The Paradox of Openness Appropriability and the Use of External Sources of Knowledge for Innovation

To innovate, firms often need to draw from a wide number of different sources of knowledge from outside their organization. At the same time as firms need to be open to external sources, they also need to be focused on capturing returns to their innovative ideas. This gives rise to a paradox of openness the creation of innovations often requires openness and commercialization of innovations requires appropriability. Using an econometric analysis of the UK innovation survey, we find the openness of firms to external sources of innovation is curvilinearly (taking an inverted U-shape) related to the strength of the firm’s appropriability strategy. We also find that the greater the presences of the absorptive capacity within a firm, the greater are the chances that it will be open to external sources. We explore the implications of these findings for theory and empirical research.

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