Determinants of Sustainable Open Innovations-A Firm-Level Capacity Analysis

Abstract

Institutional constraints impede firms' open innovation. They have been a challenge, obstructing growth and sustainable development. Research on open innovation has shown that the quality of institutions essentially affects innovation in firms. Hence, prior research has made efforts to incorporate the quality of institutions into open innovation analysis. We can use a series of analyses to examine the impact of corruption, the tax system, and other indicators on firm innovation performance. However, developing economies, such as countries in sub-Saharan Africa, represent a specific group of countries that have long been perceived as those mostly deficient in the rule of law, with poor regulatory quality and a great deal of corruption. In these countries, it is also possible to see a lower number of studies, as the inability to obtain quality data to perform empirical analyses can often limit researchers. Nevertheless, employing data from the World Bank's 2019 Enterprise Survey, this research aimed at exploring the determinants of sustainable open innovation as well as the effect of institutional quality on firms' capacity utilization and process innovation through a PLS structural equation model analysis. Our research showed interesting findings, such as the fact that the quality of institutions significantly affects firms' use of OI instruments and capacity utilization. This research also provides for the novelty of the analysis of capacity utilization in an open innovation analysis. The results support the hypotheses that low institutional quality negatively affects firms' implementation of inbound open innovation instruments, and that there is a strong and positive effect of low institutional quality on firms' capacity utilization. In addition, we confirm the premise that firms' implementation of inbound open innovation instruments has a positive and significant influence on firms' process innovation.