logologologo
  • Home
  • About
    • Contributors
    • Guide for contributors
  • Themes
    • Roadmapping
    • Open Innovation
    • Managing the R&D pipeline
    • Technology Strategy
    • Managing international R&D
    • Ideation and creativity in R&D
    • Impact of digital technologies
    • The resurgence of frugal innovation
  • Tools
  • News
  • Resources
  • Papers
  • Case Studies
  • Events
  • R&D Conference
  • Contact
  • Home
  • About
    • Contributors
    • Guide for contributors
  • Themes
    • Roadmapping
    • Open Innovation
    • Managing the R&D pipeline
    • Technology Strategy
    • Managing international R&D
    • Ideation and creativity in R&D
    • Impact of digital technologies
    • The resurgence of frugal innovation
  • Tools
  • News
  • Resources
  • Papers
  • Case Studies
  • Events
  • R&D Conference
  • Contact

Can openness enhance a firm’s performance in an economic downturn?

Can openness enhance a firm’s performance in an economic downturn? Cutting the innovation budget may be one of the easiest ways of coping with an economic crisis but evidence from the previous downturns suggest that a strategy of Open Innovation can provide the necessary resilience.

In their article “Dynamic capabilities and economic crises: Has openness enhanced a firm’s performance in an economic downturn?” Joon Mo Ahn, Letizia Mortara and Tim Minshall investigate the dynamic relationship between openness and firm performance with particular consideration of the recent financial crisis in 2008.

Although during the recent economic recession, many firms severely reduced their investment in innovation (OECD, 2009) some highly innovative incumbents and fast-growing new entrants instead increased their innovation investment. Evidence suggests that this has helped them to overcome the challenges of operating in a slow economy.

Additionally, firms actively engaged in collaboration with new external partners displayed an increased organizational flexibility while preserving innovation capabilities for future growth implying that this is an effective approach for coping with an economic crisis.

Open approaches helped Fiat to avoid substantial reduction of R&D and innovation capabilityFor example, Fiat’s core R&D organization, Centro Ricerche Fiat (CRF), did not reduce its internal R&D costs during an economic downturn (1993–2003) but instead selected what knowledge to keep private and what to expose and then shared non-core technologies with external partners to generate additional income. CRF also established long-term strategic partnerships with customers and new partners to diversify the exploitation of their complementary assets. Such open approaches helped Fiat to avoid substantial reduction of R&D and innovation capability that would have impacted negatively the firm in a long term.

The study

It is proposed that an open approach can also increase organizational flexibility by adding new innovation routes. Firms can move onto a new equilibrium point that is more robust against external turbulence and to retain knowledge. This prevents firms from losing its future innovation capability.

To investigate these observations, the authors analysed data from the UK Community Innovation Survey (CIS) panel collected between 2006 and 2012. The study found evidence that supports the positive influence of openness on long-term firm performance. The results show that:

  • Increasing a firm’s openness is an effective way of enhancing its dynamic capability and hence its resilience
  • Collaboration with partners outside the firm’s value chain and with international partners has the highest impact on turnover recovery.
  • Openness increases the chances of acquiring newer knowledge, which in turn will help firms to identify new opportunities to achieve sustainable growth.

The findings of this article have some practical implications for managers and policymakers.

To read the article

Dynamic capabilities and economic crises: Has openness enhanced a firm’s performance in an economic downturn?

Joon Mo Ahn, Letizia Mortara and Tim Minshall

Industrial and Corporate Change, dtx048, https://doi.org/10.1093/icc/dtx048

Published: 27 November 2017

Abstract: https://academic.oup.com/icc/advance-article-abstract/doi/10.1093/icc/dtx048/4662982

Dr Letizia MortaraJoon Mo Ahnopen innovation enhance performance in economic crisisTim Minshall
Previous PostMoonshots and megatrends observations from Wo...
Next PostInternational R&D podcast 3: Equilibrium, aca...
Search R&D Today
Search
Generic filters
Exact matches only
Search in title
Search in content
Search in excerpt
Filter by Article Type
Papers
Events
Tools
Funding Articles
Case Studies
Resources
Opportunities
Theme Editor Blogs
Filter by Categories
Business model innovation
Ideation and creativity in R&D
Latest news
Managing international R&D
Managing technology platforms
Managing the R&D pipeline
Open innovation
Outsourcing R&D
Project valuation and selection
R&D strategy
Roadmapping
Stage gate processes
Technology intelligence
Theme Editor Blogs
  • Moonshots and megatrends observations from World Open Innovation Conference
  • Making asymmetric partnerships work
  • At what point does ‘Open Innovation’ become just ‘Innovation’?
Associated Papers
  • Building Innovation Capabilities
Resources
  • How to implement open innovation: Lessons from studying large multinational companies
  • Good Things in Small Packages – Open Innovation isn’t just for large firms
  • Top 20 Innovation Blogs of 2016
Related Posts
  • The problem of plastic: Open Innovation Forum tackles sustainable packaging
  • What skills do we need for Open Innovation?
  • How to implement open innovation: Lessons from studying large multinational companies
Tools
  • Frugal Innovation Index
    Frugal innovation - competitive advantage when resources are limited
    Frugal innovation allows a company with a quality product to compete effectively with cheaper...
  • FEMA
    Failure Mode and Effects Analysis (FMEA)
    To fail fast can save enormous waste later in the product lifecycle. Failure Mode...
  • Would an analogy help?
    nalogies are a useful tool for creative problem solving, to help one move away...
  • Most useful R&D Management tools survey
    Most useful tools for R&D Management
    Ask which are the most useful tools for R&D Management and you will find...
  • Paired comparison
    Techniques for Effective Prioritisation
    Gut feeling may be a valid basis for making decisions about your personal life...
Have Your Say…

Have Your Say / Follow Us

R&D Today is the outreach site for the Research and Development Management Association, a charitable organisation that supports research, best practice and innovation.  www.radma.net

Click here to sign up to our newsletter, and click here to view our newsletter archive.

Copyright R&D Today 2020. All rights reserved.