Implications of Openness: An assessment of the dynamics of open innovation engagement to the intrinsic characteristics of innovative small and medium enterprises

Abstract

Promoters of open innovation highlight advantages in overcoming knowledge and other resource shortages to realise innovation objectives. Consequently, indications are that adoption of such collaborative practices would be beneficial to address the well-recognised innovative SME characteristic of resource shortages that impede innovation. However, open innovation research generally centres on large firms and focuses on the advantages of engagement, with less known of the disadvantages (Dahlander & Gann, 2010). The literature continues to be scarce regarding whether open innovation is predominately contributory or detrimental to SMEs (Huizingh, 2011). This study investigates engagement in open innovation to determine the implications to innovative SMEs’ characteristics. From a systematic review of the literature on open innovation and the domain of the innovative SME, a framework is derived to guide the empirical research. The research method employed two stages; firstly, a questionnaire to 25 New Zealand engineering SMEs established the presence of open innovation. Six of these firms then participated as case studies for the second stage of research. This study finds: 1. Open innovation affords access to critical innovation-required resources for SMEs, however engagement presents serious detriments, primarily relating to personnel. 2. Decisive challenges for practitioners include steep demands on management, time issues, and internal resistance. 3. Whereas the majority of effects span open innovation engagement, certain practices incur specific effects. 4. As open innovation is contingent upon interaction with external entities, effective management of the relationship dimension and relational competence are determinates of success. 5. To optimise engagement benefits, SMEs implement a range of organisational practices. This study contributes to the existing literature on open innovation and SMEs by developing understanding of the effects of engagement. Results indicate that while detriments are significant, the importance of the benefits surpasses the detriments, with case firms employing practices to manage the effects of engagement. Moreover, open innovation enhances organisational learning, in turn developing the organisational practices to optimise the return on open innovation endeavours in an interrelated cyclical process. The final model integrates this cyclical process to illustrate the dynamics of open innovation engagement by innovative SMEs and provides a framework for further research.