Open innovation knowledge management in transition to market economy: integrating dynamic capability and institutional theory

This study provides a theoretical framework and empirical evidence to argue that a knowledge management process under the open innovation paradigm brings a viable solution for firms, especially those in transition economies, to acquire valuable knowledge-based dynamic capabilities to respond to environmental changes and achieve desirable organizational performance. These knowledge-based capabilities in turn enable firms to enhance their economic performance in terms of productivity and profitability. Dynamic capabilities act as an intermediary that bridges firms’ open innovation efforts and their economic realization. Local institutional quality plays an important moderating role in this process. Micro-sized firms have not consistently obtained the expected economic benefits from their open innovation efforts, which require more policy attention. For empirical evidence, we consider a comprehensive range of measures for open innovation and dynamic capabilities. Our proposed hypotheses are tested in a set of seemingly unrelated equations by combining two datasets from the Vietnam SME survey and the Provincial Competitiveness Index survey. As a robustness check, we estimate the performance equation applying fixed-effect regression and one-year lag structure.