Effective industrial policy implementation for open innovation: The role of government resources and capabilities

•Industrial policy (IP) via public R&D funding for public-private technology transfer positively affects firms’ innovation.•Public research institutes’ top management team (TMT) capability in portfolio management is a form of government capability.•TMT' capability in portfolio management partially mediates conversion of IP-induced project funding into open innovation outcome.•Performance management processes should enable TMT to track project performance and monitor threats and opportunities.•The government has multiple roles in the open-innovation-based IP intervention model—as resource provider and gatekeeper. This study examines how the implementation of industrial policy through public research and development funding impacts the outcome of open innovation collaboration between public research institutes and firms. Based on empirical study of 153 public-private technology transfer projects in the context of Singapore economy and its biotechnology sector, we found that project funding significantly and positively influences their innovation collaboration outcome. We established that public research institutes’ top management team' capability in portfolio management partially mediates the conversion of project funding into innovation collaboration outcome.