Sharing ideas and remaining innovative. Adoption of open innovation and inbound and outbound open innovation’s conjoint effect on innovation performance

Master thesis research by Frank Mom

In January 2016 Frank Mom graduated from the Tilburg School of Economics and Management at Tilburg University. He followed the master Strategic Management and wrote his master thesis in the area of open innovation.

The growing complexity and dispersion of knowledge has greatly increased the relevance of external information sources for innovation. An integral framework grasping the concept has been of high interest to academics as well as to managers. Open innovation describes the concept of recombining internal and external innovational processes as well as internal and external paths to market. Two different approaches can be derived from this definition. Firstly, inbound open innovation which describes the acquisition of external technology to the internal innovational processes. Secondly, outbound open innovation which describes the outward transfer of technology from the internal innovational processes.

The present study has two objectives. The first is to research the conjoint effect of inbound and outbound open innovation on innovation performance. The second is to shed light on the drivers and inhibitors of open innovation’s adoption. Furthermore, the literature on open innovation has largely neglected Small- and Medium-sized Enterprises (SMEs) in open innovation theory, and the existent findings on SMEs’ adoption of open innovation were contradictory. The present study will therefore focus on SMEs. These different objectives have led to the following problem statement:

“How has open innovation been adopted by Dutch SMEs and how do inbound and outbound open innovation jointly influence their innovation performance?”

To answer the problem statement, interviews with six Dutch SME managers were held in a low-,

medium- and high-tech SME as well as interviews with three industry experts. The results of these interviews show that SMEs are practicing open innovation and there is an increasing awareness that open innovation is a necessity rather than an option for organizations. However, different characteristics influence this adoption.

Furthermore, the results show that inbound and outbound open innovation separately and positively influence innovation performance. Besides this, an important notion revealed itself: for successful collaboration both inbound and outbound open innovation practices are required. Therefore, the conjoint effect of inbound and outbound open innovation on innovation performance supersedes the independent effect of either one of the approaches practiced in isolation of the other. The networks that are created in such a manner result in mutual learning and context-specific implicit knowledge, all of which contribute to a competitive advantage. The conjoint effect positively influenced two out of three measures for innovation performance, i.e. R&D effectiveness and efficiency and product performance. The effect on the pipeline of products was not found to be either positive or negative.

In conclusion: open innovation, specifically the conjoint effort of inbound and outbound open innovation, can create a strong competitive advantage, result in higher effectiveness of R&D and reduce development time and costs when compared to closed innovation.