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The Role of Industry and Economic Context in Open Innovation: Evidence from Nigeria

Innovation is strongly related to the use of external knowledge. First, in terms of absorptive capacity, or how much a firm can use external knowledge. Second, in terms of search diversity, or how the broader and deeper a firm searches, the more innovative it tends to be. A new paper co-authored by visiting researcher Abiodun Egbetokun focuses on the latter, breaking new ground in research on Africa.
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    #2014-073 The   role   of    industry   and   economic   context   in   open   innovation:   Evidence   from   Nigeria   Abiodun   Egbetokun,   Omolayo   Oluwatope,   David   Adeyeye   and   Maruf    Sanni   Maastricht   Economic   and   social   Research   institute   on   Innovation   and   Technology   (UNU ‐ MERIT)   email:   |   website:   Maastricht   Graduate   School   of    Governance   (MGSoG)   email:   info ‐   |   website:   Keizer   Karelplein   19,   6211   TC   Maastricht,   The   Netherlands   Tel:   (31)   (43)   388   4400,   Fax:   (31)   (43)   388   4499     UNU ‐ MERIT   Working   Paper   Series    UNU-MERIT Working Papers   ISSN 1871-9872 Maastricht Economic and social Research Institute on Innovation and Technology, UNU-MERIT Maastricht Graduate School of Governance MGSoG UNU-MERIT Working Papers intend to disseminate preliminary results of research  carried out at UNU-MERIT and MGSoG to stimulate discussion on the issues raised.  1 The role of industry and economic context in open innovation: evidence from Nigeria   Abiodun Egbetokun, Omolayo Oluwatope, David Adeyeye, Maruf Sanni  National Centre for Technology Management [Federal Ministry of Science and Technology], PMB 012, Obafemi Awolowo University, Ile-Ife, Nigeria Email:; [Egbetokun], [Oluwatope], [Adeyeye], [Sanni]  Abstract Using innovation survey data on a sample of UK manufacturing firms, Laursen and Salter [2006] documented a non-monotonous relationship between external search strategies and firm-level innovative performance. We find partially similar results in a combined sample of  Nigerian manufacturing and service firms. A major discrepancy is that external search appears not to matter for radical innovation in our sample. Based on multiple research streams including economics of innovation and development economics, we develop and test new hypotheses on sectoral differences and the role of the economic context. We find that in a developing context, a wider range of innovation obstacles implies broader external search and more intense obstacles require deeper search. We explore the implications of these results for management research and theory. Keywords: open innovation; search strategies; innovation obstacles; technological and non-technological innovation; Nigeria JEL Codes:  L14, O32, C30    This research benefitted from Egbetokun’s research stay [February-April, 2014] at the United Nations University-Maastricht   Economic and social Research institute on Innovation and Technology [UNU-MERIT], Maastricht, the Netherlands. Comments and suggestions from Pierre Mohnen, Micheline Goedhuys and  participants at the Joint UNU-MERIT/Maastricht Graduate School of Governance Seminars are gratefully acknowledged.    2 Introduction Innovation is a systemic phenomenon that is strongly related to the use of external knowledge [Tomlinson, 2010, Enkel et al., 2009, Chesbrough, 2003, Lundvall, 1988]. There are two well-known empirical regularities on this relationship, as demonstrated by extensive research evidence. The first one is based on the seminal work of [Cohen and Levinthal, 1990] and [Cohen and Levinthal, 1989] on absorptive capacity. A firm tends to be more or less innovative depending on its ability to appropriate external knowledge [Lin et al., 2012, de Jong and Freel, 2010, Todorova and Durisin, 2007, Lane et al., 2006, Lane et al., 2002, Zahra and George, 2002, Lane and Lubatkin, 1998]. The second empirical regularity, which  builds upon the first, stems from the groundbreaking work of [Laursen and Salter, 2006] [henceforth LS]. The broader and deeper a firm searches, the more innovative it tends to be,  but search diversity 1  is subject to decreasing returns [de Leeuw et al., 2014, Oerlemans et al., 2013, Garriga et al., 2013, Duysters and Lokshin, 2011, Jiang et al., 2010, Chiang and Hung, 2010]. Our analyses are directed towards re-evaluating and extending the second empirical regularity described above. In this light, our specific objectives are two-fold. First, we explicitly replicate the analyses of LS, for the first time ever on a combined pooled cross-sectional sample of service and manufacturing firms from a developing country in Africa. For this purpose, we use a novel dataset on service and manufacturing firms in Nigeria, which is one of Africa’s largest economies . Our dataset has a key advantage: instead of single cross-sections of manufacturing firms that are commonly used in previous studies, we pool a sample of manufacturing and service firms over two periods. The completely different sample and economic context help us to deliver additional insight to the strategic management literature on innovation and knowledge search behaviour beneath the frontier. Second, we extend the analyses of LS by taking a multidimensional view of innovation, and considering sectoral differences and the role of the economic context. In particular, we combine insight from the economics and management literatures to develop new hypotheses 1  A clarification of terminology is essential at this point. [Harrison and Klein, 2007] make an extensive discussion of the diversity concept in the context of management research. [Stirling, 2007] presents a stylised framework of different aspects of diversity: variety (‘how many types of thing do we have?’), balance (‘how much of each type of thing do we have?’) and disparity (‘how different from each  other are the types of thing that we have?’). Clearly, the notions of search breadth and depth used in Laursen and Salter (2006)  reflect the aspect of variety. The term ‘diversity’ applied in other related research such as [de Leeuw et al., 2014, Oerlemans et al., 2013, Duysters and Lokshin, 2011] actually reflects only the aspect of balance. Throughout this paper, we al ign ourselves with Stirling’s broad framework and terminology.  
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