How do institutional innovation systems affect open innovation?

It is well known that innovation benefits firms and that openness may enhance these benefits. Yet few studies consider how a firm’s institutional context and different economic systems moderate openness and innovation outcomes in new ventures, which arguably are most exposed to institutional constraints. Comparing data from a liberal (Australia) and central market economy (China), and using search breadth as a measure of openness, we empirically tested the influence of external firm pressures on the relationship between openness and innovation outcomes in new ventures. Our results show that the well-established positive relationship between openness and innovation is market dependent and that, in emerging economies, it can be negative. Our findings demonstrate the importance of institutions and national economic systems in explaining open innovation in different contexts–a point not yet addressed in the open innovation literature.