Open innovation deficiency: evidence on project abandonment and delay

Abstract The concept of Open Innovation (OI) has breathed new life into both empirical research and industry practice concerned with distributed and collaborative modes of innovating. While much of the empirical literature has emphasised the innovation enhancing benefits, our study extends existing work that has recorded the limits to open innovation. Using a sample of Belgian firms, we document that open innovation leads to higher rates of project abandonment and to lower rates of project completion; the latter suggesting the presence of delays and interruptions. Among other robustness tests, we address the concern that openness could be endogenous with regard to project abandonment. As we also find that higher abandonment rates coincide with lower future firm performance, we conclude that open innovation may have negative effects on firms’ innovation outcomes because of higher rates of project failures and hold-ups.