Exploring Financing for Open Innovation

Factors Hampering Innovation (FHI) activities, such as economic constraints and skilled labour shortages, drive firms seeking to improve their Innovation Industrial Performance (IIP) to adopt Open Innovation (OI). Using data from the Community Innovation Survey (CIS), this study examines OI's potential role as a mediator in the relationship between FHI and IIP. Additionally, it analyses how financing methods – specifically debt and equity – moderate the relationship between OI and IIP. Indeed, both debt and equity provide monetary resources to support innovation projects. However, equity also brings new competencies from shareholders, while increasing leverage would bring value increases in the form of tax benefits. The study finds that OI effectively mediates the relationship between FHI and IIP, while the moderation effects of equity and debt on the relationship between OI and IIP differ significantly. Equity positively moderates this relationship, while debt does not. This result highlights that in the development of innovation projects within a firm, the new competencies, cognitive, and knowledge resources brought by equity (but not by debt) are more decisive than tax shields for enhancing IIP.