Innovation under constraints: the role of open innovation in Ghana

Abstract

ABSTRACT This paper analyses Low-Income Country (LICs) firms’ use of open innovation (OI) in overcoming various innovation constraints. We disaggregate local and foreign sources of innovation using a new measure of international openness. A survey of 501 manufacturing firms in Ghana reveals that OI is employed to address cost, knowledge, management, and market barriers. Knowledge and cost constraints lead to a broader and deeper search whereas cost barriers lead to a greater domestic search. Firms that faced market barriers significantly search more internationally while those facing infrastructure barriers tend to search less broadly and deeply for external knowledge. The substantial informal sector in Ghana hampers OI. Results also indicate an inverted-U-shaped relationship between the breadth of openness and innovation performance. This paper contributes to the literature by providing the first large firm-level survey-based evidence of OI in a LICs context, and by introducing a new measure of international innovation openness.