These days, instead of developing and marketing new products in the market, organizations are shifting towards commercialization. Therefore, open innovation is of much importance in this era of industrialization. In this study, open innovation is used as a strategic tool to improve the service innovation and organizational performance of the Malaysian hospitality industry. Therefore, the objective of this research study is to examine the role of open innovation in business performance of Malaysian hospitality industry. A survey is conducted with the management of the organizations of the hospitality industry to collect data. Partial Least Square-Structural equation modeling (PLS-SEM) tool is used to test the hypothesis and get results. The findings of the study highlighted that open innovation is the main source of boosting organizational performance in the hospitality industry of Malaysia. The increase in open innovation practices among hotels can increase the business performance by increasing return on investment, return on assets, return on sales and return on equity. The term open innovation incorporates ICT, innovation in the organization, and internal and external knowledge management. Accumulation of these elements forms a mechanism that results in an increase in organizational performance by incorporating service innovation. Hence, this study is most suitable to develop strategies for service innovation using open innovation that improves organizational performance.
Keywords: Business performance; Hospitality industry; Knowledge management; Open innovation; Service innovation.
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