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Open innovation practices and their effect on innovation performance

Article  in  International Journal of Innovation and Technology Management · December 2012

DOI: 10.1142/S021987701250040X

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International Journal of Innovation and Technology Management
©World Scientific Publishing Company

OPEN INNOVATION PRACTICES AND THEIR EFFECT ON INNOVATION

PERFORMANCE

BERND EBERSBERGER
Management Center Innsbruck (MCI), Universitaetsstrasse 15
A-6020 Innsbruck, Austria
bernd.ebersberger@mci.edu

CARTER BLOCH ∗

Danish Centre for Studies in Research and Research Policy (CFA), Aarhus University,
Finlandsgade 4, 8200 Aarhus N., Denmark
carter.bloch@cfa.au.dk

SVERRE J. HERSTAD
NIFU STEP Norwegian Institute for Studies in Innovation, Research and Education, Wergelandsveien 7,
N-0167 Oslo, Norway
Sverre@nifustep.no

ELS VAN DE VELDE

Senior Consultant, IDEA Consult, Kunstlaan 1-2, bus 16
B-1210 Brussels, Belgium
els.vandevelde@ideaconsult.be
Management and Innovation, Ghent University, Tweekerkenstraat 2
9000 Ghent, Belgium
els.vandevelde@ugent.be

Received (30 August 2010)

Revised (29 November 2010)

This paper develops an indicator framework for examining open innovation practices and their
impact on performance. The analysis, which is based on Community Innovation Survey (CIS) data
for Austria, Belgium, Denmark and Norway, yields a number of interesting results. First, we find
that open innovation practices have a strong impact on innovation performance. Second, results
suggest that that broad-based approaches yield the strongest impacts, and that the collective of open
innovation strategies appear more important than individual practices. Third, intramural investments
are still important for innovative performance, stressing that open innovation is not a substitute for
internal knowledge building.

Keywords: Open innovation; technological regimes; knowledge interfaces; innovation systems;

Community Innovation Survey.

∗
Corresponding author.

1
2 B. Ebersberger et al.

1. Introduction
Arguments have been made in recent years [OECD (2008); Chesbrough (2003, 2005)]
that industry is entering a new era of “open innovation”; an era of purposeful corporate
strategies through which investments in intramural R&D are supplemented or even
substituted by extensive use of external knowledge sourcing and external paths to
commercialization [Herstad and Naas (2007); Mariussen (2007); Lazonick (2007)].
This is not a phenomenon limited to companies from high technology or innovation
intensive sectors [OECD (2008)] such as Procter & Gamble, IBM and Giesecke &
Devrient. Companies in traditional industries, like Ewos Innovation from Norway which
develops and manufactures fodder for aquaculture, have consciously opened up their
search for new ideas and knowledge, and now target actors and communities well beyond
their traditional industry boundaries. Quilts of Denmark, which produces quilts,
mattresses and pillows, has built up a competitive advantage by combining internal
knowledge development with technology sourced from NASA and research findings
from Danish sleep researchers. Firms in the service sector, such as the Belgian bank
Fortis, constantly assess how external ideas and opportunities can be used to create value
within its own business model or contribute to the development of new models. Also,
companies whose innovation process has been perceived as tightly closed, such as the
Austrian Swarovski, are steadily opening up their innovation processes to improve their
performance [Reichwald and Piller (2006)].
These and other cases (see OECD [2008]) indicate that innovation processes at the
firm level can be conceptualized as requiring the simultaneous existence of various
external interfaces [Powell and Grodal (2005)], from mere information gathering to
collaborations and alliances with actors ranging from universities to suppliers and
customers. In this perspective, the roles of the firm become one of synthesizing and
integrating various external inputs, and in the process developing new ideas in the
interface between identified technological opportunities and perceived market demand.
How these complex patterns of network interaction emerge in real life will vary
substantially between firms and industries. This means that the question of interfacing or
"openness" cannot be reduced to formal ties or to one single dimension, such as alliances,
purchases of patents or collaboration; and that these dimensions should not be considered
in isolation from each other.
Despite the substantial attention that has been given to open innovation, there is little
systematic evidence on open innovation practices or on the impact on firm performance.
Among the few exceptions to this are Laursen and Salter, who look at one aspect of open
innovation, search strategies, examining the role of universities as a source of innovation
[Laursen and Salter (2004)] and the impact of breadth vs. depth of search strategies on
innovation performance [Laursen and Salter (2006)]. Acha [2007] examines different
measures of openness, focusing primarily on the association between openness and
design practices. However, these measures are looked at individually and are not
examined as different elements of an overall open innovation strategy. Jensen et al.
[2007] examine two modes of innovation, Science, Technology and Innovation (STI) and
Doing, Using and Interaction (DUI), both of which can be considered modes of
interaction or open innovation.
 Open Innovation Practices and their Effect on Innovation Performance 3

This underlies a need for greater analysis of the role of open innovation, and a
framework that captures its many dimensions. This paper seeks to contribute to the
literature on open innovation in two important ways. First, the paper develops a
framework of indicators of open innovation that is much more complete than earlier work
and allows the examination of open innovation across a variety of dimensions. These
include types of open innovation practices, the breadth and intensity of these practices,
and overall measures of open innovation. Our framework draws on CIS4 data and thus is
potentially applicable for a wide range of countries. Second, we analyze the impact of
these practices on innovation performance. In particular, we examine the following
questions: which types of open innovation practices have the greatest impact (if any) on
innovation performance? Do widespread practices matter most, or focused, intensive
efforts? Do individual open innovation practices appear to be most important, or the
collective of practices? And, are there differences between the impacts of domestic and
international channels?
The analysis is conducted using Community Innovation Survey (CIS) data for
Austria, Belgium, Denmark and Norway. The clear advantage with this data is its
harmonization, which greatly facilitates international comparative analysis. While the
analysis is also subject to the limitations of the data, it allows a fairly broad
representation of open innovation and yields a number of insights on the impact of open
innovation practices.

2. Conceptual background and hypotheses

This section reviews related empirical work and provides a conceptual background for
open innovation and the indicators developed in this paper. For a more detailed
theoretical discussion of open innovation, see Herstad et al. [2008].
Concepts such as open innovation and innovation systems build on the idea that
interactions are central to innovation and growth. Linkages and ‘openness’ are often
argued to have increased in importance, driven by a variety of factors [Hagedoorn (1993);
Lichtenthaler and Ernst (2007)], including complexity in the technological content of
products, processes and services, and the patterns of territorial specialization which
appear to follow from globalization. Often, the external knowledge needed for innovation
is dispersed across different actors and environments [Rothaermel et al. (2006)]. The
more complex knowledge bases, products or processes become, the higher is the direct or
indirect dependence on various external sources of knowledge. These external sources
may in turn be from completely different technologies or sectors. Companies may thus
need to establish interfaces serving functions ranging from mere information scanning to
in-depth collaboration, and targeting diverse environments and actor groups. And firms
may often need to keep these diverse interfaces open simultaneously [Herstad et al.
(2008)], operating in parallel and serving different functions in innovation and learning
processes.
The implication is that open innovation is much more than the purchase and sale of
intellectual property. There are a number of dimensions to open innovation. Collectively,
and interplay with each other, they define the open innovation strategies of companies.
4 B. Ebersberger et al.

Based on the above, we can broadly group open innovation practices into 4 dimensions:
search, external sourcing, commercialization, and collaboration.
Gassmann and Enkel [2004, 2006] structure open innovation in terms of three basic
processes: the inside-out process, the outside-in process and the coupled process. The
outside-in process covers all activities bringing external ideas inside the firm and
commercializing them in the form of new products and processes. The inside-out process
encompasses activities involved in exploiting ideas originated outside the firm. These
activities hence capture the external exploitation of technologies through licensing out,
sale of knowledge and divestment of parts of the firm, such as spinning off innovation
projects into new create innovative firms. The coupled process refers to collaborative
activities between different actors in the innovation system. This process captures
activities that relate to innovation collaboration as opposed to arm’s-length relationships
through market links [Pyka and Küppers (2003); Dittrich and Duysters (2007); Harryson
(2008)].
Search is the systematic scanning of external environments, using mechanisms
ranging from the personal networks of employees and partners to participation at e.g.
conferences or trade-fairs [Maskell et al. (2006)] and to the establishment of subsidiaries
as “listening posts” to tap into knowledge externalities [Grünfeld (2004); Asheim and
Gertler (2005)]. Firms search among customers, clients and competitors to increase their
understanding of the market and the direction of market change, and among universities,
research institutes, suppliers and again competitors for possible solutions or new
directions to explore. This all exposes the organization to diverse inputs, allowing them
to imagine, experiment and establish new combinations of technologies and knowledge –
and venture down new technological paths. Search processes can therefore be seen as a
dynamic capability that allows firms to sustain their competitive advantage over time
[Eisenhardt and Martin (2000)].
Fey and Birkinshaw [2005] find that openness to new ideas is the single most
important predictor of R&D performance. In an earlier analysis of corporate search
strategies, Laursen and Salter [2004] find that knowledge sources such as own R&D,
suppliers and customers are the most commonly used by UK manufacturing firms. The
direct use of universities as sources of ideas and information remain limited to a small
number of firms, found either in a limited number of sectors and among those who use
other information sources most extensively, and among those who have strong internal
R&D capacities. Laursen and Salter [2006] find that innovation performance increases
with both the breadth and depth of external search; i.e. with the diversity of external
information sources used, and their intensity of use. These relationships are however
found take on inverse U-shapes, indicating the possibility of excessive dependence on
external information sources.
The nature of search and its relationship towards performance is further argued to
depend on the richness of technological inputs and opportunities available in the
environment, and the ease of which these sources can be tapped into. Laursen and Salter
[2006] therefore point out that the relationship between search and performance is
affected by the degrees of complexity in industrial knowledge bases, search costs and the
possibility of over-searching (see also Katila and Ahuja [2002]).
 Open Innovation Practices and their Effect on Innovation Performance 5

Sourcing refers to the acquisition of knowledge or solutions on a market basis

[Granstrand et al. (1992); Fey and Birkinshaw (2005)]. The sourcing firm is primarily
concerned with the output of the contract, not the learning processes occurring through
the development work. Sourcing therefore provides solutions without knowledge
accumulation, and de facto leaves the contracting firm less control over assets developed.
The contract partner, in turn, whether it is a research institute or a supplier, is free to use
the experiences gained if not also the IPRs developed to serve other client companies (see
e.g. Hargadorn and Sutton [1997]). This may have the effect of increasing the
innovativeness of a larger population of companies.
The increasing prevalence of open search and sourcing strategies among businesses in
general and the tightening of IPR regimes combine to pave the way for external
technology commercialization [Lichtenthaler (2005); Gassmann and Enkel (2006)]. It can
take the form of licensing, establishment of new enterprises and the sale of IPRs [Boyens
(1998); Granstrand (2000)]. Through licensing, the originating firm remains in control of
the technology in question, but can utilize the already available complementary
capabilities of other firms [Teece (2001)]. Licensing therefore combines organizational
resources at their margins. By establishing new enterprises as vehicles for
commercialization the company may utilize external sources of funding to reduce its own
risk, while remaining in possession of an option for later full re-internalization.
External technology commercialization remains an under-investigated phenomenon,
although anecdotal case evidence [Chesbrough (2005)] as well as larger sample case
evidence [OECD (2008); Herstad and Naas (2007)] indicate it is becoming a broader
trend [Lichtenthaler and Ernst (2007)].
Collaboration is the development of knowledge through relationships with specific
partner organizations, and involves mutual exchanges of knowledge. Industrial firms may
collaborate with universities or research institutes [Balietta and Callahan (1992); Conway
(1995)], or with suppliers and customers [von Hippel (1988); Dyer (1991); Helper et al.
(2000); Lettl et al. (2006); Knell and Srholec (2008)], or form alliances or joint ventures
with other industrial firms holding complementary knowledge [Chiesa and Manzini
(1998); Hagedoorn (1993)].
As collaboration involves dense interaction and exposure of own knowledge, it also
requires trust [Storper (1997); Lundvall (1992)]. Typically, there is a need for
mechanisms to regulate opportunism [Helper et al. (2000)] and the development of
mutual understandings concerning what is to be achieved. Some of this can be
understood as relation specific, irreversible investments. It will, depending on the degree
of intensity and success in the interaction, result in processes of mutual learning and
adaptation. However, it also contains the risk of each partner gaining less through inflows
of knowledge than what is communicated outwards. In addition, it will often require the
allocation of substantial resources in the form of personnel (see e.g. Lam [2000]).
Collaboration is therefore presumably a more selective dimension of open innovation
than search, and may be prone to lock-in.
6 B. Ebersberger et al.

3. Data and methodology

In this section we introduce the data sets utilized in the analysis below. We then elaborate
on the creation of indicators for open innovation practices and introduce the methodology
used in the analysis. In particular, we briefly discuss the econometric models used to
assess the performance effect of open innovation practices.
The data basis for this analysis is the Community Innovation Survey (CIS) of Austria,
Belgium, Denmark and Norway. It is based on CIS 4 covering the years 2002-2004 for
Belgium, Denmark and Norway. Due to differences in data availability the analysis is
based on CIS 3 covering the years 1998 to 2000 for Austria. Although the reference
period is three yearsa (1998-2000 and 2002-2004) the data is a cross-section.
The Community Innovation Survey closely reflects the definitions of the Oslo
Manual [OECD/Eurostat (2005)] and thus provides good coverage of the items that could
potentially be used to build open innovation indicators. The survey contains information
on the innovation activities of firms, innovation collaboration, search for innovation,
protection of intellectual property rights and some context information about the firm
such as the industrial sector of main activity, size, exports, major markets, organizational
information, etc. The data sets used in the analysis contain innovation active firmsb from
manufacturing (including Mining and Quarrying) and knowledge intensive service
sectorsc.

3.1. Constructing open innovation indicators

Laursen and Salter [2006] introduce the notions of breadth and depth for their analysis of
the search strategies of firms. Breadth refers to the variety of partners or activities and
depth captures the intensity of the activity. We extend this approach in developing a set
of indicators that both capture individual dimensions of open innovation, their focus in
terms of breadth and intensity, and indicators of overall open innovation activities. We
capture open innovation practices in seven dimensions: external sourcing (breadth &
depth), search (breadth & depth), collaboration (breadth & depth) and protection
(breadth). In a second stage the breadth (depth) related dimensions are aggregated into an
overall open innovation breadth (depth) indicator. Finally, in a third stage, open
innovation breadth and open innovation depth are collapsed into an overall indicator
approximating all open innovation practices of the firm. This approach thus allows us to
examine both the use and importance of individual open innovation practices and also
their combination.
The general approach for generating the indicators representing open innovation
practices is to recode the appropriate items into dummies, to build an additive composite
indicator and finally to scale the indicator to range from 0 – 10, where 10 indicates the
highest degree of openness in this dimension. The sections below give more detail about

a However, quantitative data on expenditures and innovative sales only refer to the last year of the
reference period.
b Knowledge intensive services here include: Telecommunications, Computer services and Technical
business services.
c Innovation active firms have either introduced a product or process innovation or have had innovation
projects during the reference period.
 Open Innovation Practices and their Effect on Innovation Performance 7

the creation of the indicators. Additionally, Cronbach’s alpha is reported for each of the
national data sets to illustrate the reliability of the composite indicatorsd.
Sourcing
This indicator captures the sourcing practices of the companies. It includes both
reliance on external sources for the development of final products and processes and
purchases of external knowledge for in-house development activities. Sourcing breadth
describes the heterogeneity of the sources feeding into the company’s product
development and commercialization process such as the purchase of external R&D,
machinery for innovation and other preparations for the innovation process and the co-
development of product innovations or process innovations by outside actors. Sourcing
depth describes how intensive the outside contribution is by focusing on a high level of
involvement. Expenditure for external R&D, for machinery and for other preparations are
assessed relative to the sectoral level. Shares (in terms of sales) that are greater than the
median are regarded as high. Involvement of outside actors is measured as high if product
innovations or process innovations are exclusively developed by outside actors.
Search
Open innovation strategies and employment related practices makes a company more
porous for absorbing external ideas and benefiting from partners. Search captures the
proactive component of this process. It is actively seeking new information or screening
of a company’s environment for new ideas.
Search breadth is constructed in accordance with Laursen and Salter [2006]. It gives
the variety of information channels which are utilized in the company’s innovation
activities. Search depth also follows Laursen and Salter [2006] and summarizes the
intensity of the information channels approximated by the firms regarding the
information source as important.
Collaboration
The coupled process is a combination of the inside-out and the outside-in process as
company boundaries are open in both directions. Collaboration is seen as a way to access
complementary assets and to internalize knowledge spillovers. The breadth indicator
representing the collaboration dimension within the open innovation practices captures
the variety of different collaboration partner types such as customers, suppliers,
competitors, etc.. Collaboration depth represents high intensity of collaboration with a
certain partner type, where high intensity means collaboration with at least one domestic
partner and one international partner of this type.
Protection
For companies which pursue an open innovation strategy, protection IP is a crucial
practice in securing positive economic returns from the inside-out process. Protection can
be seen as the closed dimension of open innovation as the strict protection of IP can be
conceived as a closed innovation strategy. However, registration of IP may also be used
as a tool to commodify proprietary knowledge, potentially facilitating greater interaction.
For the companies IP protection strategy we can only build a breadth indicator as data on
the importance of the measures are not available. The dataset only contains information

d We thank Bart Clarysse for pointing us towards the need to check the reliability of the indicators by
means of computing Cronbach’s alpha.
8 B. Ebersberger et al.

about the usage of certain measures of IP protection such as patents, trademarks,

copyrights, etc..
Open innovation
The overall employment of open innovation practices is summarized in an open
innovation breadth indicator and an open innovation depth indicator. Open innovation
breadth integrates all breadth dimensions of the open innovation practices. Analogously,
open innovation depth summarizes all depth indicators. The combination of open
innovation breadth and the open innovation depth gives the indicator for the usage of
open innovation practices in the firm. Overall the reliability of the indicators for the open
innovation practices as measured by Cronbach’s alpha is given in Table 1. Bearing in
mind that the items measuring the open innovation practices are dichotomous variables, a
threshold value of 0.60 represents a reasonably good reliability. The majority of
indicators exceed this threshold value for the analyzed countries.

 
Table 1. Cronbach’s alpha
Reliability of the indicator AT BE DK NO
Sourcing breadth 0.67 0.68 0.63 0.53
Sourcing depth 0.73 0.75 0.70 0.76
Search breadth 0.93 0.79 0.79 0.61
Search depth 0.57 0.72 0.68 0.71
Protection breadth 0.77 0.75 0.76 0.78
Collaboration breadth 0.79 0.85 0.84 0.91
Collaboration depth 0.78 0.81 0.82 0.85
Open innovation breadth 0.93 0.77 0.77 0.59
Open innovation depth 0.81 0.66 0.62 0.63
Open innovation, total 0.79 0.86 0.86 0.75
Note: Indicator for the reliability of the indicator for open innovation practices, Cronbach’s alpha
Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-2004).

3.2. Assessing the coverage of the indicators for open innovation practices
The indicators for open innovation practices do not fully capture open innovation
strategies. They do rather give a proxy for companies’ activities which can be thought of
as the implemented practices of an open innovation strategy. Hence, we talk about the
indicators for open innovation practices rather than indicating open innovation strategies.
This is particularly relevant for the indicator capturing the IP protection. As closed
innovation strategies will make extensive use of protection and open innovation strategies
require systematic use of protection to facilitate the inside-out process, the protection
indicator could potentially point towards the closed innovation strategies or towards open
innovation strategies. This indicator alone will not allow us to distinguish closed from
open innovation. However, as the overall open innovation indicators integrate
 Open Innovation Practices and their Effect on Innovation Performance 9

characteristics of open innovation practices, the combination of indicators will point

towards open innovation rather than to closed innovation. Collaboration, search and
sourcing allow us to interpret protection as a part of a open innovation strategy rather
than as a part of a closed innovation strategy.
The current exercise illustrates that indicators for open innovation practices can be
developed from existing firm level innovation survey data. Based on the internationally
homogenized data set we are able to generate indicators for open innovation practices
which are comparable across countries. However, not all aspects of firm level innovation
activities are covered equally well by innovation survey data.
For example, the collaboration dummy variables only allow us to describe certain
aspects of the corporate collaboration network. For more detailed analysis, the
collaboration intensity or the assessment of the relevance of certain collaboration partners
(types) would be desirable. Commercialization – the inside-out process – is not
adequately included in the current innovation survey. To be able to build indicators
capturing also commercialization, one would require information about the license
income of the firm, the income through patent sales, companies’ willingness and history
in spinning out projects or companies, companies’ corporate venturing strategies etc.

3.3. Key questions for the analysis

As stated in the introduction, the analysis seeks in particular to examine four key
questions.
Which types of open innovation practices have the greatest impact (if any) on
innovation performance? We have identified four types of open innovation practices
here. Can we find evidence that any of these have a positive impact on innovation
performance? Is search, as is focused on in Laursen and Salter [2004, 2006] most
important, or collaboration?
Do widespread practices matter most, or focused, intensive efforts? Laursen and
Salter [2006] examine this question for search. Our framework allows us to examine this
issue also for external knowledge sourcing, collaboration, and for collective open
innovation practices.
Do individual open innovation practices appear to be most important, or the
collective of practices? Our discussion above suggests that it may be misleading to focus
on individual open innovation practices, that it is instead overall open innovation
practices that matter. Our framework allows us to examine this question empirically.
Are there differences between the impacts of domestic and international channels?
CIS only contains information on geographic dimensions for collaboration, so we focus
on this dimension only, comparing three types of collaboration – vertical, horizontal and
science – domestically and internationally.
10 B. Ebersberger et al.

4. Empirical analysis

4.1. Descriptive empirical analysis

The descriptive analysis in the sections below illustrates the structure and the utilization
of open innovation practices across countries and size classes. For the descriptive
analysis we only use means and (relative) frequencies. We do not perform tests on cross-
national or cross-sectoral differences. We rather try to give an image about the structure
of open innovation practices in the analyzed countries and the sectors.

4.1.1. Description of the national data sets

Our analysis focuses on innovative firms, having either implemented a product or process
innovation or with positive innovation expenditures. Given that innovation performance
measures are only available for product innovators, the performance analysis to follow is
thus restricted to these firms (which may or may not also have implemented other types
of innovations). Hence, the number of observations included in the performance analysis
is slightly lower than those shown here.

Table 2. Size of the national data sets

AT BE DK NO Total
Total 296 1,023 859 1,508 3,688
LE 28% 18% 24% 10% 17%
SMEs 72% 82% 76% 90% 83%
Note: SME denotes small and medium sized enterprises with 250 employees or less, LE are large enterprises
with more than 250 employees. Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-
2004).

The analysis is based on 3,688 observations from Austria, Belgium, Denmark and
Norway. Table 2 displays the distribution of the national data sets on small and medium
sized enterprises and large companies. Companies with 250 employees or less are
counted as SMEs and large enterprises have more than 250 employees. The annual
turnover is not accounted for in the definition of SMEs here. In all national data sets in
the analysis we find a majority of companies being SMEs. 90% of the companies in the
Norwegian data set are small and medium sized. In the Austrian data set, the share is
72%e.

4.1.2. Innovation activities in the sample

In this section we investigate descriptively the innovation activities of companies in the
sample. In a first step we compare the national data sets and break the national averages
down between SMEs and large enterprises. We emphasize the innovation activities which

e As weights are not available for all national data sets we base the following analysis on the unweighted
observations to achieve comparability across countries.
 Open Innovation Practices and their Effect on Innovation Performance 11

are of particular relevance to open innovation practices. In particular we illustrate

collaboration behavior and search for innovation.
Table 3 reports the propensity to collaborate for innovation among SMEs and large
enterprises. Consistent across countries is the fact that SMEs exhibit a lower propensity
to collaborate with any type of collaboration partner. We find least variation across
countries in large companies’ collaboration with scientific partners. The propensities to
collaborate vertically or horizontally vary by a factor of two or three, respectively,
between the Austrian data and the Danish data.

Table 3. Fraction of companies with collaboration by size.

AT BE DK NO
Collaboration LE SME LE SME LE SME LE SME
Domestic horizontal 7% 5% 14% 5% 21% 14% 16% 8%
Domestic science 41% 11% 48% 19% 44% 21% 53% 17%
Domestic vertical 20% 11% 40% 20% 45% 25% 39% 18%
International horizontal 11% 3% 23% 7% 24% 11% 19% 8%
International science 28% 6% 27% 9% 29% 11% 31% 7%
International vertical 33% 11% 59% 26% 55% 27% 45% 22%
Note: Fraction of firms with collaboration of the specific type. SME denotes small and medium sized
enterprises with 250 employees or less, LE denote large enterprises with more than 250 employees.
Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-2004).

Table 4 and Table 5 summarize the innovation search activities of the companies.
Table 4 measure the channels to the external environment which are opened up by
companies for their innovation activities. Consistent with the formal integration of
external partners through innovation collaboration, the informal search predominantly
focuses on customers, clients and suppliers. Utilization of scientific partners as
information sources is the least prevalent.

Table 4. Search for innovation.

Search channel AT BE DK NO
Clients and customers 31% 43% 40% 42%
Suppliers 18% 31% 24% 20%
Competitors 10% 20% 12% 10%
R&D labs 2% 4% 1% 5%
Universities 5% 8% 8% 4%
Note: Fraction of companies utilizing specific partners in their search for ideas for innovation.
Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-2004).

Table 5 illustrates the differences in search strategies between large enterprises and
SMEs. Across all countries the large enterprises have a higher propensity to utilize any
12 B. Ebersberger et al.

type of information source than SMEs have. Across all countries sourcing information for
the innovation process from suppliers reveals the smallest difference between large
enterprises and SMEs. About one in five or one in four companies use information from
suppliers for their innovation activities.

Table 5. Search for innovation by size.

AT BE DK NO
Search channel LE SME LE SME LE SME LE SME
Clients and customers 43% 26% 48% 42% 45% 38% 45% 42%
Suppliers 20% 18% 30% 31% 27% 23% 18% 20%
Competitors 13% 9% 27% 19% 12% 12% 14% 9%
R&D labs 1% 3% 6% 4% 3% 1% 7% 5%
Universities 6% 5% 11% 7% 9% 7% 8% 4%
Note: Fraction of companies utilizing specific partners in their search for ideas for innovation. SME denotes
small and medium sized enterprises with 250 employees or less, LE denote large enterprises with more than 250
employees. Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-2004).

4.2. Exploring the open innovation indicators

The indicators for open innovation practices are built as discussed above. This section
summarizes the indicators for the open innovation practices.

Table 6. Open innovation indicators by country

Open innovation indicators AT BE DK NO

Sourcing breadth 3.8 3.5 3.7 2.0
Sourcing depth 3.4 3.2 3.3 3.5
Search breadth 6.3 7.4 6.9 7.0
Search depth 1.2 1.6 1.3 1.3
Protection breadth 4.1 1.2 2.2 1.7
Collaboration breadth 1.4 2.4 2.9 2.4
Collaboration depth 1.0 1.8 2.4 1.8
Open innovation breadth 3.9 3.6 3.9 3.3
Open innovation depth 1.8 2.2 2.3 2.2
Open innovation, total 2.9 2.9 3.1 2.7
Note: Average indicator for the open innovation practices.
Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-2004).

Table 6 reports the indicators for open innovation practices by country. There is some
variation in the use of open innovation practices across countries. Sourcing breadth seems
to be particularly low in Norway whereas protection breadth is relatively high in Austria.
And, in line with the results in Table 3, collaboration both in terms of breadth and depth
 Open Innovation Practices and their Effect on Innovation Performance 13

is markedly low in Austria. Neither the Danish nor the Belgian data stand out particularly
in terms of their utilization of open innovation practices.
Before we turn to the analysis of the performance effects of open innovation practices
we investigate whether open innovation practices are essentially just another measure of
innovative intensity or whether they appear to capture additional dimensions. Table 7
reports the correlation coefficients of the indicators for open innovation practices and the
R&D intensity of the firms. We observe that – although the correlation coefficients are
positive and significantly different from zero for most of the open innovation practices –
the correlation is quite low, only rarely exceeding 0.2. We can thus argue that the
indicators of open innovation practices capture additional and different information about
innovation processes in firms than covered by R&D intensity.

Table 7. Correlation of open innovation practices and R&D intensity

AT BE DK NO
Sourcing breadth 0.028 0.072 0.011 0.057
Search breadth -0.004 0.135 0.166 0.058
Protection breadth 0.134 0.226 0.101 0.111
Collaboration breadth 0.091 0.243 0.237 0.117
Sourcing depth -0.029 0.025 0.057 0.061
Search depth 0.150 0.149 0.131 0.067
Collaboration depth 0.085 0.217 0.197 0.101
Note: Correlation coefficient for open innovation practices and R&D intensity. Coefficients larger than 0.13
(AT), 0.07 (BE), 0.10 (DK), 0.05 (NO) are significant at the 5% level.
Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-2004).

4.3. Effect of open innovation on innovation performance

A central research question is the impact of open innovation practices. What is the effect
of open innovation practices on innovation performance? What types of open innovation
practices are most important, or is it rather the overall open innovation strategy that
matters most? The open innovation indicators developed above are used to assess the
impact of open innovation practices on innovation performance. Two measures of
innovation performance are used in the analysis. The first is a measure of innovative
novelty; whether firms have introduced a product innovation that is new to their market.
The second measure is the share of sales due to novel product innovations, thus
measuring the scope or impact of new to market product innovations. The first can thus
be considered as a measure of the ability of firms to create and implement novel
innovations, while the second is a measure of the impact or success of the firm’s novel
innovative activity. The dummy variable measuring innovative novelty will be analyzed
by a standard probit regression. To analyze the ratio variable, innovative sales, we use the
fractional logit model developed by Papke and Wooldridge [1996].
This section will also examine the impact of different types of innovation
collaboration on innovation performance. In particular, the analysis distinguishes
14 B. Ebersberger et al.

between collaboration with domestic and international partners, as this is both important
in understanding the role of globalization and for policy design given that most policy
measures focus on domestic collaboration and do not explicitly encourage international
collaboration.

4.3.1. Performance effects of open innovation practices

Table 8 and Table 9 show the results of probit regressions for new to market product
innovations. These regressions thus examine the effect of open innovation practices and
other control variables on the propensity to successfully introduce a new, novel product
on the firm’s market. Table 8 examines the overall indicator of open innovation practices,
and Table 9 consider the individual dimensions of open innovation.

Table 8. Performance regression, dep.var.: product innovation new to the market

AT BE DK NO
Model I II I II I II I II
Open innovation
Open innovation, .033 - .188*** - .214*** - .189*** -
total
Open innovation - .181* - .214*** - .22*** - .123***
breadth
Open innovation - -.153 - -.041 - -.024 - .051
depth
Controls
Size (log of .233*** .183** .060 .041 -.033 -.047** -.011 -.012
number of empl)
Part of a .178 .062 .078 .047 .018 -.004 -.183** -.192**
corporate group
R&D intensity 1.098 .962* .255 .162 -.194 -.224 .663*** .675***
International -.018 .031 .350*** .288** .420*** .382*** .218*** .205***
orientation
Constant -1.19*** -1.60*** -1.53*** -1.17*** -.49 -.54 -.83*** -.88***

Observations 244 244 967 967 852 852 1406 1406

LR chi2 34.92*** 38.28*** 119.9*** 128.7*** 94.8*** 103.0*** 183.1*** 185.2***
Pseudo-R2 0.11 0.12 0.09 0.10 0.08 0.09 0.10 0.10
Note: Coefficients of the Probit-regression. Dependent variable: introduction of market novelty. *** (**,*)
indicate significance at the 1% (5%, 10%) level. Standard errors of the estimates are available from the authors
upon request. An additional 10 sector dummies are included in the regressions as controls, which are not
reported here.
Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-2004).

As can be seen from Table 8, in model I the overall open innovation practices have a
positive impact on the propensity to introduce novel innovations. Coefficients for
Belgium, Denmark and Norway are all highly significant. In model II we break down the
utilization of the overall open innovation practices into the breadth and the depth
 Open Innovation Practices and their Effect on Innovation Performance 15

component. For Austria, coefficients for breadth and depth are of similar size with
opposite signs, suggesting that effects of open innovation breadth and depth to a certain
extent cancel each other out in the regression model I. The overall pattern for all
countries is that open innovation breadth is driving the positive impact on novel
innovativeness. Depth is insignificant for all countries.
Examining the control variables, R&D intensity has a significant positive impact on
the companies’ ability to innovate in Austria and Norway, while it is insignificant for
Belgium and Norway. R&D intensity thus would appear to play a lesser role in
companies’ ability to innovate in Denmark and Belgium. Finally, international
orientation has a strong positive impact on novel innovation in Belgium, Denmark and
Norway, while it is insignificant for Austria. However, it should be noted here that
variables on international orientation for CIS3 (Austria) and CIS4 (Belgium, Denmark
and Norway) are not fully comparablef.
In Table 9 we document model III and model IV of the regression analysis, where
either the breadth or the depth of the open innovation practices are separated into
individual dimensions. When disentangling the breadth of the open innovation practices,
a robust pattern across countries points to the highly significant correlation of the
protection breadth of companies and their ability to innovate (model III). All four breadth
dimensions (sourcing, search, protection and collaboration) are positive and significant
for Norway, with similar – although in terms of significance weaker - results for
Denmark.
Results are mixed for the open innovation depth indicators, with most coefficients
insignificant. An exception here is Belgium and Austria, where in Belgium sourcing
depth has a negative effect and search depth a positive impact, and in Austria
collaboration depth has a negative effect on the ability to generate novel innovations.

f More specifically, CIS3 data Austria indicates firms where international markets are cited as most
important, whereas CIS4 data simply indicates whether firms are active on international markets.
16 B. Ebersberger et al.

Table 9. Performance regression, dep.var.: product innovation new to the market

AT BE DK NO
Model III IV III IV III IV III IV
Open innovation
Open innovation - .222** - .217*** - - .124***
breadth .229***
Open innovation -.009 - .022 - .026 - .021 -
depth
Sourcing breadth .035 - -.003 - .048* - .071*** -
Search breadth -.074 - .028 - .046** - .021*** -
Protection .153*** - .122*** - .079*** - .065*** -
breadth
Collaboration -.031 - .051** - .028 - .034* -
breadth
Sourcing depth - -.062 - -.058*** - .008 - .026
Search depth - .024 - .073** - -.014 - .014
Collaboration - -.118* - -.014 - -.022 - .010
depth
Controls
Size (log of .186** .180** .033 .039 -.045 -.043 -.017 -.008
number of empl)
Part of a .282 .122 .039 .046 .007 .003 -.203** -.193**
corporate group
R&D intensity .810 .927 .014 .056 -.211 -.206 .669*** .678***
International -.018 -.005 .279** .275** .365*** -3.79*** .206*** .206***
orientation
Constant -1.23*** -1.44*** -.94*** -1.18*** -.48 .558 -1.05*** -.915***

Observations 244 244 967 967 852 852 1406 1406

LR chi2 52.69*** 41.03*** 142.7*** 142.2*** 105.7*** 104.7*** 195.5*** 185.7***
Pseudo-R2 0.16 0.13 0.11 0.11 0.09 0.09 0.10 0.10
Note: Coefficients of the Probit-regression. Dependent variable: introduction of a market novelty. *** (**,*)
indicate significance at the 1% (5%, 10%) level. Standard errors of the estimates are available from the authors
upon request. An additional 10 sector dummies are included in the regressions as controls, which are not
reported here.
Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-2004).

Table 10 and Table 11 show the results for fractional logit regressions on the share of
sales due to market novelties. While the regressions above can be interpreted as
examinations of the impact on ability or capacity to develop novel innovations, the
regressions here measure the impact on innovation output or novel innovative
performance. And, as can be seen, there are a number of important differences between
the results here and those above.
 Open Innovation Practices and their Effect on Innovation Performance 17

Table 10. Performance regression, dep.var.: sales share of market novelties

AT BE DK NO
Model I II I II I II I II
Open innovation
Open innovation, .289*** - .153*** - .100** - .093*** -
total
Open innovation - .271** - .035 - .101* - .107***
breadth
Open innovation - .016 - .121 - -.006 - -0.043
depth
Controls
Size (log of -.237* -.279** -.022 -.015 -.101* -0.107* -.198*** -.204***
number of empl)
Part of a .096 -.048 -.075 -.063 .222 .217 -.287** -.298**
corporate group
R&D intensity 2.58** 2.53** 1.39*** 1.41*** 1.71*** 1.70*** 2.04*** 2.07***
International .110 .068 .390** .42** .58*** .562*** .339** .308**
orientation
Constant -3.19*** -3.27*** -3.13*** -3.15*** -1.96** -1.98** -2.65*** -2.82***

Observations 244 244 971 971 852 852 1430 1430

LR chi2 74.6*** 72.7*** 69.4*** 63.3*** 238.1*** 238.6*** 440.7*** 436.6***
Note: Coefficients of a Fractional Logit-regression (Papke and Wooldridge 1996). Dependent variable: sales
share of market novelties. *** (**,*) indicate significance at the 1% (5%, 10%) level. Standard errors of the
estimates are available from the authors upon request. An additional 10 sector dummies are included in the
regressions as controls, which are not reported here.
Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-2004).

First, overall open innovation is positive and strongly significant in all four countries.
For Austria, whereas overall open innovation had no significant impact on the propensity
for novel innovation, the impact on innovative sales is highly significant as in the other
three countries. For Austria, Denmark and Norway, it is open innovation breadth that is
driving the positive impact on novel innovative performance. In contrast, for Belgium
open innovation depth is positive and strongly significant while breadth is insignificant.
I.e., while open innovation breadth is an important determinant of novel innovation in
Belgium, open innovation depth impacts innovative performance. In particular, search
depth is positive and strongly significant.
Protection breadth, an important determinant of novel innovations in all countries,
also has a strong impact on novel innovative sales in Austria, Norway and Belgium,
though not in Denmark. Sourcing breadth has a (weakly) positive impact for Norway, but
a negative impact for Belgium. In Denmark, none of the individual dimensions are
significant. Finally, we can also note that R&D intensity is positive and strongly
significant for all countries in all model specifications. This can also be contrasted with
the results of the probit regressions: while we find mixed results for the impact of R&D
intensity on the propensity to innovate, there is a clear strong impact on the size of
innovative sales (i.e. innovation output).
18 B. Ebersberger et al.

Table 11. Performance regression, dep.var.: sales share of market novelties

AT BE DK NO
Model III IV III IV III IV III IV
Open innovation
Open innovation
- .285*** - .041 - .116* - .111***
breadth
Open innovation
.069 - .244*** - -.003 - -.048 -
depth
Sourcing breadth .076 - -.069* - .020 - .089* -
Search breadth -.063 - -.007 - .016 - .015 -
Protection breadth .156*** - .108*** - .032 - .072*** -
Collaboration
.038 - -.043 - .029 - .002 -
breadth
Sourcing depth - -.045 - -.019 - .000 - .026
Search depth - .077 - .124*** - .035 - -.022
Collaboration
- -.002 - .041 - -.023 - -.048*
depth
Controls
Size (log of
-.280** -.279** -.022 -.015 -.101* -.107* -.198*** -.204***
number of empl)
Part of a
.166 .018 -.075 -.063 .222 .217 -.287** -.298**
corporate group
R&D intensity 2.23** 2.39** 1.39*** 1.41*** 1.71*** 1.70*** 2.04*** 2.07***
International
.023 .320 .390** .416** .578*** .562*** .339** 0.308**
orientation
Constant -3.48*** -3.22*** -3.13*** -3.15*** -1.96** -1.98** -2.65*** -2.82***

Observations 244 240 971 971 852 852 1430 1430

LR chi2 71.5*** 74.1*** 62.5*** 63.1*** 238*** 238*** 433*** 433***
Note: Coefficients of a Fractional Logit-regression (Papke and Wooldridge 1996). Dependent variable: sales
share of market novelties. *** (**,*) indicate significance at the 1% (5%, 10%) level. Standard errors of the
estimates are available from the authors upon request. An additional 10 sector dummies are included in the
regressions as controls, which are not reported here.
Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-2004).

4.3.2. Effect of globalized innovation networks on performance

In this section, we examine the impact of three different types of innovation
collaboration: vertical (collaboration with suppliers and customers), horizontal (with
competitors) and science based (with universities and government research institutions).
And, importantly, we examine the role of international versus domestic collaboration. As
above, we examine the impact on novel innovativeness.
The table gives a clear message across all four countries: of all the different types of
collaboration, it is international vertical collaboration that positively impacts innovation
performance. In all four countries, the coefficient for international vertical collaboration
is positive and strongly significant. Hence, while our findings indicate the importance of
 Open Innovation Practices and their Effect on Innovation Performance 19

broad knowledge sourcing, the result here emphasizes the importance that this knowledge
sourcing also includes close interaction with international sources. It can also be noted
from coefficient estimates of the control variables that, even after accounting for different
types of international collaboration, international orientation still has a significant,
positive impact on innovation performance.
 

Table 12. Effects of innovation networks, dep.var: market novelties

AT BE DK NO
Collaboration
Domestic vertical coll. -0.270 -0.027 0.072 0.283***
Domestic horizontal coll. 0.371 0.107 0.239* 0.008
Domestic science coll. -0.395 0.071 0.062 0.137
International vertical coll. 0.666* 0.415*** 0.344*** 0.183*
International horizontal coll. -0.649 0.287* -0.087 0.095
International science coll. 0.394 0.207 -0.031 -0.018
Controls
Size (log of number of empl) 0.260*** 0.059 -0.004 0.002
Part of a corporate group 0.145 0.065 0.062 -0.148*
R&D intensity 1.026 0.176 0.004 0.741***
International orientation 0.055 0.325*** 0.452*** 0.268***
Constant -1.206** -1.117** -0.468 -0.401**

Observations 244 967 852 1406

LR chi2 41.25*** 120.20*** 75.12*** 129.70***
Pseudo R2 0.13 0.09 0.06 0.07
Note: Coefficients of the Probit-regression. Dependent variable: firm has commercialized a product which is
new to the market in the respective period. *** (**,*) indicate significance at the 1% (5%, 10%) level. Standard
errors of the estimates are available from the authors upon request. An additional 10 sector dummies are
included in the regressions as controls, which are not reported here.
Source: AT based on CIS 3 (1998-2000); BE, DK, NO based on CIS 4 (2002-2004)

5. Summary
This analysis has investigated open innovation practices of companies in four European
economies: Austria, Belgium, Denmark and Norway. Both the descriptive and regression
results reveal a number of insights. This section summarizes the main results of the
empirical analysis and ties them into the theoretical discussion above.
Open innovation matters. Open innovation practices have a strong impact both on the
capacity for novel innovation and on actual innovation performance. In general it is the
breadth of these practices – i.e. the range of interfaces with the external environment -
that generates the positive effects. A partial exception is Belgium where, while breadth is
positively correlated with innovativeness, depth positively impacts performance.
A broad based, holistic approach to open innovation may give greater returns than a
deep focus on a single aspect. Taking the results together, what appears to be most
20 B. Ebersberger et al.

important are the overall strategies as opposed to individual dimensions of open

innovation. An exception concerning individual dimensions is Norway, where all
individual dimensions are positive and significant.
A strong internal capacity is still important. Two results point in this direction. First,
the results indicate that R&D intensity is (still) an important determinant of innovation
performance. The second result concerns sourcing. There is some mixed evidence that
sourcing breadth has positive impact (particularly in Norway), but none for sourcing
depth (with a negative impact on novel innovativeness in Belgium).
International vertical collaboration is a crucial determinant of high innovation
performance. Innovation collaboration along the value chain – i.e. vertical collaboration –
is significantly positively correlated with superior innovation performance of firms in all
analyzed countries. And, our regression results indicate that it is vertical collaboration
across national boundaries which has the greatest impact.
Open innovation practices are less used by SMEs, though have an important impact
on performance. Recalling the descriptive discussion above, we observe that across the
board, SMEs show a lower likelihood of implementing open innovation practices.
However, over three fourths of the firms in our empirical analysis are SMEs, suggesting
that positive impacts on performance that are found here are also present for SMEsg.

Acknowledgements
This paper draws on work and results from the OpenING project [Herstad et al.
(2008)]. We gratefully acknowledge Vision Eranet funding from: the Research Council
of Norway, the Danish Agency for Science, Technology and Innovation, the Flemish
Government - Department of Economy, Science & Innovation, Belgium; and the Federal
Ministry of Transport, Innovation and Technology, Austria.

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Biography
Bernd Ebersberger holds a professorship in innovation management and economics at
Management Center Innsbruck, Austria. His research focuses on quantitative analysis of
innovation system and innovation policy, the internationalization of innovation activities
and the emergence and impact of open, interactive models.
Carter Bloch is Research Director at the Danish Centre for Studies in Research and
Research Policy, University of Aarhus in Denmark. His research concerns innovation
measurement, innovation policy, and the relationship between R&D, innovation and
economic performance. He has been involved in a number of projects concerning
innovation indicators and policy, and is currently heading a project on the measurement
of innovation in public sector organizations.
Sverre J. Herstad is Senior Researcher at NIFU STEP Studies in Innovation, Research
and Education, Oslo, Norway, and Associate Professor II at Vestfold University College,
Horten, Norway. His research has mainly focused on different aspects of corporate
internationalization, including its impact on regional and national innovation systems.
Els van de Velde is Senior Consultant at IDEA Consult and professor Management and
Innovation at Ghent University, Belgium. Her research interests include technological
innovation, technology transfer, open innovation and entrepreneurship.

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