Open Innovation as a Response to Constraints and Risks: Evidence from China*

This paper examines the determinants of open innovation as a response to the constraints and risks of innovation that firms face in emerging economies. A recent national firm-level survey of 1,400 firms in the manufacturing sector is used as the basis of the analysis. We find that institutional, financial and knowledge/skills-related risks and constraints are all significantly associated with these firms' depth and breadth of openness in innovation. The responses, however, vary across firms of different ownership types. Foreign-invested firms appear to be most responsive and take action to widen and deepen their openness in innovation. Privately owned firms have made significant responses to market- and institution- and finance- and risk-related impediments but not to knowledge- and skills-related impediments. State-owned firms appear to be least responsive in use of open innovation. Firm size and industry specific effects also appear to have significant moderating effect on firms' responses to the various constraints. These findings are supported by an in-depth study of the Chinese semiconductor industry. © 2014 The Earth Institute at Columbia University and the Massachusetts Institute of Technology