Does organizational structure facilitate inbound and outbound open innovation in SMEs?

Abstract

Based on the evolutionary theory of the firm, this paper examines how traditional variables that describe a firm’s organizational structure—formalization, specialization, and centralization—affect the adoption of inbound and outbound open innovation. Using a cross-sectional survey of Chinese small and medium enterprises, our study shows that organizational structure matters for open innovation and that formalization, specialization, and centralization have diverse effects on the OI practices implemented by SMEs. Results indicate that specialization and centralization have a critical role in open innovation practices as they both foster the use of inbound and outbound open innovation. Formalization negatively affects outbound, but it is positively associated with inbound open innovation.