Does Open Innovation Enhance a Large Firm’s Financial Sustainability? A Case of the Korean Food Industry

Abstract

This study aims to explore whether a firm’s financial sustainability is enhanced by open innovation especially after a global financial crisis. There are few studies on the relationship between open innovation and financial sustainability. This study aimed to fill the literature gap by analyzing the change in the financial ratio according to the increase or decrease in open innovation. We used a case study method regarding large Korean food firms. Korea is a latecomer in the food industry, which is driven by large companies. This study is meaningful for financial sustainability studies of countries with a lack of resources and small market size, which require open innovation. The findings of this study are as follows: The most preferred alliance strategy of large food firms is joint research. In order to secure raw materials and markets, open innovation was actively conducted abroad, which increased growth and profitability. However, a firm which rarely adopts open innovation could grow steadily through internal strategies. On the other hand, although relatively many open innovations have been used, growth and profitability could decrease. Firms with sufficient absorptive capacity strengthen financial sustainability through open innovation.

Exploring Factors Affecting Sustainable Innovation Performance of Food Firms. A Case of Korean Food Industry

“…Socioeconomic changes such as price hikes and hunger problems follow. Each actor in the value chain needs to promote sustainable growth by increasing productivity and profitability in a stable financial environment [29].…”

Relationship between User Innovation Activities and Market Performance: Moderated Mediating Effect of Absorptive Capacity and CEO’s Shareholding on Innovation Performance

“…Many research findings show that the level of absorptive capacity has a significant influence on a firm's innovation activities and performance [16,[34][35][36][37][38]. Studies on Western firms have suggested that absorptive capacity positively influences a firm's innovation performance, including new product development [17,33,36].…”

“…Studies on Western firms have suggested that absorptive capacity positively influences a firm's innovation performance, including new product development [17,33,36]. In addition, some studies on Korean firms have suggested that absorptive capacity increases patent registrations and improves financial performance [2,24,34,37,38]. Other studies have reported that firms' performance may decline when their absorptive capacity rises above a certain level in technical cooperation with a partner firm [39].…”

“…Thus, firms should be able to reinforce innovation that can provide higher added value to users to secure their market positions and obtain high profits [3,5]. Several empirical studies have shown that new technologies or products derived from firms' innovation performance can enhance their market competitiveness and increase their sales and market share [6,37,49,52]. Users can provide problem-solving ideas or methods for existing products, thereby helping the firm offer differentiated new products that do not exist in the current market.…”

“…Firms experienced with innovation processes based on cooperative relationships with other firms or competitors may be more active in building and utilizing cooperative relationships with users [19,37]. Therefore, we coded alliance experience with knowledge or resource sharing through strategic cooperation with other organizations as a dummy variable (those who answered "yes" to the partnership experience were given "1", whereas those who answered "no" were given "0") [40].…”