial ecosystems are traditionally viewed as engines for growth-centric innovation, the intensifying pressures of climate change and resource depletion have catalyzed interest in degrowth as a viable alternative paradigm. This study investigates the factors influencing the adoption of degrowth strategies among Small and Medium Enterprises (SMEs) within the entrepreneurial ecosystem of Quebec, Canada. Based on a 2024 survey of 1416 entrepreneurs, our analysis focuses on the 512 respondents who implemented degrowth strategies in subsequent years, revealing that motivations such as personal work-life balance, economic constraints, and a lack of adequate ecosystem support were more influential than environmental concerns. These findings highlight a significant misalignment between existing ecosystem structures and the practical needs of sustainability-oriented entrepreneurs. Ultimately, this research argues that integrating degrowth principles into the broader entrepreneurial framework can foster greater inclusivity, resilience, and ecological responsibility, offering critical insights for policymakers and stakeholders seeking to bridge the gap between individual decision-making and systemic sustainability. © 2026 The Authors.

From Personal to Collective Powers: Towards Gender Inclusivity in Entrepreneurial Ecosystems

Stroila I.; Isakova E.; Neergaard H. Entrepreneurship Theory and Practice. DOI: 10.1177/10422587261450569.

Entrepreneurship research increasingly seeks to explain how systemic change towards gender inclusivity unfolds. Drawing on a critical realist case study, we develop a morphogenetic account of how such change becomes possible within entrepreneurial ecosystems through structural and cultural conditioning, social interaction, and structural and cultural elaboration. We show that bonding and bridging function as collective, agential mechanisms through which women and their allies reflexively contest gendered constraints and mobilise resource gatekeepers, thereby enabling shifts in ecosystem norms and practices over time. By doing so, the study bridges women’s entrepreneurship, ecosystem scholarship, and critical realism through a processual explanation of change. © The Author(s) 2026. This article is distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 License (https://creativecommons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage).

Mission-oriented sustainable innovation ecosystems as complex systems: Lessons from the amazon bioeconomy

Pamplona L.; Lins M.E.; Xavier A.; Almeida E.M. Journal of Innovation and Knowledge. DOI: 10.1016/j.jik.2026.101061

This study analyzes the emergence of a mission-oriented Sustainable Innovation Ecosystem in the Amazon bioeconomy to determine how national bioeconomy missions interact with territorially embedded actors in the context of institutional fragility and systemic complexity. Drawing on an in-depth qualitative case study in Santarém (Pará, Brazil), this study conducts semistructured interviews in conjunction with the Complex Holographic Assessment of Paradoxical Problems methodology to construct metacognitive maps of actor interactions, tensions, and governance gaps. Conceptually, the manuscript integrates complexity science, mission-oriented innovation policy, and transformative social innovation to explore how directionality, social agency, and learning coevolve in peripheral regions. Empirically, the findings reveal a fragmented yet emergent ecosystem characterized by weak policy coordination, latent self-organizing capacities, and strong bottom–up transformative intent. The study proposes a set of process-oriented indicators designed as reflexive learning devices rather than performance metrics, supporting adaptive mission governance across scales. By foregrounding regional embeddedness and participatory alignment, this article offers insights relevant to current debates on place-based sustainability transitions, including policy challenges facing the Amazon concerning the upcoming global climate negotiations. Copyright © 2026. Published by Elsevier B.V.

Identification of driving factors in national innovation ecosystems under the PSR framework: Based on machine learning algorithms

Shen N.; Wu L.; Zhang J.; Zhang L. Technovation. DOI: 10.1016/j.technovation.2026.103581.

To address the challenge of insufficient momentum for sustainable global innovation development, a growing number of countries are elevating the cultivation of innovation ecosystems to the level of national strategy, aiming to secure discourse power and initiative in future international competition. Previously, studies have primarily focused on the conceptualization and evolutionary mechanisms of National Innovation Ecosystems (NIEs), and have extended the indicator systems of National Innovation Systems to evaluate NIEs performance. However, there remains a notable gap in applying ecological theories to construct NIEs indicator systems, as well as a lack of exploration into the driving effects of national macro-level characteristics on NIEs. Addressing this research gap, this study draws upon the food chain perspective and the quadruple helix model to propose a novel conceptual framework for understanding the interactions among actors within the NIEs. Furthermore, we introduce the Pressure-State-Response (PSR) framework to establish a system of driving factors centered on National Risk, National Openness, and National Governance. This research provides a systematic analytical tool for clarifying the interactive logic among multi-level innovation actors. The revealed differentiated driving pathways offer empirical evidence for countries to tailor innovation governance policies. © 2026 Elsevier Ltd

Institutional Space-Making for Equity in Entrepreneurial Ecosystems: Evidence from U.S. Cities

Wang Q.; Kim S.; Taylor S. Entrepreneurship Theory and Practice. DOI: 10.1177/10422587261450579.

Entrepreneurial ecosystems (EE) are widely viewed as engines of innovation, economic development, and opportunity, yet prior research offers limited insight into how equity is institutionally produced and sustained, particularly for minority- and women-owned businesses. We introduce institutional space-making—the purposeful construction of governance, relational, and organizational environments that enable equitable participation—as a core institutional mechanism for ecosystem redesign. Drawing on a multi-city case analysis of the Ascend program across 13 U.S. cities, we identify 3 interrelated processes: (a) structural redesign that confronts exclusionary rules, routines, and evaluative logics; (b) relational mobilization through institutional entrepreneurship that assembles cross-sector coalitions to reconfigure resource flows and opportunity structures; and (c) organizational and implementation practices that embed cultural responsiveness through trust-building and adaptive coordination. Findings show that inclusive ecosystems emerge when these processes are jointly enacted, linking ecosystem design with everyday implementation. Our study advances EE theory by specifying how equity is produced through institutional redesign and offers actionable guidance for policymakers and ecosystem builders seeking durable inclusion. © The Author(s) 2026. This article is distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 License (https://creativecommons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage).

The financial implications of open innovation: Evidence from stock market reactions to public companies' open source software releases

Yang W. Research Policy. DOI: 10.1016/j.respol.2026.105500.

Open source has become an increasingly important strategy in many technology-intensive industries, including the financial sector. Yet, because open source makes technology and knowledge available for free, it runs counter to well-established theories that emphasize the need for appropriability and knowledge control to profit from innovation, thereby creating challenges for assessing its financial implications. Against this backdrop, this study examines how financial investors react to public companies' open-source innovation. Drawing on the literatures on open source, technology ecosystems, and the interplay between financial markets and firm strategy, I propose that a company's open-source innovation release is associated with a positive stock-market reaction. I further propose that investors' positive reactions increase with the company's proprietary innovation, because proprietary innovation allows more value created from the open source innovation to be retained within the firm through appropriability regime, while enhancing the inimitability of the interdependent ecosystem enabled by open source. Moreover, the effect of proprietary innovation is stronger when the company incorporates pre-existing open-source modules into the technological architecture of the released technology. Those hypotheses are supported by the empirical analysis based on 2693 open-source software releases by 108 public firms from 2012 to 2020. Event-study analysis also reveals an average cumulative abnormal return of 0.37% associated with a company's release of open source innovation. In addition, exploratory evidence suggests that greater knowledge reliance on open-source contributors of the company dampens the effect of proprietary innovation on stock-market reactions, although identification challenges limit causal interpretation of this pattern. I conclude by discussing implications for understanding open source and the co-evolution of financial and technological innovation. © 2026 Elsevier B.V.