Open Versus Closed Innovation
A Critical Look at the Effects of
Open Versus Closed Innovation
In the Innovative Firms of the Twenty-first Century
June 17, 2010
Abstract
In today’s fast paced business world, which innovation method should companies adopt, open or closed innovation? In this paper we will explore the methods of closed and open innovation. Then we will explore the pros and cons of both innovation methods and discuss which method works better in the business world of the twenty-first century. After reviewing the results this paper explores the particle implications that innovative firms should be aware of regarding Open and Closed innovation and recommendations will be made for future research in this area.
Introduction
Background
Looking back even a few decades companies viewed innovation strategies very differently then they do today. It was believed that successful innovation needed internal control and secrecy from others in the market. Large corporations used to dominate the field of innovation because they were the only ones who could afford to invest it large scale R&D. Any company that tried to enter the market would have to find large amounts of resources to be able to even attempt to compete with the R&D of the large corporations (Chesbrough, 2003; Herzog , 2008;
Aylen, 2010; Kodama, 2005; Trott & Hartmann, 2009).
In the current economy start-up companies have found ways to bypass the large R&D investments of the past. Instead of doing their own research these new entrance are getting their knowledge and technology from outside their company by either investing in relevant startup companies, or partnering with other companies up, down or horizontally on the value chain (Chesbrough, 2003).
With the expanding options on how to obtain innovative ideas, processes, and products the big question remains should companies used a closed or open approach to innovation? And does the open and closed methods work for all companies? (Almirall &
Open Versus Closed Innovation
In the Innovative Firms of the Twenty-first Century
June 17, 2010
Abstract
In today’s fast paced business world, which innovation method should companies adopt, open or closed innovation? In this paper we will explore the methods of closed and open innovation. Then we will explore the pros and cons of both innovation methods and discuss which method works better in the business world of the twenty-first century. After reviewing the results this paper explores the particle implications that innovative firms should be aware of regarding Open and Closed innovation and recommendations will be made for future research in this area.
Introduction
Background
Looking back even a few decades companies viewed innovation strategies very differently then they do today. It was believed that successful innovation needed internal control and secrecy from others in the market. Large corporations used to dominate the field of innovation because they were the only ones who could afford to invest it large scale R&D. Any company that tried to enter the market would have to find large amounts of resources to be able to even attempt to compete with the R&D of the large corporations (Chesbrough, 2003; Herzog , 2008;
Aylen, 2010; Kodama, 2005; Trott & Hartmann, 2009).
In the current economy start-up companies have found ways to bypass the large R&D investments of the past. Instead of doing their own research these new entrance are getting their knowledge and technology from outside their company by either investing in relevant startup companies, or partnering with other companies up, down or horizontally on the value chain (Chesbrough, 2003).
With the expanding options on how to obtain innovative ideas, processes, and products the big question remains should companies used a closed or open approach to innovation? And does the open and closed methods work for all companies? (Almirall &
References: Berkhout, AJ, Patrick van der Duin, Dap Hartmann & Roland Ortt, (2007), The Cyclic Nature of Innovation: Connecting Hard Sciences with Soft Values (Chesbrough, 2003) Figure 2 – The Open Innovation Model (Chesbrough, 2003) Figure 3 – Managerial Implications for working with OI in strategic communities (Kodama, 2005)