Assessing the Impact of Open and Closed Knowledge Sourcing Approach on Innovation in Small and Medium Enterprises

There is very limited research on open innovation in small and medium enterprises (SMEs). By drawing on complementarity theory and knowledge based theory, this study develops three hypotheses in order to identify the impact of knowledge sourcing approaches for innovation on SMEs’ innovation performance. Surveys collected from 196 SMEs in Korea were analyzed to test the hypotheses by using supermodularity function. The results indicate no significant impact of external knowledge-oriented approach while positive impact of internal knowledge-oriented (i.e., closed approach) on innovation performance. Interestingly, this study finds that open innovation has significant negative impact on SMEs’ innovation performance (i.e., both internal knowledge- and external knowledge-oriented approaches have a substitutive relationship). This study sheds new light on open innovation and knowledge management research by identifying the relationships between knowledge sourcing approaches for innovation and innovation performance in SMEs.