How Does the Use of External Knowledge Influence Innovative Performance of Service Firm? An Introductory Study of Openness and Service

Abstract

This study examines how the use of external knowledge influences innovative performance of Korean service firms. Especially, this study underscores whether the relationship between external knowledge and innovation in Korean service industries differs from the relationship in Korean manufacturing industries found by Moon (2011). Using 2006 Korean Innovation Survey in service sector, this study tests whether the use of external knowledge improves innovative performance and how absorptive capacity, new startup and appropriation methods moderate the effect of the use of external knowledge on Korean service firms innovation. The relationship between openness and innovative performance in service is different from that in manufacturing in Korea: First, openness in service is more effective for radical innovation than for incremental innovation; in contrast, openness in manufacturing was more effective for incremental innovation than for radical innovation. Second, there is no complementarity between openness and R&D intensity in the service sector; in contrast, there existed the complementarity for incremental innovation in the manufacturing sector. Third, when a firm uses too many appropriation methods, openness of service firms is not effective. Lastly, the quality of human capital is important for service innovation while it was not for manufacturing innovation in Korea.