Technology Orientation and Inbound Open Innovation at LMT Firms: An Empirical Study in Sri Lanka

Despite the growing interest in open innovation, previous studies have ignored the role of firms’ strategic capability in evoking open innovation, especially in low and medium-low technology (LMT) firms from technologically less advanced countries. This study rectifies this problem by examining the impact of technology orientation on the implementation of inbound open innovation. Also, assessing the effect of the environment on the relationship between technology orientation and inbound open innovation, this study considers technology turbulence and market potential. The hierarchical regression analysis, based on cross-sectional survey data collected from 272 LMT firms in Sri Lanka reveals that LMT firms adopt inbound open innovation at a moderate level. LMT firms value technology and face above-average level technology turbulence and market potential. Results show that both technology orientation and market potential have a significant positive effect on the implementation of inbound open innovation, but no evidence from technology turbulence. Also, technology turbulence negatively, and market potential positively moderate the relationship between technology orientation and inbound open innovation. The findings indicate that LMT firms in Sri Lanka should exploit technologically superior products to meet customers’ needs and attract the market. Also, technology orientation plays a salient role in attractive markets but not in technologically turbulent environments.


INTRODUCTION
During the latter part of the twentieth century, the innovation landscape underwent a drastic change due to the growing mobility of highly experienced and skilled workers, presence of private venture capitals, shorten time to market (Chesbrough, 2006a), short innovation and product life cycles, the rising cost of research and development (R&D), the dearth of resources, etc. (Drechsler & Natter, 2012). Those changes caused to erode the underpinnings of closed innovation and emerge open innovation (Chesbrough, 2006a). The firms implement closed innovation by strictly controlling R&D activities. Contrary to that, open innovation DOI: http://doi.org/ 10.4038/wjm.v9i2.7494 works through cooperating with outside firms over more porous organizational boundaries. Thus the way, the firms manage innovation and commercialize knowledge, underwent a fundamental shift (Chesbrough, 2003;Chesbrough, 2006a).
The resource-based view highlights that the firms apply assets and capabilities to achieve competitive advantages (Hunt & Morgan, 1995). Prior researches also show distinctive capability can promote innovation (Zhou, Yim, & Tse, 2005) and generate competitive advantages (Barney, 1991;Zhou et al., 2005). Irrespective of its reliability and validity, a few studies focus on the role of capabilities in implementing open innovation. Though the present literature discusses the effect of some capabilities such as absorptive and desorptive capabilities, a few studies have inquired about the effect of strategic capabilities on open innovation (i.e. Deegahawature, 2014b; 2014c).
On the other hand, open innovation studies lack in certain contexts though the scholars' speculate that open innovation applies across firms and countries irrespective of their technology and R&D intensity (Chesbrough & Crowther, 2006;Santamaría, Nieto, & Barge-Gil, 2009). Many studies focus on hightech firms and ignore low and medium-low technology (LMT) firms (Heidenreich, 2009;Santamaría et al., 2009;Vrande, Jong, Vanhaverbeke, & Rochemont, 2009). West and Bogers (2017) also highlight the need for investigating open innovation in different firms such as small, new, and not-for-profit firms. Though there are a few open innovation studies (Hossain & Kauranen, 2016, Santoro, Ferraris, Giacosa, & Giovando, 2018, yet the open innovation at small and medium-sized enterprises is to be investigated (Hossain, Islam, Sayeed, & Kauranen, 2016). Thus, limited studies on LMT firms appeal to this study (i.e. Deegahawature, 2014b(i.e. Deegahawature, , 2014cSantamaría at al., 2009;Robertson, Smith, & von Tunzelmann, 2009). Further, many studies focus on the context of developed, technologically advanced economies (Karo & Kattel, 2010), and emerging economies (i.e. Kafouros & Forsana, 2012;Lee, Park, Yoon, & Park, 2010;Li & Kozhikode, 2009 This paper has been arranged as follows. The next section reviews the relevant literature on open innovation, technology orientation, technology turbulence, and market potential, and develops study hypotheses. The third section describes the methodology employed in this study. The fourth section reports and discusses the analysis and results of the empirical study, whereas the final section outlines the discussion, conclusions, and directions for future studies.
The OECD (2005, p.46) defined innovation as "the implementation of a new or significantly improved product (good or service), or a process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations". Innovation exists in any new or significantly improved product, process, marketing method, and organizational method. Technological innovation alone has a limited effect on firm performance, thus firms should also innovate in terms of organizationally to create appropriate business models (Kolk & Püümann, 2008). Chesbrough (2006a) highlights that the firms need to change the way they generate and commercialize new ideas. Accordingly, prior research used a linear innovation model, called closed innovation assuming innovation is a product of internal R&D efforts. Closed innovation believes in internal innovations, investing heavily on resources in internal R&D departments (OECD, 2008 Firm performance depends on both opportunities and resources. As pointed out earlier, resources consist of assets and capabilities. This study distinguishes capabilities from other resources, and defines it as a "firmspecific resource an organizationally embedded nontransferable resource which contributes to improve the productivity of other resources possessed by the firm" (Makadok, 2001, p. 389). Firms can only build capabilities (Teece, Pisano, & Shuen, 1997). As the resource-based view suggests, distinctive capabilities bring competitive advantages to firms. On the other hand, according to the dynamic capability perspective, firms should have an "ability to integrate, build and reconfigure internal and external competencies to address rapidly changing environment" (Teece et al., 1997, p. 516). Firms equipped with dynamic capabilities will respond to the erosion factors, which undermine closed innovation and promote open innovation, and finally, adopt open innovation. Among various capabilities, strategic orientation counts for innovation (Zhou et al., 2005).
Technology orientation reflects the inclination of a firm towards introducing or using new technologies, products, and innovations (Gatignon & Xuereb, 1997;Hult, Ketchen, & Slater, 2005). This adapts the 'technology pull' strategy and assumes that customers prefer technologically superior products or services (Zhou et al., 2005). Two significant features of technology-oriented firms include: their willingness to acquire new technologies and apply state-of-theart technologies. Thereby, such firms achieve product differentiation or cost advantages to satisfy and attract customers (Gatignon & Xuereb, 1997). Creativity and inventions become norms and values guiding the activities and strategies of the technology-oriented firms. Thus, such firms are proactive in acquiring new technologies and applying the latest sophisticated technologies in product developments (Gatignon & Xuereb, 1997). When attempting to acquire new technologies, they may willingly turn to outside since by default, LMT firms are weak in internal knowledge creation by R&D. Thus, a technologyoriented firm may prefer inbound open innovation through acquiring and using state-of-the-art technologies. Based on this argument, the theoretical speculations of the resource-based view and dynamic capability perspective, this study postulates the following hypothesis. H1: Technology orientation has a positive effect on implementing inbound open innovation.

Turbulent Environment:
Environmental turbulence reflects the magnitude of change in the elements of environment. A dynamic, threatening, and complex environment is challenging the traditional approaches of management (Davis, Morris, & Allen, 1991). Due to the implications of a turbulent environment, firms tend to learn new ways to do business and compete (Davis et al., 1991) and create new strategies. The uncertainty created by the turbulent environment stimulates firms to change present strategies and be innovative in management approaches (Ettlie, 1983). The present study focuses on two aspects of environment turbulence: technology turbulence and market potential. Technology turbulence refers to the speed of change and unpredictability of technology in an industry environment (Jaworski & Kohli, 1993). Market potential indicates the extent of attractiveness of the market place, and is characterized by growth in customer demand and size (Song & Parry, 1997). A highly turbulent environment in terms of technology and market potential creates opportunities and challenges. Firms may change their present business strategies to utilize opportunities and face challenges, and finally to retain and sustain in the market (Ettlie, 1983;Li & Calantone, 1998). But some erosion factors such as high technology turbulence and difficulty in adapting to the rapid changes inhibit closed innovation and promote open innovation. Higher market potential spurs faster innovation resulting in higher market share and profit growth (Acemoglu & Linn, 2004;Song & Parry, 1997). Growing market demands firms to use new sophisticated knowledge to meet growing current and especially, latent needs of customers. LMT firms lack internally created knowledge due to weak R&D intensity, and therefore, have to rely on external knowledge sources. Thus, firms in a more technologically turbulent environment and having higher market potential may tend to adopt inbound open innovation. Thus, this study postulates the following hypotheses.
H2: Technology turbulence has a positive effect on implementing inbound open innovation. H3: Market potential has a positive effect on implementing inbound open innovation.
The turbulent environment in terms of technology and market potential creates opportunities for the firms. This helps firms enhance their customer base by meeting their current and future latent needs. Customers in a turbulent environment change their product preference and consistently seek new products, and firms appeal to potential customers and maintain current customers with new and upgraded products (Hanvanich, Sivakumar, & Hult, 2006). Firms' survival in such an environment, therefore, depends on the firms' ability to respond to the varying requirements of present and potential customers. Technologyoriented firms in turbulent environments incline to introduce and use new technologies, products, and innovations. Due to weak internal R&D capacity, LMT firms have to seek external knowledge sources to handle the changing technology requirements.
Thus, technology orientation has a stronger effect on inbound open innovation in a technologically turbulent environment. In an attractive market, LMT firms need new knowledge to capture growing customer demand and market share. Particularly, they may need such knowledge to meet the current and latent needs of customers in attractive growing markets. Thus, technology orientation may have a stronger effect on inbound open innovation in a highly potential market.
Therefore, the study postulates the following hypotheses.

METHODOLOGY 3.1 Sample and Data Collection
This study aims to investigate the effect of technology orientation, technology turbulence, and market potential on implementing inbound open innovation, and evaluate the moderating effect of technology turbulence and market potential focusing on LMT firms in technologically less advanced countries. LMT firms in Sri Lanka were selected as the empirical setting.
This study collected data through a questionnaire based on the crosssectional survey method. In accordance with OECD categorization of industries, five industries out of nine in the LMT category (Hatzichronoglou, 1997;Hirsch-Kreinsen, 2008) were selected based on the number of firms in the industry. Selected industries were Rubber and plastics products, Basic metals and fabricated metal products, Wood, pulp, paper, paper products, printing and publishing, Food products, beverages and tobacco, Textiles, textile products, leather, and footwear. Other industries were dropped due to a lower number of firms. This study selected 660 firms employing 25 or more employees as the sample by proportionate stratified random sampling method (population was 2,496 firms). Allowing for a 50 percent non-response and rejection rate, the study planned to gather 330 responses. However, only 312 firms responded (yielding 47.3 percent response rate), and 40 responses were discarded due to incompletion. Finally, 272 useable questionnaires were retained for the analysis (yielding 41.2 percent net response rate).

Variables and Measures
This research uses reflective measures to operationalize constructs. The measure of technology orientation was adapted from Zhou et al. (2005) who developed it based on Gatignon andXuereb (1997), andHurley andHult (1998 Discriminant validity of the measures was tested by calculating the shared variance between all possible pairs of the construct, and then comparing them with AVE to determine whether they were lower than the AVE of the individual constructs (Fornell & Larcker 1981). Results show that all AVE values (0.78 -0.91) were sufficiently higher than the shared variance with other constructs (0.34 -0.55), supporting the discriminant validity. Accordingly, the results confirm adequate reliability and validity of the measures.
Also, the study considered two control variables focusing on the characteristics of the firms: firm age and firm size. The number of years from the start of the business was used to measure firm age. Firm age ranged from 1 to 60 years. 25 percent of the firms were below 11 years of age while 25 percent were above 22 years of age. Firm size was determined by the number of employees in the firm. The number of employees in the firm ranged from 25 to 6000. 25 percent of the firms in the sample employed 42 employees while 25 percent of the firms employed over 95 employees. The present study employed the hierarchical regression analysis to test hypotheses and assess the explanatory power of each variable (Aiken & West, 1991). This method is appropriate since it can explain whether interaction terms have significant effects over and above the direct effect, and thereby the existence of interaction effect (Wiklund & Shepherd, 2003). The scales, which were used to test the interaction effect, were mean-centered aiming at alleviating the possible effect of multicollinearity and explaining the effect of interaction terms (Aiken & West, 1991). The effect of multicollinearity was tested by the variance inflation factor (VIF), and calculated for all constructs in each regression model. The maximum VIF value within the models was 3.59, and it is far below the threshold value of 10 (Neter, Wasserman, & Kutner, 1990). Thus, the results alleviate the issue of multicollinearity. The results of the hierarchical regression analysis are presented in Table 2. inbound open innovation (R 2 = 0.37, ΔR 2 = 0.04, p < .001). Adjusted R 2 increases gradually from model 1 to 3, indicating that each model has a significant influence on the dependent variable even after considering the effect of other variables in the model (Tarling, 2009).

DISCUSSION AND CONCLUSION
Yet, open innovation in LMT firms and technologically less advanced countries has been less researched.

Limitations and Further Research
This study has several limitations that demand further investigations. First, this study focuses mainly on technology orientation and inbound open innovation. Further research can expand the present study by adding other capabilities market orientation, entrepreneurial orientation, learning orientation, political and business ties, and outbound innovation. The collective effect of capabilities deserves our attention. Also, this study can be improved by incorporating the firms' assets such as physical resources.
Second, this study concentrates on environmental effect by considering only technology turbulence and market potential. It opens further research opportunities to consider the effect of other environmental conditions such as the government support, the intensity of competitive rivalry, industry characteristics and national culture. Third, the empirical findings are based on firms in five LMT industries (out of nine) in Sri Lanka. This study leaves out dissimilarities across the LMT industries, low-and-medium-low technology industry categories, and countries. However, the unique characteristics of industries, industry categories and countries may influence the present findings. This limits the generalizability of the findings and opens further research opportunities for cross-industry, cross-industry-category, and crosscountry studies. Finally, this study postulates a causation mechanism from technology orientation as a strategic capability for implementing inbound open innovation. Though research in this nature prefers a longitudinal approach, this study adopted cross-sectional approach. Thus, the author appeals for additional longitudinal research design.