Beyond Open Innovation in Large Enterprises: How Do Small and Medium-Sized Enterprises (SMEs) Open Up to External Innovation Sources?

Abstract

The existing literature on open innovation mostly concentrates on large firms. Little is known about the role of open innovation in small and medium-sized enterprises (SMEs). In this paper we explore how SMEs engage in open innovation search. We draw upon a new survey of 1,489 SMEs. Results highlight that SMEs purposively open up to external innovation inputs. We identify variations in how SMEs search for external innovation inputs and empirically classify five strategic types of open innovation search. While these five strategies can be found in different industries, size and age classes, results suggest that a SME’s open innovation search strategy is conditioned by its organizational context. We also find that these strategies significantly differ in their ability to improve innovation performance as well as their internal organizational requirements for managing innovation. Our study indicates that both a demand-driven and a widely diversified search strategy can improve the success of SMEs in launching innovations. The latter can even enhance their ability to capture financial value from innovation; however, value capture requires a higher proficiency in managing innovation internally.

Keywords: SMEs, open innovation, open innovation search, organizational innovation practices, absorptive capacity, innovation performance