Measuring Open Innovation in the Bio-Pharmaceutical Industry Francesca Michelino, Emilia Lamberti, Antonello Cammarano and Mauro Caputo The paper suggests a methodology for measuring the degree of openness in companies’ innovation processes through the analysis of annual reports. Four openness dimensions are defined based on costs and revenues deriving from open innovation activities and new invest- ments and divestments of innovation-related intangibles, occurring in either separate acqui- sitions or business combinations. A synthetic measure of openness is defined, including all the four dimensions. The model is then applied to a sample of 126 global top R&D spending companies in the bio-pharmaceutical industry for the period 2008–2012, for a total of 630 annual reports analysed. Results show a negative correlation of openness degree with firm age, dimension and efficiency, with biotech companies being more open than pharmaceutical ones. The paper contributes to the research on open innovation by suggesting a comprehensive framework for the measure of the pecuniary dimension of the phenomenon in both inbound and outbound processes. From a managerial point of view, the framework can be used by companies to both monitor their own degree of openness and to benchmark it with those of competitors. Introduction S ince 2003, when Chesbrough introduced the term open innovation (OI), organiza- tions have become increasingly aware that they are unable to hold in-house all the competen- cies they require, thus forcing them to open up their research and development (R&D) pro- cesses through pooling of collaborative activ- ities and/or trading of intellectual property (IP) rights (Gassmann, 2006; West & Gallagher, 2006). Following the OI paradigm, the firm is an active participant in the market for technol- ogy (Arora, Fosfuri & Gambardella, 2001), proactively acquiring technologies from outside and selling surplus technologies through spin-offs and licensing arrangements. Different studies have developed several classifications of openness embedded in differ- ent frameworks. Yet, apart from terminological differences, the main distinction can be reported as inbound vs. outbound processes (Gassmann & Enkel, 2004), the former referring to enriching the company’s own knowledge base through the integration of suppliers, cus- tomers and external knowledge sourcing; the latter to earning profits by bringing ideas to market, selling intellectual property and multi- plying technology by transferring ideas to the outside environment. Academic research is dominated by case studies on how open inno- vation is implemented and organized within firms (e.g., Dodgson, Gann & Salter, 2006), and survey studies on the adoption and perfor- mance implications of open innovation strat- egies (e.g., Laursen & Salter, 2006). Although practice and theory seem to indi- cate that the open innovation approach is ben- eficial for companies as well as for users, and the possibilities of opening innovation pro- cesses are growing, innovation measurement is still looking for appropriate metrics that monitor the investments and the effects of open versus closed innovation approaches, in order to help companies to find their right balance. Measuring the value of open innova- tion activities is increasingly important and measurement systems are not yet adapted to monitor the value of such activities. Only spe- cific measurement systems will allow the suc- 4 CREATIVITY AND INNOVATION MANAGEMENT Volume 24 Number 1 2015 10.1111/caim.12072 © 2014 John Wiley & Sons Ltd