The strategic determinants of choosing an inbound or outbound approach to Open Innovation. A practical application to Swedish and Italian pharmaceutical SMEs.

Abstract

In today’s increasingly complex and competitive business landscape, SMEs face significant challenges in sustaining innovation with limited internal resources. Open innovation has emerged as the imperative from profiting in this environment, especially for a R&D intensive sector like the pharmaceutical one; yet little empirical evidence was found on how SMEs practically choose between the two main approaches of open innovation: whether an inbound or an outbound type. This study investigates the strategic factors guiding this choice by conducting six semi-structured interviews with pharmaceutical SMEs based in Italy and Sweden. Through the implementation of a qualitative, inductive approach and a subsequent cross-case thematic analysis, the following four key strategic factors were identified: strategic alignment, resource constraints, regulatory and cultural barriers, and the stage of the innovation lifecycle. The analysis of these findings exposes inbound open innovation as the preferred approach within the sample, particularly in early development phases and for knowledge and capabilities building, while outbound tends to be adopted for proprietary drugs and medicines closer to commercialization. Overall, this work attempts to extend the existing literature around open innovation by emphasizing the contextual, institutional and sectorial nature of open innovation in pharmaceutical SMEs. By doing so, this study also provides managers with actionable insights for navigating the innovation process in constrained SMEs.