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Openness and innovation performance: are small firms different?

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  • Priit Vahter

    (Birmingham Business School, University of Birmingham)

  • James Love

    (Birmingham Business School, University of Birmingham)

  • Stephen Roper

    (Small and Medium Sized Enterprise Centre, Warwick Business School, University of Warwick)

Abstract

Traditionally, literature on open innovation has concentrated on analysis of larger firms. We explore whether and how the benefits of openness in innovation are different for small firms (less than 50 employees) compared to medium and large ones. Using panel data over a long time period (1994-2008) from Irish manufacturing plants, we find that small plants have on average significantly lower levels of openness, a pattern which has not changed significantly since the early 1990s. However, the effect of ‘breadth’ of openness (i.e. variety of innovation linkages) on innovation performance is stronger for small firms than for larger firms. For small firms (with 10-49 employees) external linkages account for around 40 per cent of innovative sales compared to around 25 per cent in larger firms. Small plants also reach the limits to benefitting from openness at lower levels of breadth of openness than larger firms. Our results suggest that small firms can gain significantly from adopting an open innovation strategy, but for such firms appropriate partner choice is a particularly important issue.

Suggested Citation

  • Priit Vahter & James Love & Stephen Roper, 2012. "Openness and innovation performance: are small firms different?," The Centre for Small and Medium Sized Enterprises Research Paper Series 113, Centre for Small and Medium Sized Enterprises, Warwick Business School, University of Warwick.
    • Handle: RePEc:sme:wpaper:113
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    1. Corral de Zubielqui, Graciela & Fryges, Helmut & Jones, Janice, 2019. "Social media, open innovation & HRM: Implications for performance," Technological Forecasting and Social Change, Elsevier, vol. 144(C), pages 334-347.
    2. Daniel RUSU, 2023. "Perspectives of Collaboration between Large Firms and High-Tech SMEs Regarding Open Innovation (OI)," Management and Economics Review, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 8(2), pages 180-200, June.
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    5. Graciela Corral de Zubielqui & Noel Lindsay & Wendy Lindsay & Janice Jones, 2019. "Knowledge quality, innovation and firm performance: a study of knowledge transfer in SMEs," Small Business Economics, Springer, vol. 53(1), pages 145-164, June.
    6. Mohamed Zain & Norizan Kassim & Nasser Kadasah, 2017. "Isn’T It Now A Crucial Time For Saudi Arabian Firms To Be More Innovative And Competitive?," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 21(03), pages 1-22, April.
    7. Love, James H. & Máñez, Juan A., 2019. "Persistence in exporting: Cumulative and punctuated learning effects," International Business Review, Elsevier, vol. 28(1), pages 74-89.
    8. Lu, Qinli & Chesbrough, Henry, 2022. "Measuring open innovation practices through topic modelling: Revisiting their impact on firm financial performance," Technovation, Elsevier, vol. 114(C).
    9. Heuschneider, Sara & Herstatt, Cornelius, 2016. "External search for exploration of future discontinuities and trends: Implications from the literature using co-citation and content analysis," Working Papers 92, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
    10. 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.
    11. Radicic, Dragana & Petković, Saša, 2023. "Impact of digitalization on technological innovations in small and medium-sized enterprises (SMEs)," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    12. Alfonso Expósito & Juan A. Sanchis-Llopis, 2019. "The relationship between types of innovation and SMEs’ performance: a multi-dimensional empirical assessment," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 9(2), pages 115-135, June.
    13. 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).
    14. Ashish Kumar Jha & Indranil Bose, 2021. "Linking Drivers and Outcomes of Innovation in IT Firms: The Role of Partnerships," Information Systems Frontiers, Springer, vol. 23(6), pages 1593-1607, December.
    15. Obradović, Tena & Vlačić, Božidar & Dabić, Marina, 2021. "Open innovation in the manufacturing industry: A review and research agenda," Technovation, Elsevier, vol. 102(C).
    16. Alfonso Expósito & Juan A. Sanchis-Llopis, 2018. "Innovation and business performance for Spanish SMEs: new evidence from a multi-dimensional approach," Working Papers 1805, Department of Applied Economics II, Universidad de Valencia.
    17. Andriana G. Dimakopoulou & Nikos Chatzistamoulou & Kostas Kounetas & Kostas Tsekouras, 2023. "Environmental innovation and R&D collaborations: Firm decisions in the innovation efficiency context," The Journal of Technology Transfer, Springer, vol. 48(4), pages 1176-1205, August.
    18. Roper, Stephen & Love, James H. & Bonner, Karen, 2017. "Firms’ knowledge search and local knowledge externalities in innovation performance," Research Policy, Elsevier, vol. 46(1), pages 43-56.
    19. Stephen Roper & Nola Hewitt-Dundas, 2017. "Investigating a neglected part of Schumpeter’s creative army: what drives new-to-the-market innovation in micro-enterprises?," Small Business Economics, Springer, vol. 49(3), pages 559-577, October.
    20. Becker, Bettina & Roper, Stephen & Vanino, Enrico, 2023. "Assessing innovation spillovers from publicly funded R&D and innovation support: Evidence from the UK," Technovation, Elsevier, vol. 128(C).
    21. Messer, Julia & Martin, Alexander, 2019. "Open Innovation in KMU: Eine empirische Analyse ausgewählter Faktoren," Flensburger Hefte zu Unternehmertum und Mittelstand 18, Jackstädt-Zentrum Flensburg.

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    More about this item

    Keywords

    Open innovation; SMEs; boundary-spanning linkages; learning effects; Ireland;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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