Can open innovation improve firm performance? An investigation of financial information in the biopharmaceutical industry

Over the past decade, open innovation has seemingly become the dominant approach for revitalising a company’s innovation process. Can open innovation improve firm performance? This study optimises the measures for open innovation based on existing literature and by considering the actual situation in China. We draw conclusions from an analysis of 516 annual reports and data from Wind of 172 biopharmaceutical companies from 2013 to 2015. Result indicates that open innovation strategies have different effects at different times: (1) Inbound open innovation has a negative impact on short-term (1–2 years) firm performance, but an inverted U-shaped curvilinear relationship will develop after about 3 years. (2) Outbound open innovation has a negative impact on short-term firm performance, but leaves a positive effect in the long run. Therefore, enterprises should maintain a moderate inbound open innovation level and improve the degree of outbound open innovation to improve long-term performance.