Managing Open Innovation
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Managing Open Innovation

Connecting the Firm to External Knowledge

André Spithoven, Peter Teirlinck and Dirk Frantzen

Open innovation is about firms’ external relations with other firms and organisations. It is a topic which has attracted an immense amount of attention, but which has also been heavily criticised due to the diversity of the ideas and fuzziness of its key concepts. To date, the bulk of the literature on open innovation draws on case study material to illustrate the operation of firms in an anecdotal way. By contrast, this book examines open innovation practices by using large-scale datasets and stresses their impact on firm performance. The authors examine four key issues: differences between firms in open innovation practices, public funding to enhance external relations, R & D outsourcing of firms, and the role of human resources in R & D and innovation.
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Chapter 4: Public Intervention and Innovative Networking: Firm-level Evidence on the Opening-up of the Innovation Process

André Spithoven, Peter Teirlinck and Dirk Frantzen


4.1 INTRODUCTION The main argument in favour of public intervention in R&D and innovation processes lies in the existence of market failures (Arrow, 1962). Due to these failures unintended knowledge spillovers occur and the appropriability of benefits from the innovation hinders further activity (Martin and Scott, 2000). Enterprises are then assumed to avoid R&D investment through lack of necessary incentives (Hall, 2002). Hence, supporting innovation is a major ingredient of science and technology policy, which ultimately aims to enhance entrepreneurial performance and so stimulate economic growth. Policy-makers have at their disposal a large number of policy instruments to enhance R&D and innovation. These range from passive instruments like tax policy through fiscal incentives (Hall and Van Reenen, 2000; Klette et al., 2000; Guellec and Van Pottelsberghe, 2003) and subsidies (Klette et al., 2000; Guellec and Van Pottelsberghe, 2003) to more active involvement by performing R&D in public research organisations designed to create spillovers (Martin and Scott, 2000; OECD, 2002b). This chapter focuses on subsidies. These relate directly to the innovation projects the enterprises perform themselves (Busom, 2000). Although the rationale behind the public funding of innovation is theoretically well grounded, the empirical literature is ambiguous in its assessment of the benefits of public funding of R&D and innovative activity (David et al., 2000, Klette et al., 2000) and there is little consensus on the effectiveness of R&D subsidies (Jaffe, 2002; Hall, 2002). This lack of consensus can be attributed to several factors. First, subsidies...

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