Treble Innovation Firms: Implications for Open Innovation Strategies and Profitability

Abstract

Manufacturing firms can develop three forms of technological innovation: process, product, and service. While previous research has primarily analyzed service innovation in isolation, this study compares the profit position of firms adopting all technological innovations simultaneously (treble innovation firms) to firms that “only” adopt process and product innovation (dual innovation firms). Drawing on the premises of the resource-based view (RBV), we argue that treble innovation firms can build on innovation cross-fertilization to develop valuable, rare, and inimitable resources that translate into higher profitability. Consistently with the RBV, we also expect treble innovation firms to benefit more from open innovation because they can save considerably more in internal R&D investment while maintaining differentiated supply. We test our hypotheses on a random and representative survey of 423 Spanish manufacturing firms, of which 62% are dual innovators and 22% treble innovators. The results support our hypotheses. Based on propensity score matching and doubly robust estimations, we find causal evidence supporting the conclusion that treble innovation firms are more profitable than dual innovation firms. Our results also confirm that open innovation positively moderates the relationship between treble innovation firms and performance, but this moderation is statistically significant only when internal R&D investment is low.