The Influence of the Entrepreneur's Open Innovation Strategy on Firm Performance: Empirical Evidence From SMEs in Kenya

1. Introduction

Open innovation (OI) represents a more encompassing framework for understanding the phenomenon of generating value via innovation (Zhang et al., 2018; Schroll and Mild, 2011). The concept developed by Chesbrough (2003) has established important strategies in the world of business, institutional and academia. It represents a new way of looking at innovation as a new paradigm shift for functional innovation process and research. Thus, the concept has enlisted major concern for researchers, managers, and policymakers in analyzing innovation as an interactive process rather than an exclusive one (Chesbrough, 2003). Small and medium enterprises (SMEs) are more inclined to succeed in their innovation activities by using a wide range of spectrum of partners and external knowledge to take advantage of their expertise, to overcome the limits of their resources and to share uncertainties and costs related to innovation activities (Fakhreddine, Amara, and Landry, 2012).

It is in this perspective that this paper pursues to understand better the concept of the OI process in SMEs. The particular choice of SMEs can be explained in particular by their presence in the industrial fabric of the majority of countries and their importance in job creation. Moreover, SMEs are often considered as a bastion of innovation (Becheikh, Landry, and Amara, 2006; Massa and Testa, 2008).

Innovation activities are also one of the most important factors of international competitiveness, productivity, production and employment performance of many countries (Lee, Park, and Park, 2010). In recent years, innovation has become one of the main concerns of business leaders who want to penetrate new markets, increase their profitability and improve the value of their goods and services (Barrett and Wynarczyk, 2009; Barron, Hultén, and Hudson, 2012). The review of the literature reveals the complex nature of OI, given the existence of various internal and external factors whose interactions influence a firm’s innovation activities and performance (Huizingh, 2011).

The concept of OI has been widely studied in the context of large companies (Chesbrough, 2003; Criscuolo, Haskel, and Slaughter, 2010; Laursen and Salter, 2006, 2004; Lichtenthaler, 2008). Some researchers have analyzed the over-all effect of OI on organizational performance and recognized the positive effect of such aspects as involvement of firms with OI (Chaston and Scott, 2012), OI inclination (Hung and Chiang, 2010), the publication of OI events (Noh, 2015), OI capabilities (Ahn, Minshall, and Mortara, 2013), OI application (Huizingh, 2011), open search strategies (Cruz-Gonzalez, Lopez-Saez, and Navas-Lopez, 2015), technology association portfolio (Faems et al., 2010). Most of these studies have focused on the effect of incoming external knowledge and found a direct positive effect of external knowledge sourcing on firm performance (Vrontis et al., 2016; Wang, Chang, and Shen, 2015). However, these studies did not focus on the entrepreneur’s OI strategy when analyzing the OI aspects and the studies were not sector specific. Furthermore, researchers have used the concept of absorptive capacity to understand the contingency of OI on firm performance (Wang, 2018). SMEs require appropriate knowledge basis and compatible cognitive ability to integrate and transform external knowledge. Such capabilities are highly reliant on the firm’s strategic behavior and human resource. Thus, some researchers proposed that entrepreneur open innovation strategy is important but ignored component of firm technology absorption capacity and performance (Jelonek, 2015; Huggins and Thompson, 2017). Studies that have focused on open innovation within agribusiness enterprises remains rare.