An Empirical Investigation into Inbound Open Innovation and Absorptive Capacity: The Case of Thai Dessert SMEs

The aim of this research is to study ‘potential absorptive capacity’ (PAC) and ‘realised absorptive capacity’ (RAC) concepts within Thai SMEs in the ‘low-medium-tech’ (LMT) sector. This research has two main objectives: 1) to explore Thai dessert SMEs’ motives and knowledge domains in relation to inbound open innovation (OI) access, and 2) to understand the effect of search breadth and search depth, local search experience, and innovation capability on PAC and RAC.

A mixed methods approach with an exploratory design was employed in this research. It was based on a qualitative approach using semi-structured interviews. The 14 sets of interview data were gained from three agencies: Thai dessert SMEs, government agencies responsible for the promotion of technology and innovation in Thai SMEs, and a large company possessing one production line for an innovative Thai dessert product. The thematic analysis findings revealed three key motives engaging Thai dessert SMEs in the inbound OI access in support of new product development (NPD): brand building, product quality, and improvement. Significantly, the findings also revealed that internal factors (employee and technology management) and the type of OI practice (openness) were two key elements that Thai dessert SMEs engaged with, along with the motives. Using a quantitative approach with a survey of 211 Thai dessert SMEs, the findings of structural equation modelling (SEM) analysis revealed that search breadth was positively related to PAC, but was not found to relate to RAC. On the other hand, search depth was found to positively relate to RAC but was not found to relate to PAC. In addition, the effects of innovation capability and local search experience were examined. The findings revealed that local search experience through frequent searching in the oriented-knowledge domain significantly influenced the PAC, while there was no moderating effect of innovation capability on the relationship between the RAC and new product performance because the linear relationship of RAC and new product performance was found to be non-significant.

This research contributes to the existing literature in three ways. Firstly, it advances the research on absorptive capacity by linking the concept of PAC and RAC with two distinct dimensions of search: search breadth and search depth, which corresponds to organisational learning, namely exploration learning and exploitation learning, respectively. To the researcher’s knowledge, this is the first study examining the effects of search breadth and depth on PAC and RAC. Secondly, it contributes to the research on absorptive capacity by examining the moderating role of innovation capability in the relationship between RAC and new product performance. Prior research has never before examined the interaction effect of innovation capability and RAC on new product performance. This is potentially the first study examining this interaction effect. Thirdly, the study contributes to the knowledge of the implementation of inbound OI, in particular within the context of low-medium-tech (LMT) SMEs. To date, studies regarding inbound OI access of low-medium-tech SMEs are scarce. This research bridges this gap in knowledge by providing qualitative evidence of motives and knowledge in inbound OI access.