The inconvenient truth of the relationship between open innovation activities and innovation performance

Purpose – Despite extensive published research into the relationship between open innovation (OI) activities and performance, the nature and direction of the relationship remain inconclusive. The purpose of this paper is to investigate the relationship as to how firms’ inbound and outbound OI activities, as well as their interaction influence incremental and radical innovation performance. The authors also consider the potentially mediating roles of knowledge learning and organizational capabilities in such a relationship. Design/methodology/approach – To investigate this relationship, data were collected from a cross-industry survey of 304 leading Taiwanese-based firms. Three-stage least square analysis was employed to test the model. Findings – Analyses reveal that knowledge learning and organizational capabilities mediate the OI activities-innovation performance relationship. In addition, a firm focussing on inbound activities enhances its radical innovation performance, but hinders its incremental innovation performance, while focussing on outbound activities produces the opposite effects. Among the findings, it is worth emphasizing that the effect of the interaction between inbound and outbound activities on innovation performance can be counter-productive. Research limitations/implications – The findings demonstrate that existing studies only partially explain the effects of OI activities on innovation performance. Understanding how OI activities influence innovation performance will facilitate more informed decision making, leading to more effective use of OI activities. Practical implications – The results suggest that managers need to consider knowledge learning and organizational capabilities in order to fully capture the potential effects of OI activities. Managers also need to be aware of the limitations of OI activities. Originality/value – The theoretical model presented here offers a timely contribution to the theory base underpinning the development of OI activities for innovation performance.