The Main Characteristics of the Model of Innovation in Australian Businesses and Their Rationale

The role of open innovation in small firms is receiving more attention as its inherent benefits become clear. This paper investigates the relationships between open innovation, formal networks, innovation breadth and performance. It argues that the early formation of formal networks will enhance the benefits that a small firm will get from involvement in open innovation. These relationships are investigated in a longitudinal study of 1580 Australian small firms. Findings suggest that the adoption of inward open innovation has benefits for both improving the innovation breadth as well as the performance of small firms. Small firms mitigate their size handicap by establishing formal networks, and in the process enhance innovation and its effect on firm performance.