Open Innovation Driven Absorptive Capacity Towards Customer Functional Value Creation: A Case in the Sri Lankan ICT Sector SMEs

In Sri Lanka Small and Medium Enterprise (SMEs) is the back bone of the economy and contribute more than 50% of GDP. However, Sri Lankan SMEs are lack of innovations and lack of awareness about new trends and global markets. To compete with global markets, SMEs need to access to outside knowledge as well as Innovations. Open Innovation (OI) driven Absorptive Capacity is one of a key concept that SMEs can adopt in order to grow their business to global level. This paper explores how Open Innovation driven absorptive capacity can contribute to customer value creation in terms of functional value aspect. The paper also examines how Technological Turbulence, Market Turbulence and Competitive Intensity influence the relationship between Open Innovation Driven Absorptive Capacity and Functional value to the customer. The study is focus on ICT based SME firms which operates within the Western Province and the study is draw upon 60 ICT SMEs as the sample. Data collection has been carried out using 5 Likert Scale questionnaires. 2 different questionnaires send through Google Forms to Top Manager and 3 Customers who uses their products/services. For the Data analysis this study used SmartPLS and IBM SPSS software. The results indicated that there is no relationship between Open Innovation driven absorptive capacity and functional value to customer. In addition to that the results highlighted that technological turbulence, market turbulence has no influence between Open Innovation Driven Absorptive Capacity and functional value to customer. But competitive intensity has an influence between Open Innovation Driven Absorptive Capacity and functional value to customer. This study provides implications for industry experts and policy makers to think about invest on innovations and recommended the importance of acquire right combination of external knowledge to create a value to the customer.