Open with competitors to innovate? A temporal perspective on the paradox of openness

Abstract

Using a longitudinal panel data of Spanish manufacturing and service firms during 2006-2016, we examine whether firms of higher absorptive capacity (ACAP) can rely on openness to competitors to innovate, as well as the importance of knowledge protection. We draw upon a temporal perspective of ACAP view and conceptualize an innovation process with competitors into two stages – potential stage (i.e., knowledge acquisition) and realized stage (i.e., knowledge transformation). We show that firms with higher technological investment (which forms the base of ACAP) can improve innovation performance by drawing more knowledge from, and cooperate with, competitors. Moreover, knowledge-protection mechanisms play different roles pertaining to the stages: they strengthen a firm’s ability to open with competitors in the potential stage, whereas they weaken the efficiency of openness in fostering innovation in the realized stage. Our findings extend the ACAP view to competitor contexts and contribute to open innovation literature by reconciling the debate on the paradox of openness versus knowledge protection.