The interplay of open innovation and strategic innovation: Unpacking the role of organizational learning ability and absorptive capacity

We explore the open innovation research model in order to remove barriers in service organizations, where lack of knowledge is the main barrier to innovation. The purpose of this paper is to propose a research model exploring the relationship between open innovation, organizational learning ability, absorptive capacity, and strategic innovation. In this study, we collected data from 330 pharmaceutical companies in Lahore and Karachi (Pakistan). The Structural equation model analysis was used through analysis of moment structures and statistical package for the social sciences to check the relationship between the variables. The results reveal that hypotheses related to innovation have been accepted. The findings of this study are evidence that various types of open innovation have different effects on strategic innovation. The inbound and outbound open innovation directly affects strategic innovation; the mutual effect of exploitative learning ability and explorative learning ability between open innovation and strategic innovation have indirect effects. Similarly, the empirical findings of absorptive capacity also significantly impact open innovation and organizational learning ability. This study contributes to the theory by introducing exploitative and explorative learning abilities as mediators between open innovation and strategic innovation. Moreover, it analyzes how absorptive capacity may enhance learning abilities through the open innovation phenomenon. Practically, this study would help the managers understand and improve organizational productivity and gain competitive advantage by creating, sharing, and utilizing knowledge through internal and external avenues.