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Chapter 4 Examining the Applicability of Outside-In Open Innovation Approaches for Small

B-to-B Businesses

Abstract The purpose of this paper was to investigate and provide practical implications on the applicability of open innovation in small B-to-B businesses (less than 100 employees) and to determine which open innovation approach is most appropriate for small businesses. A qualitative research design based on an interpretive epistemological methodology in the form of six semistructured interviews with senior managers of small B-to-B businesses was applied. It was found that the key competences of absorptive capacity and collaborative capability exist in small B-to-B businesses or was at least perceived to be sufficient to apply open innovation. Customer involvement was established to be the most promising open innovation approach, followed by R&D outsourcing. There was no agreement on whether collaborations with universities could and/or should be applied or not. As with any qualitative research design, generalizability is limited. This paper provides a conceptual framework for further research in the not yet explicitly researched field of applying open innovation in small B-to-B businesses.

4.1 Introduction

This paper examines whether and how small B-to-B businesses with less than 100 employees can apply outside-in open innovation (OI) approaches and also provides recommendations for small B-to-B businesses on how to apply OI in relation to which specific approach is the most suitable for small businesses. It sheds light on the question whether small B-to-B businesses are able to apply OI and which OI approach is the best applicable. To do this, it focuses on the opinions of senior managers of small B-to-B businesses. Since OI is said to still be in its infancy by important contributors such as Gassmann et al. [1], this paper is placed in the current discussion of and development toward a new OI paradigm. Thus, it arguably also contributes to an academic benefit in providing a conceptual framework. Innovation in general has gained more and more importance for small businesses in their economic development [2]. Increasing competitiveness, growing complexity and risks, as well as the increased knowledge intensity pressure businesses to develop products as fast as possible [3]. To meet these challenges and develop a competitive edge, companies have to respond with adopting new approaches to their innovation strategy [4]. Besides traditional closed innovation concepts such as internal research and development (R&D), companies are shifting toward more openness and flexibility in their innovation process [5, 6]. The importance of small businesses in the innovative environment is unquestioned [7]. Their entrepreneurial innovative spirit arguably indicates that they could benefit from OI. Furthermore, many characteristics of small businesses seem to have the potential to support OI. Their ability to quickly respond to changing market needs and their more clannish structures, e.g., leading to less bureaucracy, are just a few characteristics that enhance the interorganizational trust, communication, and competencies in collaborations and can therefore contribute to a business's innovativeness and thus to OI [8]. Surprisingly, small businesses have not yet been explicitly researched in the context of OI [6, 9]. Most studies on OI so far focused on large companies (e.g., [6, 10–12]). Newer studies only recently examined the applicability in smalland medium-sized enterprises (SMEs). This paper focuses on small Bto-B businesses, which are here defined as businesses with less than 100 employees. Since the growth of small businesses mainly relies on their innovation performance [2], it seems appropriate to focus on whether and how small B-to-B businesses can apply OI as a new opportunity for them to increase their innovation performance. To investigate this, the paper focuses on three key OI approaches – customer involvement, collaborations with universities, and contracted R&D outsourcing.

Absorptive capacity and collaborative capability are defined as the two key competences for applying OI [13]. Absorptive capacity is defined as a business's ability to identify, explore, and apply external knowledge to increase its innovativeness [14–16]. It requires appropriate personnel and financial resources, R&D intensity, and market and technical expertise. Networking capabilities and the organizational and technological infrastructures of a small business are seen as important for its collaborative capacity [13]. Thus, these two key competences defined by the key literature were used as a basis to identify the two levels of OI applicability in small businesses. After investigating the key competences as the first level of OI applicability, the second level focuses on customer involvement, collaborations with universities, and contracted R&D outsourcing to establish whether these approaches are appropriate for small B-to-B businesses.

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