Open and closed knowledge sourcing. Their effect on innovation performance in small and medium enterprises
| Pages | 1166-1184 |
| DOI | https://doi.org/10.1108/IMDS-08-2016-0338 |
| Published date | 10 July 2017 |
| Date | 10 July 2017 |
| Author | Juyeon Ham,Byounggu Choi,Jae-Nam Lee |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
Open and closed
knowledge sourcing
Their effect on innovation performance in
small and medium enterprises
Juyeon Ham
Korea University Business School, Seoul, Republic of Korea
Byounggu Choi
College of Business Administration, Kookmin University,
Seoul, Republic of Korea, and
Jae-Nam Lee
Korea University Business School, Seoul, Republic of Korea
Abstract
Purpose –Many studies have investigated the relationship between the adoption of open innovation and
performance in large firms. However, limited research is availablewith regard to the use of open innovation in
small and medium enterprises (SMEs). SMEs are important because of their contribution to innovation in
almost all economies. The purpose of this paper is to extend the current literature by focusing on SMEs.
Using complementarity and knowledge-based theories, this study develops three hypotheses to identify the
effect of knowledge sourcing approaches for innovation on SMEs’innovation performance.
Design/methodology/approach –Surveys collected from 196 SMEs in Korea were analyzed using the
supermodularity function to test the hypotheses.
Findings –Resultsindicate that an external knowledge-oriented approachhas no significant effect,whereas an
internalknowledge-oriented (i.e.closed) approach has a positiveeffect on innovation performance.Interestingly,
this study foundthat open innovation has a negative effecton SMEs’innovation performance(i.e. both internal
knowledge-oriented and external knowledge-oriented approacheshave a substitutive relationship).
Originality/value –This study sheds new light on open innovation and knowledge management research by
identifying the relationship between knowledge sourcing approaches for innovation, and innovation performance
in SMEs. Practical implications highlight that open innovation could impede SMEs’innovation performance.
Keywords SMEs, Complementarity, Open innovation, Knowledge sourcing approach, Substitutability
Paper type Research paper
1. Introduction
Open innovation is defined as “the use of purposive inflows and outflows of knowledge
to accelerate internal innovation and expand the markets for external use of
innovation, respectively”(Chesbrough et al., 2006). Many researchers have emphasized
its strategic importance as a critical approach for innovation, and have suggested that
a positive relationship exists between open innovation and a firm’s performance
(Christensen et al., 2005). In addition, many firms in a variety of industries, such as the
high-tech, service, and chemical industries, have adopted open innovation to improve their
performance (Chesbrough, 2011).
The basic assumption of open innovation is that by using external knowledge in
conjunction with internal knowledge, the performance of a firm can improve in a rapidly
changing environment (Chesbrough, 2003). Leiponen and Helfat (2010) suggested that firms
can improve their odds of achieving successful innovations by accessing to broad
knowledge sources, including external ones. Rass et al. (2013) proposed that open innovation
Industrial Management & Data
Systems
Vol. 117 No. 6, 2017
pp. 1166-1184
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-08-2016-0338
Received 23 August 2016
Revised 24 October 2016
Accepted 2 November 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
This work was supported by the National Research Foundation of Korea Grant funded by the Korean
Government (NRF-2014S1A5A2A03064953).
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IMDS
117,6
instruments positively affect a firm’s performance through the firm’s social relations and
networks. Procter & Gamble estimated that they can save more than 25 percent of their
printing and copying costs by introducing open innovation (Chesbrough, 2011).
For example, Curana, a small bicycle accessory manufacturer in Belgium, has become a
trendsetter in the bicycle industry, and most bicycle manufacturers wish to combine their
products with Curana’s products. Open innovation enabled Curana to develop new and
innovative products, such as mudguard combining aluminum and plastic, and made the
firm a worldwide market leader (Vanhaverbeke et al., 2012).
However, little research has verified if open innovation indicates a better performance for
a firm compared with the use of closed innovation despite the theoretical entrenchment of
the idea that firms can use internal and external knowledge sources together. Some studies
reveal that a firm’s performance can increase by using closed innovation and focusing on
the internal R&D investment because doing so enables the firm to have an in-depth
understanding of the strengths and weaknesses of its own knowledge and capabilities
(Bogner and Bansal, 2007). Other studies pointed out that open innovation, which focuses on
combining internal and external knowledge sources, can enhance a firm’s performance by
allowing the firm to have a broader range of knowledge, and enabling the firm to have a
different perspective on its critical issues (De Clercq and Dimov, 2008). To verify the
accuracy of the previous studies’results, many efforts have been made to investigate
the conditions where the closed and open innovation approach es are applicable
(Garrig et al., 2013; Makri et al., 2010). Almirall and Casadesus-Masanell (2010) argued
that the open innovation approach restricts a firm’s ability to establish technological
capabilities when suppliers and/or complementors have different goals.
Although previous studies on open innovation improved the understanding of the open
innovation phenomenon, these studies were performed specifically for managers in large
firms. Only a few studies focused on open innovation in small and medium enterprises
(SMEs). Open innovation in SMEs is significant for the following reasons. First, SMEs are
important because of their contribution to innovation in almost all economies in the world.
According to the Organization for Economic Cooperation and Development (OECD), SMEs
represent more than 95 percent of enterprises and account for 60-70 percent of employment
in most OECD countries (OECD, 2005). Therefore, encouraging innovation in SMEs is
essential for policy makers to promote economic growth (Lee et al., 2010).
Second, SMEs often lack human capital, financial resources, and knowledge to develop
and commercialize new products or services internally. To overcome their inherent
limitations, SMEs opt to collaborate with other organizations. SMEs have thus engaged in
various open innovation practices and continue to adopt such practices (Dufour and
Son, 2015). Furthermore, open innovation in SMEs has become more important than before
(Van de Vrande et al., 2009). Open innovation is a critical issue for SMEs to reduce
innovation risk and cost and increase operation flexibility in today’s rapidly changing and
knowledge-intensive world with shortened product and service life cycles (Lee et al., 2010).
Third, major differences exist between large enterprises and SMEs (Gopalakrishnan and
Bierly, 2006). Therefore, different open innovation approaches need to be adopted
depending on firm size (Vossen, 1998). Significant differences exist between large firms and
SMEs in terms of the resources that constrain a firm’s ability to access, acquire, and use
knowledge (Wong, 2005). Therefore, simply viewing SMEs’open innovation approaches as
scaled-down versions of those used in larger firms is incorrect (Pillania, 2008).
To explore the researchgaps in previous studies, this study examinesthe effect of a firm’s
size on its innovation performance from the perspective of SMEs by focusing on knowledge
sourcing. Open innovation emphasizes the importance of using external and internal
knowledge for a firm’s innovation (Torres et al., 2015). Therefore, t his study focuses on how
SMEs’innovation performance varies depending on its knowledge sourcing approaches.
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Open and
closed
knowledge
sourcing
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