Open innovation

The term open innovation was first coined by Henry Chesbrough in his book with the same name. Chesbrough defines open innovation as the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively. As such, open innovation can be seen as a paradigm that assumes that firms can, and should, use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology. Open innovation, therefore, combine internal and external ideas into architectures and systems (Davis 2006; Chesbrough, H. 2006). Traditionally, innovation processes has been a closed process where firms adhered the philosophy that successful innovation requires control (Chesbrough, H. 2003). With that line of thought follows that companies must generate all their own innovative ideas themselves. For years, this model was considered to be the right way to bring ideas to market. However, towards the end of 20th century a number of factors influenced the start of an erode of the closed innovation approach. One important factor was the increasing number of mobile knowledge workers and another factor was the growing availability of private venture capital, hence the open innovation approach started to emerge (Chesbrough, H. 2003). Within this approach ideas can originate outside the firms own labs and be brought into the organization for commercialization. Thus, the boundaries between the firm and its surroundings have become more porous, enabling innovations to move between these two easily. Van der Meer (2007) enriches the concept of open innovation with the insights that open innovation includes the notion that is takes a lot of effort to bring monetary value to technological knowledge, because the knowledge in itself brings little value. Adding to that, innovation seems to pay better if a company’s own knowledge is combined with that of others. Van der Meer continues by stating that the reality of open innovation seems to be easier said than done.

Open innovation is sometimes related with open source methodologies for software development. West and Gallagher (2006) say that open source is an open innovation strategy and has two key elements; shared rights to use the technology, and collaborative development of that technology. While these two concepts share some ideas, such as the idea of greater external sources of information to create value, one difference is the open innovations explicit incorporation of the business model as a source of value creation and value capture (Chesbrough, H. 2006; Chesbrough, Henry. and Appleyard 2007; Chesbrough, H and Schwartz 2007). Many firms involved in open source fall into the definition of open innovation, but there are situation when they do not since open source can happen without being open innovation, and open innovation can happen without open source (West and Gallagher 2006). Chesbrough (2006) argues that, while open source shares the focus on value creation throughout a value chain, the importance of value capture is often denied or downplayed.