An analysis of the open innovation effect on firm performance

The open innovation (OI) paradigm describes how firms innovate by interacting with other organizations. Several authors found that specific OI strategies have a positive effect on economic and industrial innovation performance. Nevertheless, over-search and over-collaboration phenomena might reduce the OI marginal returns when a firm resorts to additional external innovation partners. This article hypothesizes that the variety of external innovation channels (search breadth) used by a firm, the extent to which a firm draws deeply from them (search depth) and the extent to which a firm collaborates through different external channels (coupled OI) are curvilinearly related with innovation performance. The empirical models are estimated using 84,919 firms from Eurostat's Community Innovation Survey, which was conducted in 2008 across European countries. The results suggest that search breadth is curvilinearly related with all the measures of innovation performance, whereas search depth is not subject to diminishing marginal returns in most cases. Furthermore, this article shows that coupled OI is curvilinearly related with the development and commercialization of radically new products. The findings of this study make several contributions both in a practical perspective, showing how managers can put into practice different OI strategies to influence innovation performance, and in a theoretical perspective, suggesting a number of recommendations for future research.