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Dynamic capabilities and economic crises: has openness enhanced a firm's performance in an economic downturn?

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  • Joon Mo Ahn
  • Letizia Mortara
  • Tim Minshall

Abstract

Many studies have attempted to investigate the potential benefits of open innovation. However, the long-term effects of openness have yet to be demonstrated, even if few researchers hypothesized that high openness could increase firms’ dynamic capabilities and hence their resilience in the face of adversities, such economic downturns. Hence, this article attempts to investigate this dynamic relationship between openness and firm performance with particular considerations addressing the recent financial crisis in 2008. Based upon the UK Community Innovation Survey (CIS) panel data collected between 2006 and 2012, this study finds evidence that supports the positive influence of openness on long-term firm performance. The results show that (i) increasing a firm's openness is an effective way of enhancing its dynamic capability and hence its resilience, and (ii) of all the various configurations of openness, the collaboration with partners outside the firm's value chain and international partners has the highest impact on turnover recovery, as they will increase the chances of acquiring newer knowledge, which in turn will help firms to identify new opportunities to achieve sustainable growth. The findings of this article have some practical implications for managers and policymakers.

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  • Joon Mo Ahn & Letizia Mortara & Tim Minshall, 2018. "Dynamic capabilities and economic crises: has openness enhanced a firm's performance in an economic downturn?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 27(1), pages 49-63.
    • Handle: RePEc:oup:indcch:v:27:y:2018:i:1:p:49-63.
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    3. Hutton, Steven & Demir, Robert & Eldridge, Stephen, 2021. "How does open innovation contribute to the firm's dynamic capabilities?," Technovation, Elsevier, vol. 106(C).
    4. Garcia Martinez, Marian & Zouaghi, Ferdaous & Garcia Marco, Teresa & Robinson, Catherine, 2019. "What drives business failure? Exploring the role of internal and external knowledge capabilities during the global financial crisis," Journal of Business Research, Elsevier, vol. 98(C), pages 441-449.
    5. Parnell, John A., 2021. "An Ounce of Prevention: What Promotes Crisis Readiness and How Does It Drive Firm Performance?," American Business Review, Pompea College of Business, University of New Haven, vol. 24(1), pages 90-113, May.
    6. Omar Carrasco-Carvajal & Mauricio Castillo-Vergara & Domingo García-Pérez-de-Lema, 2023. "Measuring open innovation in SMEs: an overview of current research," Review of Managerial Science, Springer, vol. 17(2), pages 397-442, February.
    7. Ahn, Joon Mo & Lee, Weonvin & Mortara, Letizia, 2020. "Do government R&D subsidies stimulate collaboration initiatives in private firms?," Technological Forecasting and Social Change, Elsevier, vol. 151(C).
    8. Constantinescu,Ileana Cristina & Fernandes,Ana Margarida & Grover,Arti Goswami & Poupakis,Stavros & Reyes Ortega,Santiago, 2022. "Globally Engaged Firms in the COVID-19 Crisis," Policy Research Working Paper Series 9991, The World Bank.
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    12. Marullo, Cristina & Ahn, Joon Mo & Martelli, Irene & Di Minin, Alberto, 2022. "Open for innovation: An improved measurement approach using item response theory," Technovation, Elsevier, vol. 109(C).
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    14. Osiyevskyy, Oleksiy & Shirokova, Galina & Ritala, Paavo, 2020. "Exploration and exploitation in crisis environment: Implications for level and variability of firm performance," Journal of Business Research, Elsevier, vol. 114(C), pages 227-239.
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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