Open Innovation - A Gold Mine or Fool’s Gold for Young Firms?

Abstract

Executives often cite innovation as the critical capability necessary for their company’s growth and success. Open innovation has been heralded as an important approach for the acceleration of the innovation process, especially for large, established firms. The impact of open innovation practices of young firms, whose resources and capabilities differ significantly from those of more mature firms, has been left nearly unexplored. In addition, the quantitative analysis of the effects of open innovation on firm performance is scarce. While size comparisons are important, age-specific factors are potentially more influential on the outcomes of open innovation activities. Thus, this research seeks to compare different open innovation activities of young verses established firms, and explore their effects on innovation and financial performance. The analysis of survey-based data from 1,202 UK firms across multiple sectors shows that established firms engage more strongly in inbound activities while young firms are significantly more active in knowledge and technology transfer (outbound activities). However, these preferences are not always fruitful as only selected open innovation activities are beneficial for young and established firms. Different open innovation activities are relevant for different types of performance. This research contributes to theory and practice by questioning the generalizability of the open innovation concept and highlighting activity and age-specific factors that trigger the variability in the effect of open innovation activities on different types of firm performance.