Content uploaded by Björn Wikhamn
Author content
All content in this area was uploaded by Björn Wikhamn on Feb 19, 2019
Content may be subject to copyright.
1
Open Innovation in SMEs: A study of the Swedish bio-pharmaceutical
industry
Björn Remneland Wikhamn
Phone: +46 31 786 2297
E-mail: Bjorn.Wikhamn@handels.gu.se
Wajda Wikhamn & Alexander Styhre
School of Business, Economics and Law, Department of Business Administration
Postal address: Box 610, S-405 30 Göteborg, Sweden
Accepted to: Journal of Small Business & Entrepreneurship, 2016, Vol 28, No 2, 169-185
Abstract:
The purpose with this paper is to discuss how small and middle-sized enterprises (SMEs)
utilize open innovation in practice. Open innovation has become a well-used rhetorical
concept among key bio-pharmaceutical spokespersons, suggesting that it would help to renew
the stagnated industry. We report a survey (N=104) on Swedish SMEs in the bio-
pharmaceutical industry, where we shed a light on how widespread the knowledge and
practical uses of open innovation activities actually are. The findings show that very few
respondents are aware of the open innovation concept, but also that open innovation-related
activities are to a large extent integrated within their ordinary innovation practices. The study
also suggests that firms that are engaged in open innovation activities tend to be more
innovation-productive than those who do not. On the basis of these findings, we propose that
there is a casual relation between open innovation and entrepreneurial growth, in that open
innovation activities can act as accelerators for entrepreneurial growth. At the same time,
much “openness” is still performed on informal and ad hoc basis by SMEs in the industry.
Key words: Open innovation; bio-pharmaceutical industry; Sweden
2
Biographical notes:
Björn Remneland Wikhamn is Associate Professor organisational theory and innovation
management at the School of Business, Economics and Law, University of Gothenburg. His
research interests include innovation practices and network organising.
Wajda Wikhamn is Associate Professor in organizational behaviour and human resource
management at the School of Business, Economics and Law, University of Gothenburg. Her
research interests include innovation, employee responsibility and quantitative methods,
among other topics.
Alexander Styhre is Professor and Chair of Organizational Theory and Management in the
Department of Business Administration, School of Business, Economics and Law, University
of Gothenburg. His work has appeared in several journals including Journal of Management
Studies, Organization Studies, Human Relations, Organization, Gender, Work and
Organization and British Journal of Management.
Abstract
The purpose with this paper is to discuss how small and middle-sized enterprises (SMEs)
utilize open innovation in practice. Open innovation has become a well-used rhetorical
concept among key bio-pharmaceutical spokespersons, suggesting that it would help to renew
the stagnated industry. We report a survey (N=104) on Swedish SMEs in the bio-
pharmaceutical industry, where we shed a light on how widespread the knowledge and
practical uses of open innovation activities actually are. The findings show that very few
respondents are aware of the open innovation concept, but also that open innovation-related
activities are to a large extent integrated within their ordinary innovation practices. The study
also suggests that firms that are engaged in open innovation activities tend to be more
innovation-productive than those who do not. On the basis of these findings, we propose that
there is a casual relation between open innovation and entrepreneurial growth, in that open
innovation activities can act as accelerators for entrepreneurial growth. At the same time,
much “openness” is still performed on informal and ad hoc basis by SMEs in the industry.
3
Introduction
Open innovation (Chesbrough 2003) is a notion that has gained a wide interest among
scholars, practitioners and policy makers (Chesbrough, Vanhaverbeke, and West 2014). Some
researchers claim that open innovation is one of the most important trends within the domain
of innovation management (e.g. Huizingh 2011). It has gained attraction to the point of
turning it into a rather vague and bland buzzword. There is a lot of talk about open
innovation, but there are not yet enough empirical evidences that firms and industries really
on a large scale also started to embrace open innovation principles in the daily innovation
work. Open innovation can be defined as distributed innovation processes based on
purposively managed knowledge flows across organizational boundaries, using pecuniary
and/or non-pecuniary mechanisms (Chesbrough and Bogers 2014) in order to enhance
innovation. Such open innovation activities include for instance research collaboration with
universities (Perkmann and Walsh 2007), the use of innovation intermediaries (Sieg, Wallin,
and von Krogh 2010), involvement of users (von Hippel 1986; 2005), business partners
(Chesbrough and Schwartz 2007), communities (West and Lakhani 2008) and other
stakeholders in cross-boundary innovation work. So far, most of the empirical studies and
theorizing on open innovation have been focused on large corporations (Van de Vrande et al.
2009), predominantly in high-tech industries (Chesbrough and Crowther 2006). An increased
awareness of this too narrow focus has been noted (Gassmann, Enkel, and Chesbrough 2010;
Van de Vrande, Vanhaverbeke, and Gassmann 2010) where for instance Vanhaverbeke,
Vermeersch and De Zutter (2012) call for more specific studies about open innovation in
SMEs, specifically working in other settings than in high-tech.
In this paper we will analyse how SMEs utilize activities which could be conceptually
linked to open innovation. There is a strong rationale in investigating how SMEs work with
innovation, as they are often pointed out as having a profound societal role in generating
products and services, economic prosperity and job opportunities (Birch 1979; Brown,
Fazzari and Peterson 2009; Samila and Sorenson 2011). Also, innovation management is
particularly challenging for smaller firms just because of the ‘liability of newness’
(Stinchcombe 1965) and/or the ‘liability of smallness’ (Freeman, Carroll, and Hannan 1983;
Parida, Westerberg, and Frishammar 2012). That is, small firms generally face barriers for
growth which are fundamentally different from large established firms (Dandridge 1979;
Doern 2009). We will in this study explore the enactment of the open innovation concept in
relation to small and middle-sized enterprises (SMEs) within the Swedish bio-pharmaceutical
industry. More specifically, the research question is; How do SMEs in the Swedish bio-
pharmaceutical industry enact open innovation activities in practice?
Open innovation has started to become a popular notion among key spokespersons for
the bio-pharmaceutical industry (e.g. Bianchi et al. 2011; Munos 2009), suggesting that this
mode of innovation would help to renew the stagnated industry (Hunter and Stephens 2010).
Open innovation has been pointed out as a way for curing neglected diseases (Kar 2010), a
semantic coordination of public and private data (Ecker and Williams-Jones 2012) and
enhancing pre-competitive research (Hunter and Stephens 2010). The bio-pharmaceutical
industry has to some extent a long history of ‘openness’ (Powell, Koput, and Smith-Doerr
1996), especially in terms of collaborations with universities (Chandler 2005; Furman and
MacGarvie 2009; Gottinger and Umali 2008; Sternitzke 2010; Swann 1988). Over the years, a
wide range of organizational modes have been used for strategic R&D collaboration, such as
mergers, joint ventures, alliances, outsourcing and licensing agreements (Chiaroni, Chiesa,
and Frattini 2008; Xia and Roper 2008). Barbanti, Gambardella and Orsenigo (2004) portray
such partnerships as hierarchical networks which are structured and organized by a quite
small number of actors. These actors can also be located outside of the life science industry
itself, such as public funders, laboratories and universities (Powell 1998). The open
4
innovation perspective is embracing various forms of co-creation, by for instance innovation
intermediaries such InnoCentive and YourEncore, and community-based open research
ventures such as Pink Army Cooperative and Open Source Drug Discovery (OSDD) and
public-private partnerships such as Innovative Medicines Initiative (IMI) and Medicine for
Malaria Venture (MMV). Also, big pharmaceutical companies, such as AstraZeneca,
GlaxoSmithKline, Johnson & Johnson, Eli Lilly and Novartis have recently enrolled in open
innovation strategies, policies and structures (Hunter and Stephens 2010; Chesbrough and
Chen 2015). In other words, there an increased attention to open innovation in the life science
industries – both from practitioners and scholars – but there are still very few empirical
studies on innovation work in relation to open innovation and much of the theorizing in the
field is rather conceptual. This, although the industry context differ substantially from high-
tech industries where the open innovation concept has its roots, in terms of e.g. longer lead-
times, higher the investment costs, higher risk of failure, and bigger regulatory demands.
The research front of open innovation
Although being sparsely referred to in international journals before 2006 (di Benedetto 2010),
research on open innovation has been intensified and grown exponentially (Chesbrough and
Bogers 2014) and by so moving from the periphery of business life to the centre of
managerial attention (Gassmann et al. 2010). A number of conceptual overviews have been
published on the growing field of open innovation (Dahlander and Gann 2010; Elmquist,
Fredberg, and Ollila 2009; Gassmann et al. 2010; Huizingh 2011; Remneland Wikhamn 2013;
Van de Vrande et al. 2010) and theoretical links have been made with for instance the
resource-based view (Lee et al. 2010), the relational view (Vanhaverbeke and Cloodt 2006),
Transaction Cost Economics (Remneland Wikhamn and Knights 2012), absorptive capacity
(Spithoven, Clarysse, and Knockaert 2010) and dynamic capabilities (Teece 2007).
Paired with the successful diffusion of the open innovation notion, at least two sorts of
criticisms have been raised; 1) that it rests on a non-precise definition (di Benedetto 2010;
Remneland Wikhamn 2013) and 2) that it is “old wine in new bottles” (Trott and Hartmann
2009; Dahlander and Gann 2010). This has spurred an on-going debate on whether open
innovation is a field of study or a communication barrier to theory development (Linstone
2010; von Hippel 2010). For instance, Groen and Linton (2010) proposed that open
innovation could be abandoned in favour of the older and more diffused term supply-chain
management, while others (e.g. van de Vrande and de Man 2011) point to the need for
development of a new theoretical lens, grounded in practical problems in relation to
distributed collaboration of innovation work across organizational boundaries. All in all, the
different uses of the notion of open innovation have led to a conceptual ambiguity (Dahlander
and Gann 2010; Huizingh 2011), and its empirical base for theoretical contributions is mainly
made from case studies of large corporations (often anecdotal and retrospective success
stories) and conceptual argumentations. Open innovation case studies (Chiaroni, Chiesa, and
Frattini 2011; Di Minin, Frattini, and Piccaluga 2010; Huston and Sakkab 2006; Remneland
Wikhamn 2011) are often fascinating, but on an industry level we still need more research in
order to investigate if this is a general trend. Large-scale quantitative studies have until
recently been relatively rare within the field of open innovation (Dahlander and Gann 2010).
Except for some important exemptions, such as the studies of Laursen and Salter (2006) and
van de Vrande et al. (2009), theorizing of open innovation has predominantly been made
based on case studies. This is common practice in exploratory research areas, but as the open
innovation field is maturing, such studies should be followed by quantitative studies involving
large samples in different industries and geographical areas (Huizingh 2011).
Despite the lack of broad research on how open innovation can be applied in practice,
there is a tendency to rather unreflectively suggest open innovation principles as general
5
receipts for growth success for all kinds of businesses – including for SMEs. There is a need
more critical and empirical research on how ‘openness’ is enacted by smaller firms in various
institutional contexts (Bianchi et al. 2010; Christensen, Olesen, and Kjær 2005; Lecocq and
Demil 2006; Parida et al. 2012; Van de Vrande et al. 2009). It is often almost taken for
granted that SMEs due to their size have an innate ability to be adaptive and innovative
(Konsti-Laakso, Pihkala, and Kraus 2012; Vossen 1998) and intuitively a concept such as
open innovation would then suit small actors (Rahman and Ramos 2012; Vanhaverbeke et al.
2012). Meanwhile, since research in this area is still relatively new and undeveloped, we
know very little about how SMEs can take advantage of a more ‘open’ innovation process
(Gassmann et al. 2010). Recent studies have confirmed that SMEs engage in various forms of
open innovation practices (Van de Vrande et al. 2009) but they also suggest that open
innovation principles may differ to large firms (Lee et al. 2010), as it does for the innovation
process in general (Edwards, Delbridge, and Munday 2005; Vossen 1998). Bianchi et al.
(2010) argue that SMEs have difficulties to identify business possibilities outside of their core
competence due to their focused product portfolios, specific knowledge base and limited
financial resources. Hewitt-Dundas (2006) explicitly mentions the absence of external
partners as one of the key constraint to explain the poor innovative performance of SMEs
compared to large firms. The potential advantages from innovation partnership include
benefits as strategic flexibility, reducing or sharing risk, and access to complementary assets
and resources.
Certainly SMEs can strengthen their positions in relation to the existing centres of
power, as they may enact new roles and more directly challenging existing structures and
ways of doing business (Christensen et al. 2005; Narula 2004; Remneland Wikhamn et al.
2011). SMEs generally use non-internal means of innovation more than large firms to build
capabilities and gain external resources (Edwards et al. 2005) and Parida et al. (2012) claim
that SMEs that perform technology scouting, vertical and horizontal technology collaboration,
as well as technology sourcing, become more innovative. There has been a long tradition of
research on external collaboration and networking in research on SMEs and entrepreneurship
(Birley 1985, Johannisson 1998), suggesting that small firms are part of a wider innovation
system (Cooke 2001) and that SMEs that are able to mobilize multiple ties become more
innovative than those only able to mobilize a few (Baum et al. 2000).
On the other hand, there is a tendency that the networked economy rather facilitates the
large incumbent firms’ ability to exploit smaller and weaker actors’ knowledge base (Bianchi
et al. 2010). SMEs normally have fewer assets to bargain with in relation to larger firms
(Narula 2004), and they can become too dependent upon knowledge that they do not have
secured access to in the long run. Furthermore, Brunswicker and van de Vrande (2014) argue
that there is a paradox for SMEs in that they tend to have strong inter-organizational ties, but
they do not always have the ability to make the best use of these external ties. Some SMEs do
not have the capability to articulate their needs for external knowledge (Bessant 1999) and
even if they do so, they may not have the internal capabilities to utilize them in a productive
manner (Bougrain and Haudeville 2002).
Laursen and Salter (2006) suggest that ‘open’ search activities for external knowledge
are curvilinearly related to firm performance, meaning that firms that are more open to
external sources of knowledge are more likely to have higher level of innovative performance,
but they also point out a risk of over-search (i.e. prioritizing searching-activities too much in
relation to available resources) that is costly and tend to reduce innovative performance. Since
SMEs naturally have less capital and resources, this over-search problem would arguably be
more critical for them.
This literature review has described open innovation as a ‘hot topic’, but that it is also
based on a quite vague definition and with poor empirical underpinnings. Much of the open
6
innovation studies are qualitative case-studies, and this makes it not easy to get an overall
picture about what impact open innovation has in practice – that is, what small firms do. In
this paper we will contribute to the open innovation field by providing a quantitative study
investigating the knowledge about, and utilization of, open innovation by SMEs in the
Swedish bio-pharmaceutical industry.
Method
Research setting
Sweden is a nation with a large base of bio-pharmaceutical companies. It is dominated by
three regional clusters; Stockholm/Uppsala, Gothenburg and Malmö/Lund (Sandström, Dolk,
and Dolk 2011). The industry is dominated by AstraZeneca, which has its research head
quarter in Mölndal outside of Gothenburg. AstraZeneca employs about 25 % of the total
number of employees within the Swedish Life Science industry, but recent threats of
downsizing and research relocations have put pressure on the industry as a whole to maintain
competitive. AstraZeneca declared in 2012, in line with many other Big Pharma firms, a focus
on “open innovation” in their strategy, with a purpose of collaborating more with external
public and private partners. Small and middle-sized enterprises are here seen as important
knowledge generators to the Swedish life science ecosystem.
Sweden has a rather small population and a climate that is often portrayed as open-
minded and knowledge intensive. In Hofstede’s (1991) seminal study of national cultures,
Sweden scores high on individualism and low on power distance, masculinity and uncertainty
avoidance. Inglehart (1997) position Sweden as an extreme country in that it has very high
secular-rational values as well as high self-expression values in relation to other countries. For
some, this may indicate that Sweden has a good cultural potential for open innovation, and
this is then needed to be kept in mind when translating the study´s findings to other
geographical areas.
Research design
For this study, we used the database Retreiver to locate the Swedish bio-pharmaceutical firms.
We included three industry classifications: Biotechnical R&D, Pharmaceutical manufacturing
and Pharmaceutical base products. From this search, we got a list of 1421 firms. We then
restricted the selection by excluding firms that had no employees, companies that had closed
down, moved abroad and had unrecognizable addresses. We furthermore added search words
(for example: health* OR medi* OR pharma* OR biomedi*) to strictly include firms with
their main business in life science. We then ended up with 562 firms.
Inspired by the Oslo Manual (3rd edition) and the Community Innovation Survey (CIS),
as well as state-of-the-art research on open innovation (Chesbrough, Vanhaverbeke, and West
2006; Dahlander and Gann 2010; Gassmann et al. 2010; Huizingh 2011; Van de Vrande et al.
2009), we developed a questionnaire based on 30 questions. The questionnaire covers 1)
background information about the firm, 2) the respondent’s general knowledge about open
innovation, and 3) specific information about the innovation work of the firm. In late spring
of 2012, the questionnaires were sent out by mail, addressing the selected firms’ CEOs. A
reminder to people who had not answered was sent in the late summer of 2012. Questions
were possible to answer either through manually on paper or through a web survey (22
respondents did so). 114 respondents participated in the study, with gave a response rate of
20,3%. The sizes of the responding firms had a similar distribution as of the whole industry.
For this specific paper, we have limited the scope to include only small and middle-sized
firms (<250 employees). This, however, included the vast majority of the respondents.
Among the 562 companies we sent the questionnaire to, only 11 companies had over 200
employees according the database we used. Two of the 114 responding companies confirmed
7
that they had more than 250 employees, and eight responding companies did not confirm their
current size. Both these groups where removed from the analysis. Therefore, we ended up
with a set of 104 participating SMEs in this study; 83 of them had between 1-9 employees; 13
between 10-49 employees and 8 between 50-249 employees.
Analysis of the Swedish Bio-pharmaceutical SMEs
Only 19% of the responding firms have formed a R&D department. Partly, this could be a
result of the fact that many firms are very small, where innovation is less likely to be handled
in such organizational structures. 12% of the firms with less than 10 employees (N=83) state
that they have an own R&D department, which can be compared to 48% of the firms with
between 10-249 employees (N=21). Another indicator of a more structured approach to
innovation is whether the firm has adopted a formal innovation strategy. 43% of the firms
report that they have an innovation strategy. Also here there is a higher percentage in larger
firms (see Fig. 1), but not as extreme difference as for the case of having an R&D department.
Figure 1 inserted about here
When it comes to actual innovation performance, 38% stated that they had introduced at least
one innovation (product, service and/or process innovation) between 2009 and 2011. The
survey does not reveal the innovation height of these innovations, nor does it disclose any
success (in terms of for instance time, money or quality) generated from these innovations,
but it anyhow show that quite a large group of firms take innovation into practice. Also here,
there is a significant difference between micro firms (1-9 employees) and small and middle-
sized firms (10-249 employees). Of the former group, 27% had generated innovations,
compared to 80% in the latter group. Hence, the propensity to be innovative seems to increase
with size. On the other hand, in absolute numbers, many of the innovative firms are smaller
firms; 50% of the firms stating that they introduced product innovations had less than 10
employees.
In a direct question about whether they had heard of the term ‘open innovation’ before,
87,5% admitted that they had not. Furthermore, only 8 of 104 (8%) firms had utilized open
innovation in their innovation work (see Table 1) and none of them specifically measure open
innovation activities.
The use of open innovation in SMEs
Table 1 inserted about here
For those few who affirmed that they practice open innovation, all stated that the CEO (i.e.
the respondents themselves) has acted a main driving force. A few of them also highlighted
the R&D department and business units/areas as important proponents, while none of them
highlighted the customers or external consultants as drivers for open innovation. When asked
about the reasons for using open innovation, the most frequent responses were to solve
business problems and to decrease time to market.
Respondents who stated that their firm had launched innovations in the last years were
then asked more specific questions related to the innovation process, regardless of whether the
respondents know about open innovation or not. Many of these firms report that they at least
with some of their innovations do not involve any external actors at all (see Fig. 2), more
8
specifically 50% of the firms developing product innovation and 58% of the firms developing
service innovation.
Figure 2 inserted about here
As seen on Fig. 2, however, there are also several cases of involvement of external actors,
including for example suppliers, institutions and users. This indicates, perhaps not very
surprisingly, that SMEs to at least some extent are “open” in innovation work even if they
may not have heard of the notion of “open innovation. For instance, in the product innovation
process, 50% of the respondents state that they had worked with universities, research
institutes or public authorities, 42% state that they had involved customers, 25% had involved
suppliers, and 21% had involved business partners. A higher percentage is reported for
service innovations, when it comes to business partners (33%) but lower percentage when it
comes to institutions (16%) and suppliers (8%).
The responses suggest that open innovation as a strategic concept is not very well
diffused among the (top) managers of small and middle-sized enterprises in the Swedish bio-
pharmaceutical industry. The very few respondents who state that they had heard about the
open innovation concept before associate it to a larger extent to external, relation-based
network collaborations (for instance solver communities, open source, involvement of users
and external partner networks) than as transaction-based IP exchange (in- and outlicensing of
IP, joint ventures and formal partnerships, corporate venture programs, and markets for IP
trading). Potential threats are referred to as a perceived higher risk that competitors will gain
strategic knowledge, but not as much to supposed internal challenges.
When respondents were asked to describe the innovation activities that their firms had
been participating in, regardless of any open innovation concept or strategy, some interesting
results emerged. Figure 3 reports that only 23% of the respondents said that they did not
utilize any of the listed open innovation-related activities. 61% of them have engaged in
external networking to access knowledge in their innovation work. 42% had involved
users/customers into the process – which is a higher figure than involving internal employees
from other departments (26%). Outsourced R&D had been used by 42% of the firms. When it
comes to the more transaction-based activities such as venturing, in-licensing and external
research investments, the percentage of use is significantly lower.
Figure 3 inserted about here
Table 2 shows a further analysis of the firms utilization of open innovation in practice. It
shows that firms with CEO´s who have knowledge about open innovation to a larger extent
also utilize open innovation in their innovation work. As and example, 83% of the firms with
knowledge about open innovation use external networking, which can be compared to 57% of
those firms who have not heard about open innovation. This is not surprising. But what these
figures also show is that companies with no knowledge about the open innovation concept
still to a large extent utilize open innovation activities in daily practice. The same is true for
the relation between having an explicit innovation strategy and the utilization of open
innovation; firms with innovation strategies tend to more frequently use open innovation
activities than companies without an innovation strategy.
Table 2 inserted about here
Companies with an own R&D department is to a larger extent engaging in open innovation
activities than those who do not have an R&D department. This empirical result is in line with
9
the notion of absorptive capacity (Cohen and Levinthal 1990), suggesting that firms need own
R&D capabilities to absorb and engage with external sources of knowledge effectively. This
study even suggests that having an own R&D department is positively related to the
propensity to outsource R&D activities. In other words, open innovation activities do not lead
to downsizing of own R&D budgets, but rather increase them.
Figure 4 (and also Table 2) also illustrates the effectiveness of open innovation. Firms
that have generated at least one innovation between 2009 and 2011 (‘innovative effective
firms’) use of open innovation in a remarkable higher degree than those who have not done so
(‘not innovative effective firms’). For instance, the propensity to involve users differs with
70% for innovative effective firms compared to 24% for not innovative effective firms.
Figure 4 inserted about here
Discussion and concluding remarks
Although often highlighted as open and flexible (c.f. Edwards et al. 2005), SMEs have been
excluded from the mainstream open innovation research (Wynarczyk, Piperopoulos, and
McAdam 2013; Brunswicker and van de Vrande 2014) and this paper addresses this gap by
reporting a study of open innovation in Swedish small and middle-sized bio-pharmaceutical
companies. From the survey, we can first summarize some descriptive findings.
First, open innovation is still not well-diffused as a management concept to the
managers of SMEs, at least not among the Swedish bio-pharmaceutical firms. Even if the
notion has internationally been highlighted as a particularly good concept to enhance
innovation in the bio-pharmaceutical industry (Hunter and Stephens 2010; Kar 2010; Munos
2009) only 12% of the respondents had heard of the term at all, 2.6% of the firms claim to
have an open innovation strategy and none of them measure open innovation activities.
Gassmann et al. (2010) suggest that open innovation has moved from pioneers to mainstream
in business life, as well as from large firms to SMEs, but as the survey (conducted in the
summer of 2012) was targeted toward CEOs or R&D managers, the results could be seen as
an indication that the open innovation concept has not (yet?) penetrated the mainstream
strategy rooms of SMEs, at least not among bio-pharmaceutical companies in Sweden.
Second, while few managers of SMEs were familiar with the open innovation concept, a
large proportion of these firms still perform activities that are strongly related to open
innovation in their day-to-day innovation work. Partly, this finding is due to the vagueness of
the open innovation term (Remneland Wikhamn 2013) inasmuch as the concept includes
innovation activities that have been more or less standard practices within the bio-
pharmaceutical industry for decades, such as networking (Powell 1998) and strategic alliances
(Rothaermel and Deeds 2004). The study also suggests that SMEs do not enact structured and
formal strategies and implement performance metrics to support such open innovation
activities to the same extent as have been reported in studies of Big Pharma (Hunter and
Stephens 2010). Also, activities with more transactional content (e.g. in- or outlicensing and
venturing) are less utilized than activities with more relational and informal content (e.g.
external networking). This limited adoption of formalized and transactional approaches to
open innovation could possibly be attributed to the lower levels of strategic resources in
SMEs (Lee et al. 2010), as well as the fact that SMEs have available less time and resources
in general (Narula 2004).
Third, the study shows that SMEs who engage in what could be labelled as open
innovation activities do not primarily aim to downsize their own R&D departments. On the
contrary, firms with own R&D departments tend to use outsourcing of R&D to a larger degree
than those who do not have own R&D departments. In other words, the findings suggest that
SMEs that is conducting collaboration with external stakeholders also maintain a high level of
innovation capabilities in-house. This pattern is especially salient for product innovations.
10
The findings indicate that firms do not approach open innovation as a means for efficient
supply-chain management, as for instance Groen and Linton (2010) propose, where certain
tasks are removed from the organization and delegated to contracted suppliers. Instead, SMEs
with “open” approaches to innovation seem to build inhouse absorptive capacities (Cohen and
Levinthal 1990), so that their own R&D knowledge can act as a facilitator for understanding
and internalizing external knowledge. The study also shows that Swedish bio-pharmaceutical
SMEs tend to work with business partners that can be perceived as competitors, but not so
much with firms outside of the bio-pharmaceutical industry. This finding is in line with the
absorptive capacity theorizing as well, in that it is easier to work with partners that share the
same knowledge base, than to interact with companies that utilize approaches that are not
familiar.
Forth, all in all, the results suggests that firms who work with open innovation in
practice - particularly in the form of external networking and customer/user involvement -
tend to be more innovation productive than those who do not. This is a finding that is
consistent with previous studies (e.g. Parida et al. 2012). This means that there seem to be a
causal relation between open innovation (Chesbrough 2003) and what Nalid and Davidsson
(2013) call entrepreneurial growth. Entrepreneurial growth is defined as “growth through the
launch of new products or services and/or through expansion into new geographic markets,
domestically and abroad” (Naldi and Davidsson 2014). The argument is that research should
be focused on new entrepreneurial activities rather than on a possible growth results, since the
latter is to a large extent tied to exogenous increases in market demand (which is to a large
extent outside of the entrepreneurs’ or managers’ control), or on temporary power positions
distinct from the specific entrepreneurial activities at hand. The study in this paper indicates
that engagement in open innovation activities can act as accelerators for entrepreneurial
growth – put differently, the more open and collaborative you are as a SME, the more
entrepreneurial activities you undertake.
This study contributes to the open innovation literature by providing a quantitative study
of how open innovation activities are enacted in the Swedish small and middle-sized bio-
pharmaceutical firms. As empirical research on SMEs and open innovation is still limited
(Gassmann et al. 2010), the study contributes to the knowledge of open innovation by
detailing to what extent Swedish SMEs in the bio-pharmaceutical industry utilize various
forms of open innovation activities in practice. The study shows that SMEs in the bio-
pharmaceutical industry to a large extent are “open” in terms of involving external
stakeholders in innovation work but they often do this in an ad-hoc and informal way, based
on emergence rather than through planned and rational ways that cases of large corporations
illustrate. The “bounded rationality” of SMEs is arguably more limited and narrow, and
hence, they are more subject to chance and circumstances as well as to the personal attitudes
and values of individuals. So even if there would be a greater need for SMEs than for large
firms to balance openness and closeness, as for instance Brunswicker and van de Vrande
(2014) and Lauren and Salter (2006) imply, such calculus and analytical strategizing is not yet
common in the industry. In other words, much of the activities linked to open innovation that
has been reported in the study would rather be attributed to a standard practice among SMEs
in the industry (with long historical roots), than to innovative organizing or innovative
business models based a new paradigm shift (Chesbrough 2003; 2006).
We have also contributed to the literature about SMEs and open innovation in that we
have empirically linked it to entrepreneurial growth. More precisely we found that SMEs
utilizing open innovation activities also tend to have more innovative activities. Hence, even
if “openness” is not articulated as a formal strategy by the SMEs in the survey, the fact that
openness and innovative performance seem to have a covariation indicates that there is a
hidden potential among SMEs to raise it to a strategic question and more structurally and
11
systematically reflect on how openness and closeness should be balanced for the firm. This
also highlights the importance for the open innovation definition to bring something new to
practitioners, and not just to repackage the “old wine into new bottles” (Trott and Hartmann
2009).
Because of the limited number of respondents and the geographical limitations, our
conclusions are only tentative and should be complemented and further elaborated on in
future studies. Further research should preferably explore if open innovation is considered to
be different from the ordinary networking and knowledge sharing activities in SMEs which
are pursued on regular basis in the bio-pharmaceutical industry.
12
References
Barbanti, P., A. Gambardella, and L. Orsenigo. 2004. “The evolution of collaborative
relationships among firms in biotechnology.” International Journal of Biotechnology
1(1): 10-29.
Baum, J.A.C., T. Calabrese, and B.S. Silverman, 2000. “Dont go it alone: Alliance network
composition and startups performance in Canadian biotechnology”, Strategic
Management Journal 21: 267–294.
Bessant, J. 1999. “The rise and fall of ‘Supernet’: A case study of technology transfer policy
for smaller firms”, Research Policy 28(56): 601–614.
Bianchi, M., S. Campodall'Orto, F. Frattini, and P. Vercesi. 2010. “Enabling open innovation
in small and medium-sized enterprises: how to find alternative applications for your
technologies.” R&D Management 40(4): 414-31.
Bianchi, M., A. Cavaliere, D. Chiaroni, F. Frattini, and V. Chiesa. 2011. “Organisational
modes for Open Innovation in the bio-pharmaceutical industry: An exploratory
analysis.” Technovation 31(1): 22-33.
Birch, D.L. 1979 “The Job Generation Process.” Cambridge: M.I.T. Program on
Neighborhood and Regional Change.
Birley, S. 1985. The role of networks in the entrepreneurial process, Journal of Business
Venturing, 1(1): 107–117.
Bougrain, F. and B. Haudeville. 2002. “Innovation, collaboration and SMEs internal research
capacities”, Research Policy 31(5): 735–747.
Brown, J., S. Fazzari, and B. Peterson. 2009. “Financing innovation and growth: Cash flow,
external equity, and the 1990s R&D boom.” Journal of Finance 64(1): 151-85.
Brunswicker, S. and V. van de Vrande. 2014. “Exploring Open Innovation in Small and
Medium-Sized Entreprises.” In New Frontiers in Open Innovation, edited by H.
Chesbrough, W. Vanhaverbeke, and J. West. Oxford: Oxford University Press.
Chandler, A.D. 2005. “Shaping the industrial century: The remarkable story of the evolution
of the modern chemical and pharmaceutical industries.” London and Cambridge:
Harvard University Press.
Chesbrough, H. 2006. “Open Business Models: How to Thrive in the New Innovation
Landscape.” Boston: Harvard Business School Press.
Chesbrough, H. 2003. ”Open Innovation: The New Imperative for Creating and Profiting
from Technology.” Boston: Harvard Business School Press.
Chesbrough, H. and M. Bogers. 2014. “Explicating open innovation: Clarifying an emerging
paradigm for understanding innovation.” In New Frontiers in Open Innovation,
edited by H. Chesbrough, W. Vanhaverbeke, and J. West. Oxford: Oxford University
Press.
Chesbrough, H. and A. Crowther. 2006. “Beyond High Tech: Early Adopters of Open
Innovation in Other Industries.” R&D Management 36(3): 229-36.
Chesbrough, H. and K. Schwartz. 2007. “Innovating business models with co-development
partnerships.” Research-Technology Management 50(1): 55-59.
Chesbrough, H., W. Vanhaverbeke, and J. West. 2014. “New Frontiers in Open Innovation.”
Oxford: Oxford University Press.
Chesbrough, H., W. Vanhaverbeke, and J. West. 2006. “Open Innovation: Researching a
New Paradigm.” Oxford: Oxford University Press.
Chesbrough, H. and E. L. Chen. 2015. “Using Inside-Out Open Innovation to Recover
Abandoned Pharmaceutical Compounds.” Journal of Innovation Management 3(2):
21-32.
13
Chiaroni, D., V. Chiesa, and F. Frattini. 2011. “The Open Innovation Journey: How firms
dynamically implement the emerging innovation management paradigm.”
Technovation 31(1): 34-43.
Chiaroni, D., V. Chiesa, and F. Frattini. 2008. “Patterns of collaboration along the bio-
pharmaceutical innovation process.” Journal of Business Chemistry 5(1): 7-22.
Christensen, J., M. Olesen, and J. Kjær. 2005. “The Industrial Dynamics of Open
Innovation—Evidence from the Transformation of Consumer Electronics.” Research
Policy 34(10): 1533-49.
Cohen, W. and D. Levinthal. 1990. “Absorptive Capacity: A New Perspective on Learning
and Innovation” Administrative Science Quarterly 35(1): 128-152.
Cooke, P. 2001. “Regional Innovation Systems, Clusters, and the Knowledge Economy.”
Industrial and Corporate Change 10(4): 945-974.
Dahlander, L. and D. Gann. 2010. “How Open is Innovation?” Research Policy 39(6): 699-
709.
Dandridge, T.C. 1979. “Children are not "Little Grown-ups": Small Business Needs its own
Organizational Theory.” Journal of Small Business Management 17(2): 53–57.
di Benedetto, A. 2010. “Comment on ‘Is open innovation a field of study or a communication
barrier to theory development?’” Technovation 30(11-12): 557-57.
Di Minin, A., F. Frattini, and A. Piccaluga. 2010. “Fiat: open innovation in a downturn 1993–
2003”. California Management Review 52(3): 132-59.
Doern, R. 2009. “Investigating Barriers to SME Growth and Development in Transition
Environments A Critique and Suggestions for Developing the Methodology.“
International Small Business Journal 27(3): 275-305.
Ecker, G.F. and B. Williams-Jones. 2012. “Open Innovation in Drug Discovery.” Molecular
Informatics 31(8): 519-20.
Edwards, T., R. Delbridge, and M. Munday. 2005. “Understanding innovation in small and
medium-sized enterprises: a process manifest.” Technovation 25(10): 1119-27.
Elmquist, M., T. Fredberg, and S. Ollila. 2009. “Exploring the Field of Open Innovation.”
European Journal of Innovation Management 12(3), 326-45.
Freeman, J., G.R. Carroll, and M.T. Hannan. 1983. “The liability of newness: Age
dependence in organizational death rates.” American Sociological Review: 692-710.
Furman, J.L. and M. MacGarvie. 2009. “Academic collaboration and organizational
innovation; the development of research capabilities in the US pharmaceutical
industry, 1927-1946.” Industrial and corporate change 18(5): 929-61.
Företagarna 2013. “Välvärdsskaparna - En analys av småföretagens betydelse för
kommunernas skatteintäkter.” Företagarna.
Gassmann, O., E. Enkel, and H. Chesbrough. 2010. “The future of open innovation.” R&D
Management 40(3): 213-21.
Gottinger, H.-W. and C.L. Umali. 2008. “The evolution of the pharmaceutical-biotechnology
industry.” Business History 50(5): 583-601.
Groen, A. J. and J. D. Linton. 2010. “Is open innovation a field of study or a communication
barrier to theory development?” Technovation 30(11-12): 554-554.
Hewitt-Dundas, N. 2006. “Resource and capability constraints to innovation in small and
large plants.” Small Business Economics 26(3): 257-77.
Hofstede, G. 1991. “Cultures and organizations.” London: McGraw-Hill.
Huizingh, E. 2011. “Open innovation: State of the art and future perspectives.” Technovation
31(a): 2-9.
Hunter, J. and S. Stephens. 2010. “Is open innovation the way forward for big pharma?” Nat
Rev Drug Discov 9(2): 87-88.
14
Huston, L. and N. Sakkab. 2006. “Connect and Develop: Inside Procter & Gamble's New
Model for Innovation.” Harvard Business Review 84(3): 58-66.
Hölzl, W. and J. Janger. 2013. “Does the analysis of innovation barriers perceived by high
growth firms provide information on innovation policy priorities?” Technological
Forecasting and Social Change 80(8): 1450-68.
Johannisson, B. 1998. “Personal Networks in Emerging Knowledge-based Firms: Spatial and
Functional Patterns.” Entrepreneurship & Regional Development 10(4): 297-312.
Kar, S. 2010. “Opinion: Open innovation: an answer for neglected diseases.” Future
Medicinal Chemistry 2(9): 1411-15.
Konsti-Laakso, S., T. Pihkala, T. and S. Kraus. 2012. “Facilitating SME Innovation
Capability through Business Networking.” Creativity and Innovation Management
21(1): 93-105.
Laursen, K. and A. Salter. 2006. “Open for Innovation: The Role of Openness in Explaining
Innovation Performance Among UK Manufacturing Firms.” Strategic Management
Journal 27(2): 131-150.
Lecocq, X. and B. Demil. 2006. “Strategizing industry structure: the case of open systems in a
low-tech industry.” Strategic Management Journal 27(9): 891-98.
Lee, S., G. Park, B. Yoon, and J. Park. 2010. “Open innovation in SMEs - An intermediated
network model.” Research Policy 39(2): 290-300.
Linstone, H.A. 2010. “Comment on ‘Is open innovation a field of study or a communication
barrier to theory development?’” Technovation 30(11-12): 556-56.
Munos, B. 2009. “Lessons from 60 years of pharmaceutical innovation.” Nat Rev Drug
Discov 8(12): 959-68.
Naldi, L. and P. Davidsson. 2014. “Entrepreneurial growth: The role of international
knowledge acquisition as moderated by firm age.” Journal of Business Venturing,
29(5): 687-703.
Narula, R. 2004. “R&D collaboration by SMEs: new opportunities and limitations in the face
of globalisation.” Technovation, 24(2): 153-61.
Parida, V., M. Westerberg, and J. Frishammar. 2012. “Inbound Open Innovation Activities in
High-Tech SMEs: The Impact on Innovation Performance. “Journal of Small Business
Management 50(2): 283-309.
Perkmann, M. and K. Walsh. 2007. “University-Industry relations and Open Innovation:
Towards a Research Agenda.” International Journal of Management Reviews 9(4):
259-80.
Powell, W.W. 1998. “Learning From Collaboration: Knowledge and Networks in the
Biotechnology and Pharmaceutical Industries.” California Management Review 40(3):
228-40.
Powell, W.W., K.W. Koput, and L. Smith-Doerr. 1996. “Interorganizational collaboration and
the locus of innovation: Networks of learning in biotechnology.” Administrative
Science Quarterly 41(1): 116-45.
Rahman, H. and I. Ramos. 2012. “Cases on SMEs and Open Innovation: Applications and
Investigations.” IGI Global.
Remneland Wikhamn, B. 2011. “Path dependence as a barrier for ‘soft’ and ‘open’
innovation.” International Journal of Business Innovation and Research 5(6): 714-30.
Remneland Wikhamn, B. 2013. “Two Different Perspectives on Open Innovation – Libre
versus Control.” Creativity and Innovation Management 22(4): 375-89.
Remneland Wikhamn, B. and D. Knights. 2012. “Transaction Cost Economics and Open
Innovation: Implications for Theory and Practice.” Creativity and Innovation
Management 21(3): 277-89.
15
Remneland Wikhamn, B., J. Ljungberg, M. Bergquist, and J. Kuschel. 2011. “Open
Innovation, Generativity and the Supplier as a Peer: The Case of iPhone and
Android.” International Journal of Innovation Management 15(1): 205-30.
Rickne, A., S. Laestadius, and H. Etzkowitz. 2012. “Innovation Governance in an Open
Economy - Shaping Regional Nodes in a Globalized World.” Abingdon: Routledge.
Rothaermel, F.T. and D.L. Deeds. 2004. “Exploration and exploitation alliances in
biotechnology: a system of new product development.” Strategic Management
Journal 25(3): 201-21.
Samila, S. and O. Sorenson, O. 2011. “Venture capital, entrepreneurship and economic
growth.” Review of Economics and Statistics 93(1): 338-49.
Sandström, A., T. Dolk, and B. Dolk. 2011. “Life Science companies in Sweden - including a
comparison with Denmark.” VINNOVA 2011:03.
Sieg, J.H., M.W. Wallin, and G. von Krogh. 2010. “Managerial challenges in open
innovation: a study of innovation intermediation in the chemical industry.” R&D
Management 40(3): 281-91.
Spithoven, A., B. Clarysse, and M. Knockaert. 2010. “Building Absorptive Capacity to
Organise Inbound Open Innovation in Traditional Industries.” Technovation 30(2):
130-41.
Sternitzke, C. 2010. “Knowledge sources, patent protection, and commercialization of
pharmaceutical innovation.” Research Policy 39(6): 810-21.
Stinchcombe, A.L. 1965. “Organizations and Social Structure.” In Handbook of
Organizations, edited by J.G. March, Chicago: Rand McNally.
Swann, J.P. 1988. “Academic scientists and the pharmaceutical industry.” Baltimore and
London: Johns Hopkins University Press.
Teece, D.J. 2007. “Explicating dynamic capabilities: The nature and microfoundations of
sustainable. enterprise performance.” Strategic Management Journal 28(13): 1319-50.
Trott, P. and D. Hartmann. 2009. “Why 'Open Innovation' Is Old Wine In New Bottles.”
International Journal of Innovation Management 13(4): 715-36.
UNU-MERIT 2012. “Innovation Union Scoreboard 2011 - Research and Innovation Union
scoreboard.” European Commission.
Van de Vrande, V., J.P. de Jong, W. Vanhaverbeke, and M. de Rochemont. 2009. “Open
innovation in SMEs: Trends, motives and management challenges.” Technovation
29(6-7): 423-37.
Van de Vrande, V. and A.-P. de Man. 2011. ”A response to "Is open innovation a field of
study or a communication barrier to theory development?".” Technovation 31(4): 185-
186.
Van de Vrande, V., W, Vanhaverbeke, and O. Gassmann. 2010. “Broadening the scope of
open innovation: past research, current state and future directions.” International
Journal of Technology Management 52(3-4): 221-35.
Vanhaverbeke, W. and M. Cloodt. 2006. “Open Innovation in Value Networks.” In New
Frontiers in Open Innovation, edited by H. Chesbrough, W. Vanhaverbeke, and J.
West. Oxford: Oxford University Press.
Vanhaverbeke, W., I. Vermeersch, and S. De Zutter. 2012. “Open Innovation in SMEs: How
can small companies and start-ups benefit from open innovation strategies?”
Research report, Flanders DC.
von Hippel, E. 2010. “Comment on `Is open innovation a field of study or a communication
barrier to theory development?'” Technovation 30(11-12): 555-55.
von Hippel, E. 2005. “Democratizing Innovation.” MIT Press, Cambridge, Mass.
von Hippel, E. 1986. “Lead Users: A Source of Novel Product Concepts.” Management
Science 32(7): 791-805.
16
Vossen, R.W. 1998. “Relative strengths and weaknesses of small firms in innovation.”
International Small Business Journal 16(3): 88-94.
West, J. and K. Lakhani. 2008. “Getting Clear About Communities in Open Innovation.”
Industry & Innovation 15(2): 223-31.
Wynarczyk, P., P. Piperopoulos, and M. McAdam. 2013. “Open innovation in small and
medium-sized enterprises: An overview.” International Small Business Journal 13(3):
240-255.
Xia, T. and S. Roper. 2008. “From capability to connectivity—Absorptive capacity and
exploratory alliances in biopharmaceutical firms: A US–Europe comparison.”
Technovation 28(11): 776-85.
