Open Innovation

date Aug 14, 2010
authors Chesbrough, Wim Vanhaverbeke, Joel West
reading time 3 mins
  • Book Title: Open Innovation - Researching a New Paradigm
  • Author: Editted by Chesbrough, Wim Vanhaverbeke, Joel West
  • Year written/published: 2006
  • Book Source: Amazon
  • Some extracts:


Open Innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation, respectively…. Open innovation paradigm treats R&D as an open system. Open Innovation suggests that valuable ideas can come from inside or outside the company and can go to market from inside or outside the company as well. This approach places external ideas and external paths on the same level of importance as that reserved for internal ideas and paths to market in the earlier era.

R&D spending in small firms increases…

Business and technology…

There is no inherent value in a technology per se. The value is determined instead by the business model used to bring it to market. The same technology taken to market through 2 different business models will yield different amounts of value. As inferior technology with a better business model will often trump a better technology commercialized through an inferior business model.


Start-ups play an important role, well beyond that of their share of revenues on employment within the economy. They are the carriers of new technologies, and sometimes explorers of new markets. They also often represent experiments with new and different business models…. startups provide an initial impetus for radical innovations, and sometimes becomes important partners in the creations and delivery of those radical innovations… represent an important source of novel technologies into an industry, even though startups do not appear to command much market share in consumer electronics….

3 steps of Radical Innovation:

  1. Discovery
  2. Incubation
  3. Acceleration

Our 3 challenges led to 3 related research questions:

  1. What circumstances motivate firms to embrace Open Innovation approaches as part of their R&D efforts?
  2. Why would non-profit firms commit their IPs as well as ongoing human resources to an effort that they know will benefit others, including competitors?
  3. Why do individuals contribute their IP to a project that benefits firms without receiving financial remuneration?

Open Source….

Open source as an Open Innovation strategy has 2 key elements: shared rights to use the technology, and collaborative development of that technology. Unlike many individual participants, firms must also consider a third issue : capturing an economic return to justify their investment.

Importance of Appropriability

Nearly 2 decades ago, David Teece (1986:285) wrote: It is quite common for innovators - those firms which are first to commercialize a new product or process in the market - to lament the fact that competition/imitation have profited more than the firm first to commercialize it!…. Teece’s observation anticipated a subsequent burst of research that showed that technological pioneers have as many advantages as disadvantages.

Role of IP

Voiding this problem of underinvestment in innovation is exactly the point of granting temporary monopolies through intellectual property rights. …. “The objective of intellectual property protection is to create incentives that maximize the difference between the values of the intellectual property that is created and used and the social cost of its creation….

early and present technological innovations…

… recounts how the key technologies of the early and mid-20th century was developed by industrial research departments within the large diversified enterprises of US and Europe. Such diversification, along with vertical integration from research and development (R&D) through distribution, provided these firms with competitive advantage over smaller and newer rivals through economies of scale and scope…. “It is a view that says successful innovation requires control… This paradigm counsels firms to be strongly self-reliant, because one cannot be sure of the quality, availability and capability of other’s ideas..”… However, from his study of US industry practice at the end of the 20th century,,, this model was reaching its limits. Along other factors he identified the increased mobility of knowledge and availability of venture capital to create new firms to capitalize on such knowledge.