Innovation in micro and small businesses: how inbound open innovation and dynamic capabilities work together to explain innovation performance

Purpose: This study examined how inbound open innovation and dynamic capabilities (sensing, seizing, and transforming capacity) work together to explain innovation performance. Methodology: The study used a case research method that involved interviewing ten purposively selected managers of micro and small furniture industries in Arusha, Dar es Salaam and Mbeya cities of Tanzania. Subsequently, the study used illustrative and content analysis methods to compare and align predetermined theoretical relationships on how dynamic capabilities and inbound open innovation explain innovation performance to empirical results.Originality: The use of illustrative analysis to compare extant theoretical relationships between dynamic capabilities, inbound open innovation, and innovation performance to case studies’ processes in this study is novel to the open innovation literature. Also, the resultant conceptual framework and relationships linking inbound open innovation to innovation performance through systematic processes of dynamic capabilities are novel.Main results: This study showed that inbound open innovation explains innovation performance through systematic complementary processes of dynamic capabilities. Moreover, the study showed that if inbound open innovation generates complex external ideas, micro and small firms adopt coupled open innovation as a predecessor of dynamic capabilities to unlock complexity.Theoretical contributions: This study has integrated the theories of open innovation and dynamic capabilities by developing a conceptual framework and relationships that show how inbound open innovation explains innovation performance through dynamic capabilities.Practical contributions: This study has revealed alternative combinations of dynamic capabilities that business managers need to benefit innovation performance from inbound open innovation.