How to Appropriate Value in Formal and Informal Open Innovation: A Perspective of Strong Ties and Weak Ties

Open innovation has been a paradigm to explore new opportunities and develop new products, enabling firms to use appropriation strategies like patent and secrecy to capture value. Building on strong ties and weak ties, this paper analyzes how formal and informal open innovation activities influence the use of patent and secrecy. We argue that strong ties and weak ties are the way they govern relationships in formal partnering and informal working. Our analysis is based on the bivariate and univariate probit model. Employing a sample of 764 manufacturing firms in an innovation survey, the results suggest that firms appropriate value from formal open innovation through patent, whereas appropriate value from informal open innovation through secrecy. We further find that formal open innovation help realize the new ideas generated from informal open innovation, whose interaction results in the highest level of innovation outcome and therefore maintain it secrecy to gain lead-time advantage and market share. The findings contribute to the understanding of the tension between openness and appropriation from the perspective of ties, provide some evidence, as well as have implications for firms who are active in open innovation.