Open Innovation by the Numbers

The idea that drawing on outside contributors for innovation leads to better results has become increasingly popular. But does "open innovation," (a term used by Henry Chesbrough in his classic 2003 MIT Sloan Management Review article on the topic) really pay off? To date, write two researchers at Goethe University Frankfurt in Germany, the evidence to support the benefits of open innovation has primarily been based on case studies — and case studies often have a bias for positive results.

So Wenzler Drechsler, a Ph.D. student, and Martin Natter, Strothloff Chair of Retailing at Goethe University Frankfurt,  conducted an econometric study of the effects of open innovation, using a sample of German firms in 2007 — and the researchers discuss their preliminary results in a new working paper. Their findings suggest that open innovation can indeed be beneficial to businesses. Drechsler and Natter report that, on the whole, the use of external sources to bring new innovation into an organization "positively contribute[s] to a firm's innovation performance — the optimal level [of such external innovation sources] being relatively high. Moreover, the results show a positive indirect effect of Open Innovation actitivities on a firm's overall business performance."