An Open System Understanding of Product Innovation: Attention Allocation, External Information Sources, and Absorptive Capacity

Abstract

Product innovation is a key achievement by which a firm can not only build up its competitive advantages but also prolong its survival in the open market environment. By understanding the firm as a social system pursuing both efficiency and effectiveness, this study examines three key factors that independently enable product innovation through a theoretical lens of the open system approach: strategic attention, external information sources, and absorptive capacity. While we suggest that a focused set of strategic attentions functions as an internal means to enhance the likelihood of product innovation, we also propose that diverse external partners provide the firm with the relevant knowledge for product innovation. In addition, we argue that the absorptive capacity is a crucial factor that has a positive direct effect on product innovation and mediates the effects of the two variables on the product innovation, based on the organizational learning theory. We empirically examined our hypotheses with the reliable data collected systematically through the “Korean Innovation Survey 2020: Manufacturing Industry” and found support for all of our hypotheses. Finally, we discuss theoretical contributions and practical implications.