Openness to Competitors and Firm Innovation

Abstract

This thesis aims to explore how firms can be open to competitors to innovate, mainly focusing on the determinants of openness to competitors, whether they should adopt knowledge-protection mechanisms and why they select different openness modes. Through a systematic review of the literature on the determinants of open innovation, I find that previous studies have provided insights in improving our understanding of the topic from a range of theoretical perspectives. Yet, extant research has shown diversities and discrepancies in the findings about how internal factors affect open innovation (i.e., “internal factors of open innovation success”). By identifying four dimensions of organization factors (i.e., resource investment, organizational structure, human capital and individual attitudes) and reviewing their effects on the implementation of open innovation, I generate a literature framework and discuss several directions for future research. Based on this, I focus on open innovation in competitive contexts, i.e., the openness to competitors, a field that has received relatively less attention. Then, I conduct two empirical studies using the data from the Spanish Community Innovation surveys. The first examines the determinants of openness to competitors from the absorptive capacity (ACAP) view. This study extends this view by adding a perspective of selective openness. The results suggest that after innovation failures, firms with more R&D investments are more likely to search for knowledge from competitors (competitor search), whereas they are less likely to build formal cooperation with them (competitor cooperation). Further analysis suggests that this risk-averse propensity is because of managers’ fear of the risks from competitors. The second empirical study examines whether or not a firm should adopt knowledge-protection mechanisms. I follow the ACAP view and conceptualize the process of absorbing competitors’ knowledge to innovate into two stages: potential and realized. I try to uncover the process through which R&D investment affects innovation performance by establishing the absorption of competitors’ knowledge as a mediator. My findings reveal that a firm’s R&D investment will increase its innovation performance, which can be achieved by absorbing knowledge from competitors. In addition, knowledge protection positively moderates the relationship between R&D investment and the absorption of competitors’ knowledge, while it negatively moderates the relationship between the absorption of competitors’ knowledge and innovation performance. Overall, this thesis contributes to the ACAP view and the literature on open innovation by exploring the determinants of openness to competitors, and by reconciling the debate on the paradox of openness and protection.