The Role of Internal Coupling Activities in Explaining the Effectiveness of Open Innovation

Abstract

This paper investigates the role of internal contingencies in explaining performance implications of open innovation by addressing the questions: does openness drive innovation performance? And if so, what organizational activities impact the effectiveness of both the inbound and the outbound approaches to openness? The empirical basis of the study is a survey carried out in 321 Danish SMEs in manufacturing industries. The paper finds limited evidence of the direct effects of inbound and outbound open innovation on performance, as measured in terms of innovative output and profitability. It also finds that the effect of openness is mediated by the use of internal coupling activities that give employees latitude, information and skills to work autonomously. A key result is that the benefits of open innovation are fully captured only when firms adopt a number of activities that provide employees with autonomy and empowerment to conduct their work. The paper concludes with implications to theory and practice.