Open service innovation and the firm's search for external knowledge

TLDR

Open innovation increasingly involves cross‑boundary collaboration, yet most research has focused on manufacturing, leaving services—despite their economic prominence—understudied. This study investigates open innovation practices in business services and their implications for manufacturing firms adopting a service‑inclusive business model, aiming to reconceptualise open innovation in the service economy. Using a unique UK firm dataset, the authors analyze open‑innovation activities of business services and assess how these practices influence manufacturing firms’ adoption of service‑inclusive models. Results show that open‑innovation engagement rises with firm size and R&D spending, that business services are more active and informal innovators than manufacturers, that they prioritize scientific and technical knowledge, and that such practices are linked to manufacturing firms’ adoption of service‑inclusive models and increased informal knowledge exchange.

Abstract

The concept of open innovation captures the increasing propensity of firms to work across their traditional boundaries of operation. This phenomenon has largely been studied from the viewpoint of manufacturing businesses while services have received much less attention despite the predominant role they play in advanced economies. This paper focuses on open innovation in services, both as a subsector of the economy and as a component of the activities of manufacturing firms. We study the open innovation practices of business services firms and then consider the implications for open innovation of the adoption of a service inclusive business model by manufacturing firms. Our analyses are based on a unique dataset with information on open innovation activities amongst UK firms. Overall, engagement in open innovation increases with firm size and R&D expenditure. Business services are more active open innovators than manufacturers; they are more engaged in informal relative to formal open innovation practices than manufacturers; and they attach more importance to scientific and technical knowledge than to market knowledge compared to manufacturing firms. Open innovation practices are also associated with the adoption of a service inclusive business model in manufacturing firms and service-integrated manufacturers engage in more informal knowledge-exchange activities. The paper contributes towards a reconceptualisation of open innovation in service businesses and a deeper evidence-based understanding of the service economy.