For sustained competitive advantage of established process manufacturing firms, technological process innovation to improve resource productivity and environmental performance has become of pivotal importance. These firms, however, often face intra‐organizational tensions to reconcile pressures for exploration and exploitation across subsequent phases of technological process innovation. Firms may, therefore, need to perform the development phase – being the most sensitive to these tensions – in the inter‐organizational context of an external dedicated development facility. This requires new‐to‐the‐firm management activities, i.e., management innovation. However, the role of management innovation in enabling technological process innovation in an inter‐organizational context remains largely unexplored. To address this gap, in developing propositions we use illustrative examples from the research context of an external development facility for sustainable process technology. The paper has two contributions. First, by adopting a process perspective we are able to clarify how both types of innovation are combined over time in an intertwined way. Second, we extend management innovation theory by conceptualizing management innovation in an inter‐organizational context. We conclude with implications for theory, practice and future research.

Although research and development (R&D) is a key indicator of (technological) innovation, scholars have found mixed results regarding its effect on product innovation and firm performance. In this paper, we claim that variations in R&D effectiveness can be explained by changes in a firm's social system, in particular in its management innovation. It is still unclear how management innovation influences R&D effectiveness in terms of product innovation. In this study, we address this theoretical and empirical gap in the innovation literature. Our theoretical arguments and findings from a large-scale survey among Dutch firms show that R&D has a decreasingly positive relationship with product innovation, particularly for firms with low levels of management innovation. However, in firms with high levels of management innovation, this relationship becomes more J-shaped, especially in small and medium-sized firms. Our findings also appear to indicate that management innovation may be more important for competitive advantage than just R&D. Overall, our insights reveal that management innovation is a key moderator in explaining firms' effectiveness in transforming R&D into successful product innovation. a c bThe relationship between R&D and product innovation across various sizes of firm and types of activity. Interaction effect of R&D and management innovation on product innovation.Relationship between R&D and product innovation.

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