Open innovation business models and the role of interfirm partnerships

Abstract

Open innovation has become a popular topic in management literature since Chesbrough published his book with the same title in 2003 (Chesbrough, 2003). Consequently, no longer does it only exist in the realm of conceptualization; at numerous companies it has been applied. Chesbrough (2003) suggests that companies using the closed innovation paradigm are fundamentally inwardly focused when it comes to the development of new ideas, knowledge, and creativity; the notion of the closed innovation paradigm is not unlike that of a castle or silo. The underlying logic of this approach implies a need for vertical integration with the aim of centralized, internal research and development. But the logic underlying the closed innovation paradigm has been challenged in the transformative era of e-business and social media, due to the interdependence of various firms on other firms for critical technologies and other resources. In an information economy, firms are operating in a more open, fast-paced global environment, where firms can create ideas for external or internal use and can access ideas from outside as well as from within. The availability and quality of these external ideas have changed the logic that once led to the formation of internal, centralized R&D silos and that have now evolved with the open innovation paradigm that enables a firm to leverage and share distributed knowledge. Now firms must manage innovation in an uncertain world, and they must adopt an open innovation paradigm and become strategically agile and aligned by leveraging multiple paths to market their in-house technologies, by sharing ideas and intellectual property (IP), and by accessing and integrating external knowledge through strategic alliances and collaborative partnerships.