Abstract

Open innovation (OI) practices and intellectual capital (IC), though from developed countries and large firms’ perspective, are related to higher innovative performance. But the influence of OI paradigm on IC and consequently on firms’ innovative performance in the context of developing countries is not yet sufficiently explored. This study examined the link between OI practice and IC and their influence on the firms’ innovative performance using a survey data of 243 manufacturing small and medium-sized enterprises (SMEs) operating in Ethiopia. Partial Least Squares (PLS) approach was applied to explore the relationships and test the mediating role of intellectual capital. The research findings indicated that OI practice has a positive and significant impact on intellectual capital and innovative performance in SMEs. It also revealed that human and organizational capitals have a significant positive effect on the innovative performance of SMEs. Moreover, the finding showed that only human capital mediates the positive influence of OI practice on the innovative performance. Managers/owners should work to improve the OI practice and intellectual capital simultaneously to augment the innovative performance of SMEs.

Key words: Innovative performance, intellectual capital, open innovation practice, small and medium-sized enterprises (SMEs).