The role of internal organizational practices in managing open innovation practices and their effects on the business performance of SMEs in the UAE

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The British University in Dubai (BUiD)
Due to the technological era that the world is witnessing nowadays and the desire of firms to minimize their expenses and costs, open innovation has been a new trend in academic research recently, especially in firms with limited resources located in developing countries. According to several scholars, companies must either “innovate or die”. On the one hand, firms have consequently started to adopt modified strategies to maximize their innovation capabilities with the minimum required budgets. On the other hand, small and medium-sized enterprises (SMEs) have begun to adopt open innovation (OI) practices to maximize their competitiveness (Vanhaverbeke, 2017, p. 1). This study aims to investigate the impact of SMEs’ internal organizational practices on open innovation practices and the impact of open innovation practices on SMEs’ business performance. The main research questions are as follows: What are the effects of organizational practices on the adoption and management of open innovation processes in SMEs, and what is their role in accelerating the business performance of SMEs? The data was quantitively collected using a questionnaire and analysed using the structural equation modelling (SEM) technique to connect theory to practice and add more depth to the available theories. This enabled testing of the causal relationships between internal organizational practices and open innovation on the one hand and open innovation practices and SMEs’ business performance in the United Arab Emirates (UAE) on the other. The study outcomes revealed that some of the investigated internal organizational practices of SMEs have a positive impact on both the adoption of open innovation and those enterprises’ business performance. In contrast, other internal organizational practices need to be implemented more in SMEs to maximize their degree of innovativeness. This study is among the earliest studies in the UAE specifically and the Gulf Co-operation Council (GCC) generally to explore the impact of specific internal organizational practices (human resource management, organizational culture, knowledge sharing, and managerial ties) on SMEs’ adoption of open innovation practices and business performance. This area has been under-researched until now, since previous studies either focused on other determinants or were conducted in contexts other than the UAE. Apart from this, the results in this study differ from those in previous studies as the majority of the literature about open innovation was conducted in high-tech sectors and large firms in developed countries, and Vanhaverbeke (2017, p. 1) states that “Open innovation really does work differently in SMEs”. Furthermore, the present study tests the state of open innovation in the UAE as one of the leading gulf countries in terms of innovation, economic diversification, and the number of SMEs compared to the total number of enterprises. Moreover, the UAE is considered an innovation hub in the region that “continues to attract talent from all corners of the world eager to launch new ideas and business models.” (Thomson Reuters, 2015, p. 8). The theoretical contribution is represented in bridging the literature gap by connecting open innovation practices to existing management and firm theories (e.g. Resource based view (RBV) theory, absorptive capacity theory, and dynamic capabilities theory). In addition, this study designed a framework for measuring open innovation processes performance and assessing the internal organizational practices that contribute to and facilitate open innovation processes in SMEs. It thus enhances existing knowledge about the state of open innovation in SMEs operating in the UAE. From a practical perspective, the research findings assist SME managers and owners to evaluate their internal organizational practices as well as evaluate their intangible resources to innovate efficiently with less costs and maximize their competitive advantage. Finally, the study evaluates the readiness of SMEs’ organizational culture and climate to implement open innovation practices by determining their strengths and weaknesses.
business, open innovation, Small and Medium-sized Enterprises (SMEs), business performance, organizational culture, United Arab Emirates (UAE)