Overcoming Innovation Deficiencies in Mexico: Use of Open Innovation through IT and Closed Innovation through IT by Small and Medium Enterprises

Innovation is critical for development, especially in less-developed regions. We examine how Open Innovation through IT (an external collaboration approach) and Closed Innovation through IT (an internal collaboration approach) compare in helping small and medium enterprises overcome two challenges to achieve innovation: technological deficiency and government support deficiency. We hypothesize that Closed Innovation through IT is more important than Open Innovation through IT in helping firms overcome lack of technological abilities. We also hypothesize that Open Innovation through IT is more important than Closed Innovation through IT in helping firms overcome lack of government support through inter-organizational interactions and collaboration. Findings from a unique dataset of 389 small and medium enterprises in Mexico support our hypotheses. Our study highlights that small and medium enterprises can achieve greater innovation returns by orienting their IT-enabled innovation efforts in an open or closed fashion to address a specific deficiency.