Linking Open Innovation and Firm Performance

Introduction

The open innovation management model has been one of management’s most widely discussed topics (Huizingh, 2011). The concept of open innovation has quickly gained great prominence, both as an approach for contemporary top management concerning the business community and as a theoretical concept intensively studied by researchers (Podmetina et al., 2018).

Regarding the relationship between open innovation and organizational performance, the management competence of the firm depends on the ability of senior managers to mobilize and distribute the available resources, namely knowledge for the creation of organizational value (Alavi & Leidner, 2001). This issue positively reflects the results achieved by firms by leveraging their value chains, with strategic business objectives aligned through management innovation (West et al., 2014). The intentional use of knowledge input and output flow is intended to accelerate internal innovation and expand markets to retain external knowledge (Chesbrough & Crowther, 2006).

Open innovation is a strategy contemplated in the different management models, aiming at the superior performance of the organization (Finkelstein et al., 2009). This strategic component underlies the identification of key factors for recognizing opportunities and making decisions that affect organizational processes (Diaz-Fernandez et al., 2015). In this regard, top managers play a critical role, as their choices and actions create organizational contexts, responses to middle managers, and performances with ultimate impact on the organization (Smith, 2014). Managers (1) identify and develop new ideas to build, support, and stimulate employees involved in learning and processes, (2) contribute to the efficiency and coordination of existing capabilities that support new organizational capabilities, and (3) contribute leadership that enhances competitiveness (Lopez-Cabrales et al., 2015).

Companies that implemented open innovation, as a process of innovation in management, to direct the organization to the use of available resources, adapt to the new competitive environment before new strategic procedures, reduce organizational risk, expand competitive advantage and adaptability to the environment, to obtain superior performance (Lião et al., 2015). The shift in the management model from closed to open innovation emphasizes manager expertise, and it requires a more skilled workforce, especially concerning interpersonal skills (Reilly, 2018).

In this context, the justification of these assumptions (open innovation model and superior performance) is found in the narration of the facts that follow the vast literature on organizational theory, strategic management and management models, with particular emphasis on open innovation and the difficulties linked to management rooted in the concept of closed innovation (Aranha et al., 2017). Some authors (e.g., Almirall & Casadesus-Masanell, 2010; Leiponen & Helfat, 2010; Huizingh, 2011) argue that few studies are published in the scientific literature on the benefits of the implementation of the open innovation model in open innovation organizations, especially in SMEs.

This research sought to evaluate the relationship between open innovation and firm performance. The following research question emerged: What is the relationship between open innovation and firm performance?