Open innovation in SMEs: a dynamic capabilities perspective

Purpose This study aims to examine the relationships between organizational learning capabilities, open innovation and firm performance (FP) in the context of small and medium enterprises (SMEs) in the emerging economies. Design/methodology/approach Data collected from 384 manufacturing SMEs operating across the seven emirates of the UAE were statistically analyzed using SmartPLS 3 to examine the hypotheses of this study. Findings The results show that organizational learning capabilities positively influences both inbound and outbound dimensions of open innovation (OI). Inbound open innovation (IP) practice positively impacted both market effectiveness and profitability, while outbound open innovation (OP) practice only affected profitability. Findings further confirmed the mediating role of IP practice on the relationships of organizational learning capabilities with market effectiveness and profitability. In contrast, OP practice did not mediate the relationships of organizational learning capabilities with market effectiveness and profitability. Originality/value To the best of the authors knowledge, this is among the first study contributing to the extant innovation literature in terms of investigations into the significant and complex interrelations of organizational learning capabilities, OI and FP in a single study, demonstrating various theoretical implications in the context of manufacturing SMEs in emerging countries. Overall, the findings of this study confirmed that the owners/managers of the UAE’s manufacturing SMEs need to be acquainted with the need of creating a working environment fostering organizational learning processes and capabilities to enhance IP and OP activities, thereby improving their market effectiveness and profitability.