The effect of open innovation activities during unstable economic conditions on subsequent product innovation performance: an analysis of German SMEs

Abstract

During the past decades, the business environment experienced vast changes and unstable economic conditions. The recent economic crisis had a pervasive influence on companies’ viability and inhibited them in their innovation efforts. As a matter of fact, SMEs that typically possess fewer resources are even more constrained and affected during recessions. Much literature highlighted the strategic importance of Open Innovation practices for innovation performance. Specifically, technological co-operation is assumed to be one of the most effective Open Innovation activity that brings in external resources and thus influences product innovation performance. Nonetheless, even though some literature examined what types of companies are able to maintain or increase innovative efforts during recessions, few studies investigated in how far economic recessions change the willingness of companies to open up their innovation practices and the effect of R&D co-operation on subsequent product innovation performance. This research study investigates if open innovation activities are a possible strategy for SMEs to weather economic recessions and positively impact subsequent product innovation performance. Consequently, is gradually opening up innovation activities and participating in R&D co-operation during crisis beneficial? Having analyzed data of German SMEs, the study confirms that a higher degree of openness, compared to a closed innovation system during crisis positively affects radical and incremental innovation performance. Furthermore, R&D co-operation is more likely to affect only incremental performance. However, only vertical co-operation is found to be significant, whereas engaging with multiple different co-operation partners even deteriorates innovation performance.