Exploring the impact of open innovation on firm performances

Abstract

Purpose

The purpose of this paper is to explore the relationships between the openness of firms and their innovation and financial performances.

Design/methodology/approach

In order to investigate such relationships, data on inbound and outbound open innovation (OI) processes and performances of 110 worldwide top research and development (R & D) spending bio-pharmaceutical companies are collected via the consolidated annual reports and the PATSTAT database. The time period of the analysis is 2008-2012.

Findings

Regarding innovation performances, R & D productivity and revenues to patents ratio decrease with openness, whilst patents growth is not influenced by OI adoption. As to financial performances, sales growth exhibits a positive trend with openness, while operating profit and turnover decrease with OI adoption. Particularly, an inverted U-relationship with inbound and a U-shape one with outbound are observed as of operating profit.

Research limitations/implications

The study adds to the knowledge about the effect of openness on firms’ performances, a topic of increasing interest to academics, managers and policy makers. Both inbound and outbound facets of the phenomenon are taken into account.

Practical implications

Understanding how openness affects performances enables more informed decision making by managers, leading to a more effective use of OI activities.

Originality/value

The work provides new insights as to what “being open” means for a company, gauging both inbound and outbound transactions after a pecuniary perspective. Employing objective and continuous measures, the relevance of OI for the whole business of firms can be identified.

Citation

Caputo, M., Lamberti, E., Cammarano, A. and Michelino, F. (2016), "Exploring the impact of open innovation on firm performances", Management Decision, Vol. 54 No. 7, pp. 1788-1812. https://doi.org/10.1108/MD-02-2015-0052