Assessing the effect of open innovation on firm performance: a study of Indian IT organisations

PurposeThere is a growing interest among academics, government agencies and private organisations to examine the scale, characteristics, and impact of Open Innovation (OI). Studies have examined these issues mainly in the context of a developed world. Because firms in developing economies face unique challenges of OI such as building networks, inter-firm interactions, collaboration for resource utilisation and knowledge sharing, these warrant an examination of the theoretical relationships between the antecedents of OI and their impact on performance as well as mediators of these relationships. Therefore, this study develops a comprehensive OI framework to measure open innovation and analyse its effect on the innovation performance of Indian IT organisations.Design/methodology/approachTheoretically, the study draws upon the Resource-Based View, Relational View, and Absorptive Capacity theories. Empirically, a survey questionnaire was distributed to Indian IT organisations through the online survey tool “Qualtrics”. The research framework was tested using the data collected from 346 Indian IT organisations.FindingsThe results highlight the positive effect of OI activities on innovation performance and the mediating role of absorptive capacity. IT organisations with a higher inbound knowledge and absorptive capacity demonstrated better innovation performance.Research limitations/implicationsThis study is limited to understanding the mediating effect of absorptive capacity for inbound innovation. Future studies into the mediating role of desorption capacity could reveal its impact on innovation performance.Practical implicationsFrom a management perspective, this knowledge will enable managers and policymakers to emphasise OI to achieve better innovation performance. This knowledge will provide both government decision-makers and IT managers with definite OI implications for innovation performance.Originality/valueThe main contribution of this study lies in exploring the interconnectedness among IT organisations and collaborative processes on OI and innovation performance. This empirical study pinpoints the causes and sources of OI that would lead to innovation performance and the mediating role of absorptive capacity in achieving innovation performance. It extends the empirical base of OI scholarship based on firms in an emerging economy.