Open Innovation Where it Really Matters: The U-Shaped Relationship Between Relative Open Innovation and Innovation Performance in Developing Countries

Abstract

In the innovation literature, there are mixed findings as to the influence of open innovation on innovation performance, which may be due to the predominantly exclusive focus on the level of open innovation rather than on its comparison with closed innovation (i.e., relative open innovation) thereby considering the costs associated with opening up. To address this issue, we empirically examine how relative open innovation is related to innovation performance. Our fieldwork is based on 130 Serbian firms. This sample is relevant because embracing open innovation can bring several benefits to firms from developing countries but, at the same time, the contextual limitations that firms in such countries have, make the adoption of open innovation costly. Using ordinary-least-squares regression, we find a U-shaped relationship between relative open innovation and innovation performance. We contribute to the literature by showing that firms with either low or high relative open innovation achieve a greater innovation performance than those with medium-level relative open innovation. This is due to the fact that the costs associated with opening up (i.e., transitioning from closed to open innovation) are highest at the medium level of relative open innovation, and especially prominent in developing countries.