Customer involvement and R&D efficiency

Abstract

Open innovation, which completely transformed the form of corporate innovation, has emerged in recent years as a new business and innovation strategy research concern. Among other various types of knowledge sources that can be used during open innovation, it is noteworthy that companies utilize customer's knowledge. This is because it shows that customers are not only targeted for traditional marketing purposes, but also have potentials to become active knowledge providers in product development and innovation process. Despite this importance, there is a lack of macro level research using firm survey data that explains the effect of customer involvement as information sources (CIS) and its relationship with firm performance. Therefore, the purpose of this study is to investigate the different aspects of CIS throughout the whole innovation process, which consists of the invention stage and value-creation stage, by comparing R&D efficiencies of CIS-use firms and CIS-non-use firms. This study also aims to examine the use of CIS and R&D efficiency in different industry context through an empirical analysis for high-tech and low-tech firms, respectively. In order to achieve this, data from Korea Innovation Survey was used, and 2-stage Data Envelopment Analysis (DEA) was applied to measure the R&D efficiency of each firm at each stage. Empirical analysis showed the completely different results between high-tech and low-tech firms. In the case of high-tech firms, firms using CIS have lower R&D efficiency at value-creation stage than those who did not, while there was no statistically significant difference at the invention stage. However, for low-tech firms, CIS-use firms have higher R&D efficiency at value-creation stage (as opposed to high-tech firms), but they have lower R&D efficiency at invention stage. This paper has an academic implication that it extended the research on CIS by examining the use of CIS and its performance in terms of R&D efficiency in the whole innovation process that was not studied in the past. In addition, it can also be a practical guideline for a firm in a specific industry that seeks to leverage customer knowledge in the innovation process.