The Knowledge Economy and Open Innovation: Evidence from Pakistan

In the era of industrialization, the role of small and medium-sized enterprises (SMEs) is more crucial to boost the economy of every nation. Particularly, in line with developed nations, SMEs has also key importance for developing nations like Pakistan. However, the SME’s performance in open innovation (OI) is not reached the satisfactory position in Pakistan. That is the reason, the Pakistani SMEs are not achieved the higher performance. In response to this issue, the objective of this study is to investigate the role of maximization of internal innovation and external knowledge incorporation to increase the firm’s OI performance. Furthermore, the moderating role of knowledge management is also observed. Managerial staff of SMEs was preferred to get response. After evaluating the data by using Smart PLS 3, it was found that maximization of internal innovation; external knowledge incorporation and knowledge management is the key contributor to enhance OI. Additionally, knowledge management is one of the moderating factors which enhance the positive effect of internal innovation and knowledge management on OI. Thus, the study is significant for SMEs and practitioners to enhance OI performance in SMEs.