How does open innovation contribute to the firm's dynamic capabilities?. (August 2021)

• Record Type: Journal Article
• Authors: Hutton, Steven; Demir, Robert; Eldridge, Stephen
• Is Part Of: Technovation. Volume 106(2021)
• Publication Date: 2021-08
• Subjects: Open innovation -- Microfoundations -- Dynamic capabilities -- Capability development -- New knowledge creation; Technological innovations -- Periodicals; Industrial management -- Periodicals; Innovations -- Périodiques; Gestion d'entreprise -- Périodiques; Electronic journals; 658.57
• DOI: 10.1016/j.technovation.2021.102288
• Languages: English
• ISSNs: 0166-4972

Abstract

Abstract: A pressing management issue exists to understand how firms can develop dynamic capabilities (DC) through processes such as open innovation (OI). Our study aims to expand knowledge in this area by explicating the underlying mechanisms of OI that contribute to a firm's DC. Adopting a microfoundations perspective, we examined three separate new product development projects in a UK manufacturer over a period of two years. Our findings demonstrate that manufacturing firms can exploit technological and market-based knowledge resources during OI activities and we have developed a process model to reflect these findings. We were able to identify three underlying mechanisms of OI: realization, engagement, and appropriation, that contribute to the creation of firm resources and the firm's DC. Our study reveals that each mechanism links the process of OI to a firm's DC by sequentially and reciprocally altering the firm's abilities for sensing and seizing opportunities. This improved understanding of the microfoundations of OI enables us to explain how external knowledge search and the ensuing knowledge appropriation can correct misalignment between a firm's current capabilities and its future market opportunities, and, thus, enhance the firm's DC. Highlights: Open Innovation contributes to the firm's Dynamic Capabilities through support of the firms sensing and seizing abilities. Open innovation contributes the the firm's sensing and seizing abilities through Realization, Engagement and Appropriation. The Open Innovation process may create new knowledge by stimulating new ideas and behaviour modifications. Understanding how behaviour modifications influence new product innovation may improve the chances of product development success.