Hitting the nail on the head: Exploring the relationship between public subsidies and open innovation efficiency

Abstract

The success of open innovation as a new paradigm to enhance innovation development has brought public authorities to incentivize firms to collaborate with external organisations. Such incentive is often provided in the form of public subsidies to research and development activities. Some studies observed that public subsidies are generally successful in pursuing the goal of promoting open innovation. Nevertheless, as the number of partners increases, the positive effect of collaboration on innovation performance is likely to decrease due to over-search and over-collaboration issues. In this perspective, a mere increase of the firms' propensity to collaborate should not satisfy public authorities, which instead should carefully monitor how public subsidies can improve the efficiency of such collaborations. This article advances the literature about the relationship between public subsidies and open innovation by assessing how funds provided by local, national and European authorities are associated with open innovation efficiency. By analysing an extensive sample of 43,230 European firms, this study confirms that the three typologies of public subsidies are associated with collaboration in beneficiaries. Furthermore, the study shows that local and national subsidies are also associated with open innovation efficiency, whereas European subsidies are not statistically significantly associated with it. This study provides theoretical and policy implications. In a theoretical perspective, it introduces the concept of open innovation efficiency, it analyses its public policy drivers and presents several recommendations for future research. In a policy perspective, it suggests explanations for the results obtained and advises policy initiatives to foster open innovation efficiency.