Researchers have used several constructs to explain the success and failure of organizations’ open innovation initiatives. Building upon the resource-based view of the firm, we develop a model to explain how leadership interacts with absorptive capacity and organizational learning culture to influence open innovation outcomes. The model is tested empirically using data sourced from managers working in diverse sectors in India. Results reveal that empowering leadership leads to enhanced open innovation outcomes through the intervention of organizational learning culture. Results, however, do not confirm a significant impact of the interaction of organizational culture and absorptive capacity on open innovation. A discussion of these findings along with implications for theory and practice is presented.

Introduction

Open innovation continues to be a favorite research area in the strategic management domain (Elmquist et al., 2009). While open innovation research has focused on identifying the factors that foster or impede open innovation (Naqshbandi et al., 2015), several aspects of open innovation management still remain under-studied (West and Bogers, 2017). Dahlander and Gann (2010) pointed out that as the emergence of open innovation models challenges firms to move past their traditional innovation paradigms, institutions would need to adopt more contemporary approaches to innovation management. Hence, shifting to modern modes of innovation invites firms to a corresponding shift in their leadership models from traditional to the contemporary (Robbins and O’Gorman, 2015). Contingency leadership theory posits that the leadership style adopted is contingent on a firm’s circumstances and set performance targets (Graeff, 1983; Sims et al., 2009). In this regard, the traditional leadership styles and their association with innovation has been the focus of several studies (Jung et al., 2003). Certain leadership styles, such as transactional leadership, directive leadership, and aversive leadership have been found to act as barriers to innovation (Avolio et al., 1999; Podsakoff et al., 2006; Sims et al., 2009). This is because these leadership styles are characterized by control, compliance, low flexibility and low innovation among employees (Sims et al., 2009), hence creating impetus for the identification of an appropriate leadership style that can foster open innovation success (Von Krogh and Von Hippel, 2003). As open innovation deals with the inflows (inbound open innovation) and the outflows (outbound open innovation) of knowledge that involve knowledge exploration and exploitation (Xia and Roper, 2016), it requires human capital that is capable of selecting, acquiring, transforming and utilizing knowledge for innovative purposes (Tirabeni et al., 2015). Hence, open innovation requires leaders who can effectively manage human capital (Lee and Cole, 2003; Lerner and Tirole, 2001). This is possible when leaders encourage followers to participate in knowledge-based activities (Whelan et al., 2011). Additionally, in order to promote open innovation, leaders are required to trust and encourage followers to participate in innovative activities (Fleming and Waguespack, 2005). A leadership style characterized by encouragement and trust in followers to participate in innovative activities is termed as empowering leadership (Arnold et al., 2000; Sims et al., 2009; Zhang and Bartol, 2010). West and Bogers (2017) contend that the open innovation activity of an organization is interpreted, decided, and implemented by its employees. In this context, empowering leadership fosters creativity and flexibility among followers, resulting in “very high innovation” through followers’ development and self-confidence (Sims et al., 2009). As empowerment is one of the crucial factors for achieving innovative outcomes (Sok and O’Cass, 2015), the first objective of this study is to examine the role of empowering leadership in open innovation success.