Three Axioms on Open Innovation and a (Non-) Parametric Application to the Entrepreneurial Case

Abstract

After a brief discussion of the economics and resource-based principles underlying the open innovation (OI) paradigma we empirically investigate the impact of open innovation and alike activities on entrepreneurial knowledge and firm growth. For these purposes we use parametric as well as non-parametric techniques on panel data of US-entrepreneurs (2005-2007), the latter allowing for the analysis of multiple outputs maximization problems with multiple inputs in efficiency terms relaxing linearity and distributional assumptions of general regression estimation.

We find that outside - in processes of OI significantly increase both dimensions of growth while inside-out processes (weakly) decrease firm growth. For efficient observations within the sample the knowledge production frontier shifts from proprietary innovation sources of information (i.e. R&D staff) towards higher levels of use on external sources (i.e. IP-licensing-in) over time. When firm size (or employment generation) is included as an output goal - next to the stock of knowledge - we observe minor efficiency gains over time whereby a mixed pattern of (internal and external) information sources rather than an exclusive use becomes more dominant with increasing firm size. Additionally, the efficient design of coupled processes for firm growth and knowledge production tends to shift, in particular for very small entities, from internal capacity-building objectives, that is related to the use of outside-in processes, to a dominant external exploitation pattern of proprietary knowledge assets, that is related to the use of inside-out processes.

Keywords: Open Innovation, Entrepreneurship, Firm Growth, Panel, KFS, DEA, Non-Parametric Approach, Licensing, Inside-out, Outside-in, IPR, Market for Technology

JEL Classification: L2, O3, C23, C67