abstract
We revisit the “paradox of openness” in the literature which consists of two conflicting views on the link between patenting and open innovation—the spillover prevention and the organizational openness views. We use the data from the Survey of Innovation and Patent Use and the Community Innovation Survey (CIS6) in the UK to assess the empirical support for the distinct predictions of these theories. We argue that both patenting and external sourcing (openness) are jointly-determined decisions made by firms. Their relationship is contingent upon whether the firms are technically superior to their rivals and lead in the market or not. Leading firms are more vulnerable to unintended knowledge spillovers during collaboration as compared to followers, and consequently, the increase in patenting due to openness is higher for leaders than for followers.We develop a simple framework that allows us to formally derive the empirical implications of this hypothesis and test it by estimating whether the reduced form relationship between patenting and collaboration is stronger for leaders than for followers.
6. Conclusion
This paper has revisited the “paradox of openness”, which describes a trade-off when firms open up to outsiders to generate knowledge may weaken the firm’s power to capture knowledge. Associated with this paradox, there are two opposing theoretical hypotheses. On the one hand, firms are more likely to seek external collaborators if they can protect their innovation by patents, and more generally, can guard against unintended knowledge spillovers to partners. We call it the “spillover prevention” theory. In this view, we expect to see a positive correlation between patenting and openness. On the other hand, patenting and exclusivity makes a firm less efficient in developing collaborative innovations, and hence also, a less attractive partner. We dub this the “organizational openness” theory. It implies a negative relationship between patenting and openness.
