Does Open Innovation Apply to China? Exploring the Contingent Role of External Knowledge Sources and Internal Absorptive Capacity in Chinese Large Firms and SMEs

By Huang, Fang; Rice, John et al. | Journal of Management and Organization, September 2015 | Go to article overview

Does Open Innovation Apply to China? Exploring the Contingent Role of External Knowledge Sources and Internal Absorptive Capacity in Chinese Large Firms and SMEs


Huang, Fang, Rice, John, Martin, Nigel, Journal of Management and Organization


(ProQuest: ... denotes formulae and/or non-US-ASCII text omitted; see image)

Introduction

The 'open innovation' paradigm, first popularised by Chesbrough (2003a, 2003b, 2006) as a contrast to the traditional 'closed innovation' approach, has aroused growing research interest in recent times. As an approach to organisational design, it challenges the traditional and fundamental assumptions regarding the manner in which firms conduct innovation and commercialise innovation outputs (Liao, Rice & Lu, 2014). According to Chesbrough and other scholars, this new paradigm demonstrates some essential characteristics, such as the strong and effective interaction between a firm and its environment through permeable firm boundaries (Laursen & Salter, 2006; Volberda, Foss, & Lyles, 2010; Huizingh, 2011) and the adoption of open search strategies spanning a wide range of external actors and sources (West & Gallagher, 2006; Leiponen & Helfat, 2010).

Open innovation's proponents have asserted that it is a potential source of distinctive technological competence and hence a driver of long-term competitive advantages (Chesbrough, 2006). However, open innovation strategies can act only as a facilitator of innovation and cannot overcome fundamental deficiencies or ineffective systems and capability configurations elsewhere in the organisation (Rice, Liao, Martin, & Galvin, 2012). Further, the ubiquitous applicability of the open innovation model as a means to improve innovation performance has yet to be proven and thus the generalisability and validity of this new paradigm requires further empirical testing. Indeed, where empirical work has been undertaken, the results have been ambiguous and difficult to generalise. We see two main limitations in the extant literature that we hope to address, namely the inadequate empirical evidence of open innovation's application in the context of emerging economies and of its differential impacts on different sized organisations.

First, the majority of extant research on open innovation is drawn from firms operating in North America and Europe (Chaston & Scott, 2012). These jurisdictions tend to have elaborate knowledge diffusion systems (e.g., strong government research agencies and universities closely co-located with firms). It is thus perhaps important to assess if the situation might be different outside these highly developed regions, especially in emerging countries, such as China.

China presents an interesting, and highly topical, context to explore the wider applicability of the open innovation approach. With the economic reform processes driving the centrally planned economy towards more market-driven arrangements, and the implementation of an 'opening-up' policy over the past 35 years, China has experienced substantial changes in virtually every aspect of its society and economy, including within its national innovation and technology system (Tan, 2001; Motohashi & Yun, 2007; Li, 2009). Its National Innovation System has experimented a series of reform initiatives driving it from a plan-based system towards a market-based open system of innovation (Liu & Lundin, 2008). These initiatives include establishing special economic zones across China to support the development of high-technology enterprises, top-down systemic reforms, and bottom-up initiatives supporting the development of enterprise-centred innovation activities (Liu & Lundin, 2008; Savitskaya, Salmi, & Torkkeli, 2010).

During more recent stages of China's economic transitional phase, its National Innovation System has exhibited some open innovation features in terms of innovation practices adopted by pioneering domestic corporations such as Lenovo, Huawei, Little Swan, Haier (Liu & Lundin, 2008; Fu & Xiong, 2011). Among these indigenous open innovators, an increased degree of information fluidity and knowledge transfer between focal firms and external knowledge sources (i. …

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