Open and closed knowledge sourcing Their effect on innovation performance in small and medium enterprises

Purpose - Many studies have investigated the relationship between the adoption of open innovation and performance in large firms. However, limited research is available with regard to the use of open innovation in small and medium enterprises (SMEs). SMEs are important because of their contribution to innovation in almost all economies. The purpose of this paper is to extend the current literature by focusing on SMEs. Using complementarity and knowledge-based theories, this study develops three hypotheses to identify the effect of knowledge sourcing approaches for innovation on SMEs' innovation performance. Design/methodology/approach - Surveys collected from 196 SMEs in Korea were analyzed using the supermodularity function to test the hypotheses. Findings - Results indicate that an external knowledge-oriented approach has no significant effect, whereas an internal knowledge-oriented (i.e. closed) approach has a positive effect on innovation performance. Interestingly, this study found that open innovation has a negative effect on SMEs' innovation performance (i.e. both internal knowledge-oriented and external knowledge-oriented approaches have a substitutive relationship). Originality/value - This study sheds new light on open innovation and knowledge management research by identifying the relationship between knowledge sourcing approaches for innovation, and innovation performance in SMEs. Practical implications highlight that open innovation could impede SMEs' innovation performance.