TU-E1120 SMOTI Lecture 6 HOW OPEN IS INNOVATION? LINUS DAHLANDER, DAVID M. GANN TU-E1120 SMOTI - GROUP 11 1

Agenda 1.General overview of the article 2.Different types of openness 3.Advantages and disadvantages of each type 4.Conclusion and further research TU-E1120 SMOTI - GROUP 11 2

1.1 The Article How open is innovation? – L. Dahlander, D. M. Gann, Literary overview of use of headwords ’open innovation’ (OI) in scientific database Consists three parts: ◦Results of literary overview ◦New framework ◦Future & further discussion TU-E1120 SMOTI - GROUP 11 3 ”The author presents a model in which they categorize open innovation into four different categories. Discuss this model in detail! What are the four categories? List advantages and disadvantages within each one of the categories?”

150 - No clear definition Clarification & categorization - 4 categories Framing device 1.2 Findings and results Open innovation is widely used in scientific and technological literature ◦Thomson’s Web of Knowledge (ISI) journals till August 2009 Clarify the definition of ’openness’ used in literature ◦Different definitions and focal points ◦Use of ’openness’ is not coherent Creation of a framing device to compare and evaluate advantages and disadvatages of openness and open innovation ◦Outbound innovation ◦Inbound innovation TU-E1120 SMOTI - GROUP 11 4

1.3 Goals and group task Framework provides a tool for company managers; ◦Compare advantages and disadvantages of openess and OI ◦Identify own characteristics ◦Round up companies together ◦Not depending on field of operation ◦Ability to compare ◦Future? How did authors do? ◦Describe the framework ◦Discussion about the model TU-E1120 SMOTI - GROUP 11 5 ”The author presents a model in which they categorize open innovation into four different categories. Discuss this model in detail! What are the four categories? List advantages and disadvantages within each one of the categories?”

2.1 Revealing 6 ●outbound innovation ●non-pecuniary ●revealing internal resources to the external environment TU-E1120 SMOTI - GROUP

2.2 Selling 7 ●outbound innovation ●pecuniary ●out-licensing or selling products in the market place TU-E1120 SMOTI - GROUP 11

2.3 Sourcing ●inbound innovation ●non-pecuniary ●external ideas & knowledge TU-E1120 SMOTI - GROUP 11 8

2.4 Acquiring ●inbound innovation ●pecuniary ●external inventions & input to innovation process TU-E1120 SMOTI - GROUP 11 9

3 Overview The Four Categories of Openness TU-E1120 SMOTI - GROUP REVEALING SELLING SOURCING AQUIRING Inbound Pecuniary Outbound Non-Pecuniary

3.1 Comparison - Outbound  Steady stream of incremental innovations  Collective development of innovative solutions (e.g. open source software)  Escaping “myopia of protectiveness”  Gaining legitimacy from the environment  Difficulties in capturing accruing benefits  Decide which internal resource should be revealed  some can leak to the competitor TU-E1120 SMOTI - GROUP  firms can more fully leverage their investments in R&D  Profiting by partnering with actors adept by bringing inventions to the market place  Disclosure problem  patents, IPRs  Several obstacles to overcome:  Significant transaction costs  Lack of implementation strategy

3.2 Comparison - Inbound  Access to a broad range of ideas and knowledge  Ability to create synergy between own processes and an external idea  profitable new products  Over-search  difficulties to choose and combine the multiple alternatives  Lost focus  rely to heavily on external sources TU-E1120 SMOTI - GROUP  Many benefits from in-sourcing external ideas, but that requires expertise  Access to knowledge and resources of the partners  Risk of outsourcing critical dimensions of firm’s business model  Difficulties concerning the essence of input  too similar to existing practices  very hard to come up with new combinations  too distant  difficult to align with existing practice s

4.1 Conclusion TU-E1120 SMOTI - GROUP Research about open innovation has increased the last decades in a fragmentational way.  Develop a framework about open innovation in order to help the management calculating the advanteges and disadvantages of open innovation  Expansion on the evidence of these arguments will be useful to explain under which circumstances which strategy will be successful No clear definition

4.2 Further Research 1.The influence of new information infrasturctures on open innovation 2. Combinations of the different types 3.Develop a process for maintaining large numbers of relations TU-E1120 SMOTI - GROUP 11 14

Worth a mention Problem with open innovation When firms use external sources they have to check the relevance of all the data Critique The model and article is very cited and discussed in later research on open innovation ◦Other papers cite the credibility and the extensiveness of literary overview ◦Most of later debate agree with authors’ views about Chesbrough's model (see reference) Additional references H. W. Cherbrough, 2003: Open Innovation: The new imperative for creating and profiting from technology Fey, C. F., Birkinshaw, J., External sources of knowledge, governance mode and R&D performance. Journal of Management 31 (4), pp. 597– TU-E1120 SMOTI - GROUP 11 15