Connecting the Firm to External Knowledge
Chapter 1: Open Innovation and the Relation between Innovative Activities and Firm Performance
1. Open innovation and the relation between innovative activities and firm performance 1.1 INTRODUCTION The way firms manage innovation has changed profoundly in recent years (Chesbrough, 2003a; Chesbrough and Crowther, 2006). They used to invest heavily in specialised in-house R&D departments in order to generate innovation. This model has recently ceded ground to a more ‘open’ model, in which the research strategies of innovative firms increasingly rely on external knowledge. This encourages cooperation and implies a reorganisation of the research process, to allow for the internalisation of external ideas. Open innovation also implies a changing attitude to the appropriability of new ideas, since this may occur not only through product innovation, but through selling these ideas in disembodied form, through licensing, trademarks, and so on. It might therefore be of great interest to reconsider the relation between innovative effort and firm performance. Recent econometric studies on the relation between innovation and firm performance have estimated empirical structural models to explain the input and output stages of the innovation process as well as its impact on productivity (Crépon et al., 1998; Lööf and Heshmati, 2002, 2006; Griffith et al., 2006; Van Leeuwen and Klomp, 2006), or on turnover and employment growth (Klomp and Van Leeuwen, 2001). Special care was taken to make the models suitable for drawing statistical inferences from a population larger than that of the research-active firms. This was done by adding a probit equation to explain the probability of doing research and so obtain a...
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