Sunk costs, open innovation, and firms’ innovative performance: An interpretative framework

Objectives. The paper is aimed to understand how openness of firms influences their innovative performance. We extend the model of Laursen and Salter (2006), considering the sunk cost effect. Methodology. Data were gathered data from the Community Innovation Survey (CIS) for the last three years. Likelihood of hypotheses is explored using multivariate analysis. We compare open innovation to closed innovation; and performance of non-innovative firms with those of innovative firms. We also collect and group by categories respondents answers to different stimulus material for catching the sunk costs effect. Findings. Results of the explorative test seems to confirm that openness of a firm is significant for their innovative performance. However, the model including the sunk cost effect have a stronger explicative power than the merely breadth-and-depth model. Research limits. Different variables could lead to some differences in results. Thus, as a partial replication study on sample larger than previously, possibilities of obtaining different results are rather small. Practical implications. Managers seeking flexibility could opt for a series of small positioning investments, increasing the breadth of collaborations. In this way, they can also avoid the sunk cots effect. Conversely, when their aim is to pursue disruptive innovation, depth of collaborations should be privileged over breadth. Originality of the study. The study tackles two main gaps: first, it extends the Laursen and Salter (2006) model, considering the sunk cost effect. Second, it further test the previous model on a sample that is extremely larger than the one of the two authors, which was limited to UK only.