Market reaction to open innovation announcements

Abstract

Purpose Open innovation is of crucial importance for all companies operating in the economics of widely distributed knowledge. However, the effects of its disclosure remain largely uncharted in the case of service companies. Therefore, the purpose of this paper is to measure the impact of open innovation announcements on the market value (MV) of service enterprises. Design/methodology/approach The research covered 398 open innovation announcements released by service companies. It was conducted in the whole of the European Union in the period February 2011-December 2016. The data were analysed in the short and long term with the use of event-study and buy-and-hold methods. Findings The results indicated the significant positive effect of open innovation disclosure in both short and long term. At the same time, the market was not able to immediately fully value the information in the short run and tended to overestimate the positive effect of the innovation announced. No significant leakage and dissemination effects were observed prior to the announcement. There was no significant difference in the magnitude of positive and negative reactions to the releases. Practical implications From the point of view of business practice the research proved the benefits of information disclosure and supported the long-term planning. From the investors’ viewpoint, it signalled the small risk of significant fluctuations resulting from aggressive trading prior to the announcement and unwinding part of the acquired position afterwards. Originality/value The paper attempts to fulfil the research gap on the impact of the announcements on open innovation on the MV of companies.

Do the ecoinnovation and ecodesign strategies generate value added in munificent environments?

“…Therefore, considering the market value as a measure of business performance and expectations, investors view with good eyes that managers are proactive and explore new combinations of resources and develop more innovative projects to achieve long‐term competitive advantages such as access to new markets and the introduction of new products that can directly increase sales and have a positive impact on the company's cash flow (Cai & Li, ; Knight & Jenkins, ; Szutowski, ). According to Lee and Min (), market value is widely used to measure business performance, because it reflects the market evaluation of a company's performance.…”

How does IT capability affect open innovation performance? The mediating effect of absorptive capacity

“…In a knowledge economy and with an increasing degree of competition, firms realize that by relying solely on self-development, it is difficult for them to obtain a competitive advantage; they thus begin to acquire available knowledge or ideas from other individuals or organizations to improve innovation performance (Szutowski, 2018); this is known as open innovation. Since open innovation focuses on the extensive use of external and internal knowledge (ideas) to facilitate firm innovation (Chesbrough et al, 2006), information technology (IT) is a critical factor enabling firms to adopt this innovation strategy (West and Gallagher, 2006), as it can promote internal and external knowledge application to improve open innovation (Liu et al, 2013).…”

The impact of localized innovations on the stock returns of tourism companies

“…Such partnerships allow them to fully exploit the internal and external inflows and outflows of knowledge (West, Vanhaverbeke, & Chesbrough, ). Empirical evidence suggests that the market positively perceives decreasing the risk through participating in open innovation structures (Noh, ; Szutowski, ). There are three main benefits to collaborative development.…”