Modes of Open Innovation in Service Industries and Process Innovation

Abstract

This broad study empirically compares the returns to different open innovation approaches, namely forms of pecuniary acquisition and non-pecuniary sourcing, on both product and process innovation in low-tech service and manufacturing firms. A fixed-effects analysis reveals differing patterns of the effectiveness of open innovation strategies across sectors and type of innovation outcome, along with decreasing returns from being “too open”. In general, the purchase of intangible intellectual property and broad search breadth have greater effects on product innovation, whereas the returns to knowledge embodied in physical artefacts and to drawing deeply from external sources are greater for process innovation. Overall, external sources of knowledge more strongly predict innovation in low-tech service firms than in the manufacturing sector. The final section considers implications for managers and policy makers.