Open innovation's impact on performance: a case of an Indian IT cluster
Creators: name: Grandhi, Srimannarayana
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 350303
subject: Business information systems

description: Open innovation (OI) is the capability to innovate through the use of purposive inbound and outbound knowledge flows to benefit firms driven by external knowledge and internal innovations. Inter-firm knowledge exchange and innovation occur in organisations operating within the same supply chain. Geographic separation between organisations however may limit collaborative opportunities for businesses to reduce costs, improve efficiency and support innovation. Organisations co-locating within the close proximity are more likely to facilitate inter-firm interactions, collaborate on resource utilisation and sharing of ideas and knowledge. In recent years, there has been a growing interest among academics, government agencies and private organisations to examine the scale, characteristics and capability of IT clusters such as the `Silicon Valley' and Hyderabad   `Hi-tec city' clusters to support OI to help stimulate economic growth, improve productivity and promote inclusive development. <br><br>While there is evidence to show the benefits of geographic clustering for firms, the effect of agglomeration economies in stimulating OI however has neither been theorised nor empirically validated. Moreover, the collaborative processes through which OI and technological spill-overs are fostered within and outside an IT cluster are not well understood. Earlier studies have developed theoretical frameworks to conceptualise Open Innovation and Innovation Performance in the context of a developed world; nonetheless there is relatively little known about OI in firms in developing and emerging economies. This warrants an examination of the role of clusters in shaping OI activities within and outside an IT cluster with a particular focus on emerging economies. <br><br>Drawing on the Cluster Theory, Resource-Based View, Relational View and Absorptive Capacity, a theoretical model is developed to investigate the effect of geographic proximity on OI and innovation performance of IT organisations. This thesis developed a model and examined the relationship between OI and innovation performance as higher-order constructs and their underlying constructs driving innovation inputs.  <br><br>This thesis adopts a quantitative approach to model the relationships between OI and degree of openness, stakeholder engagement, innovation practices and knowledge spill-overs. An online survey questionnaire was administered to 346 organisations in and outside the Hyderabad IT cluster in India. Constructs were operationalised and pre-tested through expert evaluation.  Pilot testing was carried out to assess reliability and construct validity. The measurement and structural models were tested using the structural equation modelling technique.  <br><br>The results show significant differences in OI and innovation performance among IT organisations within and outside the IT cluster. Organisations, which are geographically bounded tend to participate more in OI activities when compared to those which are geographically separated.  Organisations which are clustered show better innovation performance. A multi-group analysis reveals significant differences between the two groups in relation to inbound innovation, absorptive capacity and innovation performance. This is because of the geographic proximity of IT organisations. The results highlight the positive effect of OI activities on innovation performance. IT organisations with a higher absorptive capacity for absorbing inbound knowledge demonstrated better innovation performance.  This demonstrated the importance of knowledge absorption capability in achieving higher innovation performance through open innovation. <br><br>The main contribution of this study lies in exploring the interconnectedness among IT organisations and collaborative processes on OI and innovation performance. From a management perspective, this knowledge will enable managers and policy makers to emphasise OI to achieve better innovation performance. This knowledge will provide both government decision makers and IT managers with definite OI implications for innovation performance. Local governments can benefit from the results of this study in terms of implications for investment in IT clusters as well as incentives for IT organisations to set up their businesses within a designated zone.  The major limitation is that this thesis utilised the data collected from organisations within and outside the Hyderabad IT cluster.  A future study into comparison of data collected from various IT clusters could offer an in-depth understanding on the impact of clustering on OI and innovation performance.