The impact of open innovation on firm performance: The moderating effects of internal R&D and environmental turbulence

• This study decomposes open innovation into external technology acquisition (ETA) and exploitation (ETE).
• ETA and ETE bear different impacts on firm performance, and ETA enhance the impact of ETE.
• Highly internal R&D and turbulent environment magnify the positive effects of ETA on firm performance.
• Highly internal R&D and turbulent market amplify the positive effects of ETE on firm performance.

Researchers have identified open innovation as two dimensions, external technology acquisition and external technology exploitation. This study explores the direct and interactive effects of these two dimensions on firm performance and further examines the moderation effects of two factors (i.e., internal R&D and environmental turbulence) on the relationship between both types of open innovation and firm performance. Based on Chesbrough's open innovation model, multi-item scales were developed to measure two dimensions of firm-level open innovation. Survey results of 176 Taiwanese high tech manufacturing firms provide support for most hypotheses. The result shows that external technology acquisition positively affects firm performance, whereas external technology exploitation does not. This study also finds that external technology acquisition strengthens the relationship between external technology exploitation and firm performance. Both external technology acquisition and external technology exploitation are positively related to firm performance under high internal R&D investment and a turbulent market environment. However, technological turbulence only positively affects the relationship between external technological acquisition, but not external technology exploitation, and firm performance. The findings contribute to enhanced understanding of how the degree of leveraging open innovation dimensions depends on their complementarity, internal R&D, and environmental turbulence.