The relationship between inbound open innovation patents and financial performance: evidence from global information technology companies

Most existing studies on the global information technology (IT) sector examine the causal relationship between internally generated patents and corporate performance. However, global IT companies acquire patents not only from internal research and development (R&D), but also from inbound open innovation. Focusing on this, we examine the differential effects of patents from various sources, including (1) internal R&D, (2) university-industry collaboration, and (3) transaction on corporate sales, profits, and market value in 28 global IT companies. We find that patents by internal R&D boost sales, profits, and corporate value. Purchased patents have small, immediate positive effects on market value and profit, but do not increase sales. University-industry collaboration patents drive sales after more than two years, but negatively impact market value. Overall, internal R&D is consistently important for sustainable corporate growth, implying that the acquisition of ideas, technologies, and human resources for internal R&D is the most effective method of inbound open innovation. Purchased patents boost short-term growth, while university-industry collaboration is necessary for mid- and long-term growth. Our study provides the basis for an optimal balance between internal R&D and inbound open innovation, as well as the creation of a financial performance-oriented patent portfolio.