Openness in Product and Process Innovation

Abstract

Open innovation has generally been explored in terms of improved innovation performance vis-à-vis product/service innovation performance. However, process innovation is often ignored in the open innovation literature. In this study, we assess the impact of openness on innovation in products/services, and also on process innovation, drawing on a large-scale sample of Australian firms. In essence, we find that open innovation models are useful for firms seeking to innovate in processes as well as products and services. However, we find that openness to external information sources may, after a time, lead to decreasing marginal returns as measured by innovation performance. We also observe that, within our sample, the proposed complementarities between internal and external knowledge are generally only evident as precursors to the introduction of new products and services, and may not be as beneficial in stimulating process innovations. It is also shown by our study that investment in absorptive capacity has a declining marginal effect on the innovation performance of new processes, but not on the introduction of new products and services.