THE RELATION BETWEEN OPEN INNOVATION AND ECONOMIC PERFORMANCE OF SMEs

Abstract

The interest drawn by small and medium sized enterprises (SMEs) is growing all over the world since they accredits more than 95% of all firms outside the agriculture sector and they form a considerable source of employment generate significant domestic and export earnings. Although SMEs contribute significantly to the country host them, they get the greatest damage from this new business environment created by globalization. While many SMEs have indeed surrendered to deterioration of competitiveness, others started to implement open innovation as a necessary organizational adaptation to changes in the environment. In a world of mobile workers, abundant venture capital, widely distributed knowledge and reduced product life cycles, most enterprises can no longer afford to innovate on their own. Because the funds they can allocate to R&D investment, SMEs adopt open innovation practices in which they establish external partnerships to concentrate on various technologies. These partners may be the SMEs just like themselves or the larger firms, university research centres or even non -profit organizations. However, with the fear of giving away their technology to competitors, if all of these options are available the choice of the SMEs will generally be university research centres or non-profit organizations. In this framework this study investigates the effects of open innovation on economic performance of SMEs. The study covers turnover and GERD data from 21 EU Countries covering 2007 -2014 period. The results of the study indicate that the mentioned R&D variables are responsible for 45% of the changes in turnover value of SMEs. Keywords: Open Innovation, Globalization, SMEs