Complementarity in Open Innovation and Corporate Strategy: The Moderating Effect of Ownership and Location Strategies

This paper investigates the ownership and location strategies as contingency factors, which affect the relationship between SMEs' open innovation activities and innovation performance in the context of emerging economies. Drawing from the corporate strategy and open innovation literature, we argued that SMEs with state and foreign ownership can more effectively capture economic rents from open innovation in a weak intellectual-property-rights regime. Meanwhile, the subnational environments in which SMEs locate their businesses is also crucial for them to capture value from open innovation. Using the data of 1050 SMEs in China, we found that state ownership positively and significantly moderates the relationship between openness and innovative performance, while foreign ownership partially supports the same effect. By disentangling the pro-business environment and the market development, we found that for SMEs that are located in a region with a stronger pro-business environment and a higher level of market development, open innovation can bring more value than it does for those located in regions with lower levels of those factors. Overall, this paper also contributes to our understanding of the complementary relationships between ownership and location strategies and open innovation.