How Will Openness to External Knowledge Impact Service Innovation? Evidence from Korean Service Sector
41 Pages Posted: 20 Jun 2013
Date Written: December 26, 2011
I examine whether firms’ openness improves innovative performance of the firms and what factors make the openness more effective in generating innovation. Using 2006 Korean Innovation Survey in service sector, I test whether openness improves innovative performance and how absorptive capacity, new startup and use of appropriation methods influence the effect of openness on Korean service firms’ innovation respectively. I find the following: First, the effect of openness varies depending on type of innovation. Openness is more effective for radical innovation than for incremental innovation. Second, there is complementarity between openness and R&D intensity when innovation is radical. When the R&D intensity level is high, the effect of openness becomes stronger. However, there is no complementarity when innovation is incremental. Third, openness is more effective for a new startup to perform radical innovation than incremental innovation. Fourth, when a firm uses too many appropriation methods, openness is not effective for innovation.
Keywords: Open Innovation, Openness to External Knowledge, Types of Innovation and Firm Performance
JEL Classification: O31, O32
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