Open innovation and sustainable competitive advantage

Abstract

Since the beginning of the Industrial Revolution, innovation has been an important source of compet-itive advantage. In response to changes in the global knowledge environment, companies have changed from closed innovation model to open innovation model, interacting with their environment through internal and ex-ternal technology commercialization channels. The value of open innovation is that firms can overcome limita-tions in internal capabilities with external knowledge, which may generate innovative products in response to market changes. Implementing open innovation, collaboration among organizations plays a very important role. However, there is a possibility that the cost of searching and constructing a network is not so small, and there may be a failure due to a disagreement between objectives and a difference in capability among organizations. Although various studies about open innovation have been published, most of them focus on the re-lationship between knowledge sources and innovation performance, difference in innovation performance based on the depth and breadth of source utilization and the frame of moderating effect such as absorptive capacity. In addition, they can be characterized as highly field-oriented works focusing on case studies pub-lished in practical journals such as HBR. This study examined the process of innovation activity of a company leading to the enterprise's per-formance, the effective knowledge sources, support activities necessary for the open innovation success, and its necessary capabilities, to fill in the scarce part of open innovation literatures. The key points of each research are as follows. The first essay, “An Approach of Two Dimensional Innovation Performance for Analyzing Processes In-between: Knowledge Sources Perspective”, is based on existing research dealing with the relationship between various sources of knowledge and innovation performance. While previous research has been largely focused on what sources of knowledge are effective in innovation performance, this study analyzes the process of various sources of knowledge to the final financial performance and what causality exits in the process. It is also pro-posed and demonstrated an improved innovation performance measurement method, decomposing into "prod-uct innovation performance" and "technology commercialization success", to analyze these innovation pro-cesses. The proposed measures of innovation performance are used throughout the dissertation. The results con-firm that two constructs of "product innovation performance" and "technology commercialization success" serve as mediators between the use of knowledge sources and firm performance, competitors (or peers) are the most important source of knowledge, and the role of universities is unclear. The results of this study suggest that the relative effectiveness of knowledge sources in Korea’s innovation environment can be diagnosed and that careful attention should be paid to the process of product innovation leading to technology commercialization success. The second essay, “Does External Knowledge Sourcing Enhance Market Performance?: Focusing on the Combination Effect of Technical and Non-technical Activities”, considers non-technical innovation activi-ties to enhance open innovation performance. While open innovation has been mainly dealt with technological innovation, this study has demonstrated the effects of non-technical activities ("organizational innovation" and "marketing innovation") on the process of open innovation’s value creation. The results demonstrate a strong statistical relationship in the path of external knowledge sourcing to product innovation performance to market performance. Organizational innovation is an antecedent to external knowledge sourcing while marketing inno-vation is a consequence of external knowledge sourcing, which significantly influences product innovation per-formance and market performance. The results imply that it is necessary to consider the linkage with product innovation, organizational innovation, and marketing innovation to be effective in achieving the target market performance. The third essay, "How Open Innovation Leads Competitive Advantage?: Dynamic Capability View Perspective ", examines the capabilities needed for an open innovation success and the relationship between them. The capabilities are classified into "sensing capability", "seizing capability", and "transforming capability" from the perspective of dynamic capability view. The results confirm the statistical significance of the path link-ing open innovation to competitive advantage through product innovation performance. From the viewpoint of capabilities required for open innovation, transforming capability plays a role of significant prerequisite of sens-ing capability and seizing capability, having a direct or indirect significant effect on product innovation perfor-mance and competitive advantage sequentially. The results of this study suggest that the linkages between the needed capabilities of organization must be considered for performing open innovation to secure competitive advantage. The dissertation examined the questions that help firms to adopt open innovation, i.e., whether open innovation is effective in improving corporate performance, which innovation process leads to performance, what support activities are needed to generate performance, what kind of relationships do they have with other activities, and what are the capabilities that an organization needs for open innovation success. The samples were drawn from the Korean Innovation Survey database and structural equation modeling was used to ana-lyze the models. One of the big issues in the recent business environment is the servitization of products. Open innova-tion research related to the area, including service industries not covered in this study, is necessary in this field. This will be a good approach not only to contribute to the development of theories of open innovation, but also to contribute to strengthening the competitiveness of the industry field.