By Arora, Ashish; Suma, Athreye; Huang, Can

We revisit the “paradox of openness” in the literature which consists of two conflicting views on the link between patenting and open innovation—the spillover prevention and the organizational openness views. We use the data from the Survey of Innovation and Patent Use and the Community Innovation Survey (CIS6) in the UK to assess the empirical support for the distinct predictions of these theories. We argue that both patenting and external sourcing (openness) are jointly-determined decisions made by firms. Their relationship is contingent upon whether the firms are technically superior to their rivals and lead in the market or not. Leading firms are more vulnerable to unintended knowledge spillovers during collaboration as compared to followers, and consequently, the increase in patenting due to openness is higher for leaders than for followers. We develop a simple framework that allows us to formally derive the empirical implications of this hypothesis and test it by estimating whether the reduced form relationship between patenting and collaboration is stronger for leaders than for followers.

This article is published in Research Policy, 2016, 45(07): 1352-1361.