The determinants of openness to competitors:An integrated perspective of capacity and rational views

Abstract

Absorptive capacity view suggests that innovation failure as an activation trigger will intensify a firm’s capacity to outsource from external relationships. This view appears to be challenged when applying to competitive contexts whereby the firm may be sensitive to competitors’ threats. We examine two modes of openness to competitors – bilateral (i.e., formal cooperation) and unilateral (i.e., external search) – which differ in the extent to which the focal firm is bound up with competitors and thereby face different levels of competitive threats. Using a panel data of Spanish manufacturing and service firms, we show that firms with high absorptive capacity, operationalized by more R&D investments, are more likely to open with competitors in forms of both external search and formal cooperation. However, we find that firms tend to be rational in the respect of selecting specific modes – they prefer unilateral modes (i.e., external search) over bilateral ones (i.e., formal cooperation), especially when they experienced innovation failures. Our work integrates the absorptive capacity view, which deems R&D investment and innovation failure to be the drivers of firm openness, with a rational view (transaction cost economics), which highlights firm’s rationality of risk aversion in selecting openness modes.