Societal trust and open innovation |
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| Authors: | Paul Brockman Inder K Khurana Rong Zhong |
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| Institution: | 1. Perella Department of Finance, College of Business and Economics, Lehigh University, Lehigh, PA, USA;2. School of Accountancy, Trulaske College of Business, University of Missouri-Columbia, Columbia, MO, USA;3. Department of Accounting, Liautaud Graduate School of Business, University of Illinois at Chicago, Chicago, IL USA |
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| Abstract: | While open innovation provides a new paradigm to sustain a firm’s competitive advantage, opening up to external knowledge also entails substantial risks of appropriation and opportunism. Building on this “open paradox” framework, this study investigates whether societal trust—a key aspect of informal cultural norms—serves as an effective mechanism in improving relational governance among partners, thereby leading to better collaborative outcomes. Using a novel panel data on co-owned patents across 29 countries, we show that firms in high trust countries are able to produce a higher level of joint output (i.e., co-owned patents). This effect is more pronounced when perceived opportunism is higher (i.e., firms in high-tech industries, or in countries with less disclosure transparency), and when formal contracts are less enforceable (i.e., in countries with relatively weak legal systems). We further show that open innovation is the channel through which societal trust promotes innovative efficiency. Overall, our study establishes societal trust as a key factor in influencing the efficiency of open innovation. |
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| Keywords: | M14 O31 O35 Societal trust Social capital Open innovation Innovative efficiency |
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