Measuring Open Innovation in the Bio-Pharmaceutical Industry

The paper suggests a methodology for measuring the degree of openness in companies' innovation processes through the analysis of annual reports. Four openness dimensions are defined based on costs and revenues deriving from open innovation activities and new investments and divestments of innovation-related intangibles, occurring in either separate acquisitions or business combinations. A synthetic measure of openness is defined, including all the four dimensions. The model is then applied to a sample of 126 global top R&D spending companies in the bio-pharmaceutical industry for the period 2008-2012, for a total of 630 annual reports analysed. Results show a negative correlation of openness degree with firm age, dimension and efficiency, with biotech companies being more open than pharmaceutical ones. The paper contributes to the research on open innovation by suggesting a comprehensive framework for the measure of the pecuniary dimension of the phenomenon in both inbound and outbound processes. From a managerial point of view, the framework can be used by companies to both monitor their own degree of openness and to benchmark it with those of competitors.