Open Innovation Practices and Innovation Performance: A Dynamic Capabilities Approach

Abstract

This study explores empirically the link between open innovation and dynamic capabilities. The aim is to understand the relevant capabilities required by firms to effectively engage in open innovation practices and how these practices affect innovation performance. The analysis is based on five selected service sub-sectors with a sample size of 3910 firms drawn from a dataset containing information on innovation activities in the UK. The findings show that knowledge creation capability is positively related to inbound and coupled open innovation practices. Contrary to expectation, partial support is found for the positive relationship between knowledge acquisition capability and inbound open innovation, and no support for coupled open innovation. The findings also show that operational reconfiguration strengthens the positive effects of coupled open innovation practices and incremental innovation performance. On the other hand, strategic reconfiguration strengthens the positive effects of coupled open innovation practices and radical innovation performance. This study contributes to theory by revealing the link between open innovation and dynamic capabilities. The study provides empirical evidence on the capabilities through which effective open innovation can be achieved in a dynamic environment. It also contributes to knowledge to show the effect of open innovation practices on innovation performance in the service context and the differential moderating effects of reconfiguration capabilities. Firms can use insights from this study to identify the relevant capabilities to develop in order to enhance their level of involvement in open innovation practices. The study also offer insights on the open innovation practices that service firms can pursue in order to achieve the desired innovation outcomes.