Eastern Europe's innovation puzzle: Why constraints sometimes spark breakthroughs

<p> Purpose</p><p>The innovation activities of firms are shaped by a variety of barriers that can, paradoxically, either stimulate or hinder their innovation performance. Collaboration among ecosystem partners is often essential for navigating these challenges, particularly in Central and Eastern European (CEE) countries, where persistent shortages of resources and skills make external support crucial. Despite its importance, collaboration does not uniformly yield positive outcomes and can exert a double-edged influence on innovation processes. This study examines whether innovation barriers are transformed into product and process innovations through different types of collaboration and how these mediation patterns unfold in catching-up CEE economies</p><p>Design/methodology/approach</p><p>This study uses Partial Least Squares Structural Equation Modeling (PLS-SEM) to analyze how innovation barriers influence the innovativeness of firms, using a sample of 4,230 firms across eight CEE states. Firm-level data are drawn from the Community Innovation Survey (CIS) and capture innovation barriers, product and process innovations, and three collaboration types: private market, value chain and public research. The model focuses on the mediating role of these collaboration types and includes a multi-group comparison between firms collaborating only domestically and those engaged with foreign partners</p><p>Findings</p><p>Our findings show that value-chain ties consistently channel innovation barriers into process innovation, while product innovations require public research linkages to be present. Interestingly, we show that private market ties can boost process innovation but also play an unsuccessful role in mediating innovation barriers to new products. When considering firms' international engagement, those linked with foreign cooperation partners benefit more from the public research route to product novelty, while domestically oriented firms rely more strongly on value-chain collaboration for process upgrading</p><p>Originality/value</p><p>This paper contributes by treating collaboration as a partner-specific mediating mechanism rather than a generic enabler and by introducing a threefold distinction between private market, value-chain and public research collaboration. It provides context-sensitive evidence from underexplored CEE innovation systems on how distinct collaboration modes convert innovation barriers into product and process innovations and how these effects differ between nationally and internationally oriented firms.</p>