Towards a Theory of Open Innovation: Three Core Process Archetypes Oliver Gassmann*, Ellen Enkel* *Institute of Technology Management, University of St. Gallen, Switzerland
Open Innovation is a phenomenon that has become increasingly important for both practice and theory over the last few years. The reasons are to be found in shorter innovation cycles, industrial research and development’s escalating costs as well as in the dearth of resources. Subsequently, the open source phenomenon has attracted innovation researchers and practitioners. The recent era of open innovation started when practitioners realised that companies that wished to commercialise both their own ideas as well as other firms’ innovation should seek new ways to bring their in-house ideas to market. They need to deploy pathways outside their current businesses and should realise that the locus where knowledge is created does not necessarily always equal the locus of innovation - they need not both be found within the company. Experience has furthermore shown that neither the locus of innovation nor exploitation need lie within companies’ own boundaries. However, emulation of the open innovation approach transforms a company’s solid boundaries into a semi-permeable membrane that enables innovation to move more easily between the external environment and the company’s internal innovation process. How far the open innovation approach is implemented in practice and whether there are identifiable patterns were the questions we investigated with our empirical study. Based on our own empirical database of 124 companies, we identified three core open innovation processes: (1) The outside-in process: Enriching a company’s own knowledge base through the integration of suppliers, customers, and external knowledge sourcing can increase a company’s innovativeness. (2) The inside-out process: The external exploitation of ideas in different markets, selling IP and multiplying technology by channelling ideas to the external environment. (3) The coupled process: Linking outside-in and inside-out by working in alliances with complementary companies during which give and take are crucial for success. Consequent thinking along the whole value chain and new business models enable this core process.
Keywords: Open Innovation; Archetypes; Trends; Capabilities, R&D Process
seek ways to bring their in-house ideas to market by deploying processes outside their current businesses can
start an “era of open innovation”. Examples of products invented for a specific market which then became a
Shorter innovation cycles, industrial research and great success in other markets are numerous: the
development’s escalating costs as well as the dearth of
TCP/IP protocol, which was invented for military use
resources are reasons why companies are searching for
and lead to the world-wide web (internet), the joy stick
new innovation strategies. The phenomenon is technology in the game industry that BMW used to
reinforced by the increasing globalisation of research,
develop “iDrive” as a navigation aid in the new BMW 7
technologies and innovation, by new information and
and 5 series, or Teflon, which was invented for space
communication technologies as well as by new missions and became a market success as kitchenware.
organisational forms and business models’ potential.
However, emulation requires more than a few
Only companies that wish to commercialise both
changes in a company’s innovation paradigm. One of
their own ideas as well as other firms’ innovation and
these changes is transforming a company’s solid
boundaries into a more semi-permeable membrane to
enable innovation to move more easily between the
Open innovation means that the company needs to
external environment and the company’s internal open up its solid boundaries to let valuable knowledge innovation process. Another change is to fully integrate
flow in from the outside in order to create opportunities
those external knowledge sources that are a prerequisite
for co-operative innovation processes with partners,
for enriching the internal knowledge base.
customers and/or suppliers. It also includes the
Creating a new, flexible innovation strategy means
exploitation of ideas and IP in order to bring them to
combining approaches that take market demands and
market faster than competitors can. Open innovation
the company’s vision into account. The question principles therefore describe how to deal best with remains: how can these elements of an open innovation
strategic assets in order to meet market demands and
strategy be best combined in respect of the industry
speed (clock speed), the product architecture, the
The open innovation approach is about gaining
knowledge intensity of the research, or the form of the
strategic flexibility in the strategic process and creating a
critical momentum in innovation diffusion in order to generate customer acceptance and create industry standards.
Open Source is the most prominent example of the revolutionising of the conventional innovation process:
2. Research Methodology and Data Sample
world wide, several thousand programmers develop highly sophisticated software that competes with The database that we revisited for open innovation was
Microsoft’s products. The Open Source approach is the
originally used for an analysis of companies’ activities
phenomenon of co-operative software development by
in four areas related to the innovation process. This data
independent software programmers who, on demand,
had been collected during research projects over the last
develop lines of codes to add to the initial source code
10 years. Different types of data had been collected in
to increase a program’s applicability, or enable new
each area, and different data collection methods had
been used to ensure the quality and accuracy of the
The idea behind this approach is co-operative software
creation outside firm boundaries, which is thereafter
(1) In the area of intellectual property management
freely available. However, the source code too has to be
we co-operated with 9 transnational companies for 8
freely available. This principle drives the evolutionary
months by means of workshops in order to identify
development and improvement of the software. Famous
strategies of and approaches to IP management within
examples of the development of Open Source software
co-operative innovation processes. We used interviews,
are Linux, the Apache server or Freemail. The Open
questionnaires and participating observation to collect
Source approach, which has been broadly discussed in
data. This action research approach allowed us to
practice and theory (see the special issues of Research
develop a model of IP Management for co-operative
Policy (2004) and Management Science (2005 innovation processes (see Gassmann, Bader, 2004).
forthcoming)), started the discussion on opening up the
(2) To investigate external knowledge sourcing, we
company’s internal innovation process.
conducted and compared case studies by means of 55
The core questions to be researched were: Is the
semi-structured interviews in 23 multinational
Open Source innovation approach transferable and, if
companies, using listening posts in order to access
so, under which conditions? Enabling factors for this
innovation clusters like Silicon Valley or Singapore and
successful model are the short design-build-test cycles
to trace the technological knowledge transfer to
(rapid change of generations), new releases’ low companies’ R&D centres. We were able to identify three
transaction costs, the great number of ideas that are
different modes of listening posts according to their
enabled by the number of programmers involved and
main goal: the match-maker, trend scout and technology
which, in turn, create variation and mutations as well as
the selection criteria (survival of the fittest, the principle
(3) In the area of decentralised R&D, which formed
on which acceptance within the user community is
the largest data sample, we investigated 89 companies.
based). Other success factors are a stable structure
This provided us with a comprehensive overview of the
which entails an accepted system architecture and physical and geographical structure of a firm’s R&D
language, the communication, which is a combination
organisation and processes (see Gassmann, von
of ideas and technical solutions, as well as the strong
Zedtwitz, 1998, 1999, 2003; von Zedtwitz, Gassmann,
creating an essential contribution to IBM’s innovative
(4) Based on the data analysis of the above-
power. Since research and development activities form
mentioned areas in the last phase of our data collection
the most important base of IBM’s success, it has
for the open innovation research, we collected data in
invested approximately $5 billion per year, which is 5-
two action research projects. In the area of outside-in
6% of its revenue, in research and development since
innovation, and through a workshop structure, we 1996. collected data in 10 companies, as well as in 13
This investment’s success is verified by IBM’s
companies in the area of customer-driven innovations.
constant leading role in the number of US patents
Overall we collected data through twelve workshops,
registered since 1993. Between 1993 to 2002 IBM
questionnaires, side visits and interviews over a period
registered 22,357 patents and generated $10 billion in
of 16 months with a special focus on the field of
licensing alone. And the number of patents is still
customer-driven innovations (see Gassmann, increasing: 3,288 patents in 2002 and 3,415 in 2003. The Sandmeier, Wecht, 2004).
company owns an active patent portfolio of more than
IBM’s industry solution laboratory (ISL) in Zurich
23,000 American patents and more than 40,000 world
Rüschlikon is exemplary of the concept of open wide. “But what’s more important than the statistics is innovation. IBM follows most of the principles of the
the effect that these discoveries and patents are having in
open innovation approach, which seems to be one
the marketplace – and that’s what really makes
reason for the organisation’s innovation successes.
something ‘innovative’.” (IBM 2004). Concomitantly with the increasing number of patents, IBM has explored a new business by exploiting its knowledge through licensing. It took IBM ten years, but now a huge part of
3. A case of Open Innovation – IBM
its revenue is earned through patent licensing to outside
Industry Solution Lab Zurich
partners in order to get ideas to market through its own licensing programme.
IBM is a successful and established enterprise in the
The sustained success of IBM’s research is also based
fast growing IT market. IBM can look back on a long
on the constant development of its research strategy. On
history of research and development activities, analysing this development it becomes clear that IBM impressive innovation as well as good customer did not replace one strategy with another, but built on experience. This company was one of the first past experiences. While centrally financed research enterprises that was forced to see its competitors programmes and technology transfer became core in the conquer a place in this highly dynamic industry. The
70s, this was supplemented in the 80s with collaborative
increasing complexity of the IT market established new
research teams, co-ordinated agendas and joint projects
players in the hardware (e.g., Cisco and HP) and with a focus on more effectiveness. “The 1990s saw an software (e.g., Microsoft, Oracle and SAP) sectors.
interesting shift in our industry as significant
The information and communication technology’s
innovations began to be made by IT teams within our
growing influence as well as the partial merger of
leading customers’ technology staffs.” (McQueeney,
traditional disciplines, e.g., biology and medicine, leads
to even more dynamics and complexity. Meanwhile new
Joint research projects with customers lead to
media and globalisation offer new opportunities (e.g., e-
mathematical optimisation concepts providing solutions
business), but also lead to more technology and market
to supply chain and customer relations problems. In the
uncertainty. It is therefore essential for an enterprise like
90s, the work on customer problems as well as the
IBM to not only invest in research and development, but
research into the market place complemented the current
to open up its innovation process and to focus research strategy which gives a key position to creating consistently, both operatively and strategically, on business advantages for customers and investing in e-market and customer demands.
business research and external partnerships
In the 8 research labs (which focus on basic research
(McQueeney, 2003). This new focus on research
and long-term development of core competencies) and
strategy was initiated by the wave of newly founded,
the 30 development labs (oriented towards short- and
dynamic companies and these enterprises’ structural and
middle-term projects) approximately 3400 people are
organisational problems which did not allow
employed world wide. The industry solution labs (ISL)
entrepreneurs to develop their promising ideas within
and on demand innovation services (ODIS) initiative
their companies. IBM learned from venture capitalist
aim at co-ordination and co-operation between the companies and introduced incubator organisations. research and development labs and at subsequently
These changes were necessary to develop innovations
outside IBM’s core business, called “emerging business
opportunities” or EBOs, within IBM. This was workshops, are focused to address the current and additionally supported by the early integration of potential IBM customers’ immediate and specific need, business partners and customers as well as market
such as value chain optimisation. The workshop can also
research and development analysts into the innovation
be targeted more broadly to address long-term goals,
process. This approach enabled concepts like the first-
such as increasing mind share by focusing on an array of
of-a-kind projects (FOAK), the on demand innovation
emerging technologies. Besides exchanging
services (ODIS), the industry solution lab (ISL) and the
methodologies and context-specific information with the
global technology outlook (GTO) (McQueeney, 2003
circa 20 participants who mainly come from higher
and IBM 2004). IBM successfully used their existing
management positions, specific knowledge, such as
and potential lead customers to test new technologies, to
technological, market and industry trends or current
build collaborative teams and to perform road-mapping
project outcomes, is also exchanged. Because of the
delicate and strategic issues discussed at these
The IBM industry solution lab in Zurich Rüschlikon
workshops, 90% are held in-house and limited to one
aims to establish relationships with academic and company. The workshops can be initiated in different industrial partners in Europe in order to leverage their
ways: The customer could meet up with an ISL
current technical knowledge and to follow those employee at a conference or workshop, an ISL technical developments in which Europe is the leader.
workshop is initiated via a consulting project with an
Today approximately 300 employees, mostly graduates
IBM business unit, or the contact is established by
in information sciences, electronics and physics, as well
customers requesting it via the ODIS website. After the
as 30 visiting researchers and a great number of trainees
two-day workshop has been approved, the specific
work at this research lab which has delivered 4 of
topics are discussed with all the relevant experts,
researchers and stakeholders within the customer’s
The lab contacts the global scientific community
company and IBM Rüschlikon. Thereafter the potential
through conferences and seminars and through scientific
participants (up to 20 managers, industry experts and
societies’ meetings. The lab employees also participate
researchers) are invited. Not only trend and state-of-the-
in research programmes with the European Union and
art information is exchanged during the workshop, but
work on joint projects with European universities and
also the ISL researchers and consultants’ views of
their industrial partners’ research institutions. More than
company-specific problems. According to external and
a quarter of the researchers, engineers and programmers
industry-independent perspectives, these opinions are
frequently work with important customers and give
excellent and greatly appreciated by customers.
them the opportunity to get to know technological,
Besides the strategic aim of identifying potential
technological lead positions, relationship marketing
Making the initial contact with scientific and forms the ISL mission’s main focus, thus supporting
industrial partners and customers is part the Zurich and
IBM’s business indirectly. The great success of the ISL
New York industry solution labs’ (ISL) main workshop, which is evident from Rüschlikon’s responsibilities. These two labs have a special role
employees’ high workload, can be summarised as being
within IBM’s research labs because of their double
due to the following factors: experts and high-ranking
function of doing research and building a customer and
decision-makers’ participation, a workshop design
oriented towards individual customers and the open
Although there is no contract-triggered pressure to
discussions of delicate and company-specific questions
integrate customers, IBM Rüschlikon strives towards
in a closed community. The openness regarding the
external inputs without wishing to lose its leading role
demonstration of prototypes and the presentation of
in driving innovation. The integration of customers and
IBM-specific internal methods and current research
partners is supported by 350 workshops per year as well
projects create the open and collaborative climate
as by the 50-100 on-going research projects, product
necessary to exchange knowledge. The knowledge
offers, integrated solutions and developing technologies.
gained through the ISL workshops in Zurich Rüschlikon
IBM’s innovativeness is enriched by "innovation days"
forms an important basis for IBM research and
during which leading scientists, suppliers, customers
especially for the site-independent research concepts like
and potential partners are invited to provide the first-of-a-kind projects (FOAK), on demand innovation company’s research as a whole with external input and
services (ODIS) and emerging business opportunities
to stimulate discussions on mutual issues. (EBO). Communication across company boundaries is seen as a
Another example of active customer integration into
way to obtain strategic alignment in research.
Rüschlikon’s innovation process is the global
The customer workshops at Rüschlikon, called ISL
technology outlook (GTO). The GTO aims to identify
market trends and to estimate technological collaboration with the Conxion Dotcom incubator during development. Through the GTO process those fields
which IBM Global Business Partners joined forces with
that are highly important for IBM’s R&D are identified.
Conxion, an Internet service provider and itself a start-
IBM’s strategy is to be the first in these innovation
up, to incubate start-ups. IBM is well known as a partner
fields. Annual expert interviews launched by the GTO
in strategic alliances in which the company jointly
owners have to answer the question: what are next
develops and exploits innovation with strategic partners
in different industries. This give-and-take relationship in
In a first step, the gathered information on which IBM gains knowledge from outside as well as
technology and market trends that research and providing its own knowledge and technology has development labs’ leaders have provided within a 6- to
become a major part of IBM’s business strategy.
9-month period, is combined with information from
Besides contributing to the good relationships with
competence centres’ R&D experts as well as with the
customers and partners, the exchange of knowledge
results from surveys of those IBM employees who
leads to new product ideas that serve to forecast
participated in conferences and workshops. Various
technologies and help to maintain IBM’s leading market
other sources, like industry reports from independent
research institutions and universities (e.g., the report
IBM’s success is based on its research strategy and
“Future trend in the pharmaceutical industry 2010”),
the openness of the innovation process that allows the
reports from joint research projects with partner organisational environment to react flexibly to new companies (e.g., the study on successful ageing with
market demands. IBM integrates external knowledge
Swiss Re), and marketing reports, complete the through its extended collaboration with customers and information search in this phase.
partners in joint research activities. IBM’s patent
In a second step, the information is analysed and
strategy of licensing patents that cannot be used
consolidated into approximately 20 fields, which the
internally has become part of its business strategy. It is
research departments then discuss and further group into
the combination of approaches that the organisation has
6-7 fields called GTO chapters. In this process the
attempted over the years, which makes IBM successful
leaders of the 8 research labs and specifically the heads
of the two industry solutions labs (Zurich Rüschlikon and New York) are of great importance in deciding on IBM’s future innovation fields. The GTO chapters have to be linked to the previous year’s chapters in order to
4. A Framework for Open Innovation:
guarantee resource allocation consistency and to Three Core Processes in Open Innovation safeguard the long-term development of research competencies.
What differentiates the closed innovation paradigm from
The industry solution lab in Rüschlikon has a special
the open one is basically that companies that implement
role within the GTO procedure as it can integrate the
the latter interact with external entities in terms of their
customer’s perspective through the ISL workshop innovation process’s efficiency and effectiveness.
results. Since his role at the forefront of research
Chesbrough (2002; 2003) describes four erosion factors
enables him to actively shape IBM’s research, the leader
that compel companies to transform their innovation
of Rüschlikon’s industry solution lab is seen as an
strategy into a more flexible open innovation approach.
opinion leader within IBM’s GTO process. With the
Skilled workers’ increasing availability and mobility as
exception of the largest development site in Böblingen,
well as external suppliers’ increasing capability have
Germany, IBM regards the ISL Zurich Rüschlikon as
caused a shift in innovation paradigms. In addition, the
the major authority in R&D within Europe, the Middle
external options available for unused ideas and the
venture capital market have created new opportunities
Rüschlikon’s innovation strategy is strongly focused
on joint ventures and common research projects and
The IBM case study demonstrates that IBM is mastering
reports, therefore there are manifold examples of the new challenges and reacting to them with a flexible
successful partnerships. One example is provided by the
research strategy. Besides the strong focus on
study “Computer on Wheels” in which IBM developed
integrating customers, suppliers and partners’
a vision based on the input by BMW’s research. IBM’s
knowledge and ideas into the early stage of its
vision of the car in the year 2015 is that of a computer
innovation process, IBM has created an excellent patent
on wheels with which IBM could create a great added
strategy. This strategy allows the commercialisation
value as a supplier for the automotive industry. Another
through active know-how transfer projects and licensing
example of strategic alliances for innovation is IBM’s
of those patents that cannot be realised efficiently in-
strategy in which the de-coupling of innovation sub-
house, or do not fit the innovation strategy (exploitation
processes is used to increase a company’s
of knowledge). By tapping into innovation clusters to
innovativness? Can this approach be observed in
enhance its technological knowledge transfer through
companies other than IBM? Is the opening-up of the
the research labs around the world and by supporting
innovation process a new innovation paradigm?
corporate new ventures through organisational
Boundaries Outside-in Process of the company Inside-out Process Coupled Process
Figure 1: De-coupling the locus of innovation process
A) Identifying three Open Innovation Process Archetypes
structures like incubators or spin-offs, IBM enables the realisation of ideas. This is evidenced by the high
The results of our research can be summarised by the
number of patents and Nobel Prize winners within the
three core open innovation processes: (1) The outside-in
organisation. Also co-operations within strategic process: Enriching the company’s own knowledge base
alliances, such as that with BMW, and an open standard
through the integration of suppliers, customers and
strategy to increase development support (collaborative
external knowledge sourcing can increase a company’s
knowledge creation) IBM’s leading market position.
innovativeness. (2) The inside-out process: earning
When analysing the case study from a process profits by bringing ideas to market, selling IP and
perspective, it is clear that three main processes are
multiplying technology by transferring ideas to the
responsible for IBM’s open innovation strategy.
outside environment. (3) The coupled process: coupling
Analysing the IBM case it becomes clear that IBM has
the outside-in and inside-out processes by working in
de-coupled the locus of innovation (in terms of applying
alliances with complementary partners in which give
the idea and transforming it into an innovation) with the
and take is crucial for success. All three the core
locus of knowledge creation (invention or research) and
processes represent an open innovation strategy, but not
the locus of commercialisation (product development or
all are equally important for every company (see Figure
exploitation of the innovation). Companies like IBM
can integrate external knowledge by using the outside-in
Based on our revisited data in different areas of open
process in order to increase their innovativeness. Also the locus of innovation need not necessarily be the locus
innovation, we found that not all companies choose the
of exploitation. Companies can use the inside-out same core open innovation process, or have integrated process in order to license knowledge and technology to
all three processes to the same degree. Each company
exploit them outside the firm. The following figure
chooses one primary process, but also integrates some
describes this basic principle of the open innovation
elements of the others. These process archetypes are
approach. Our research questions were: do these summarised in the following figure (Figure 2). approaches provide evidence of a new innovation
Outside-In Process Integrating external Knowledge, Customers Inside-Out Process
Bringing ideas to market,selling/licensing IP andmultiplying technology
Coupled Process couple outside-in and inside-out process, working in alliances with complementaries
Figure 2: Three archetypes of open innovation processes
repeatedly suggests that firms can significantly
benefit if they are able to set up differentiated relationships with suppliers (Dyer et al., 1998;
Boutellier, Wagner, 2002). If firms possess the
Deciding on the outside-in process as a company’s core
necessary competence and supplier management
open innovation approach means that this company
capabilities, they could successfully integrate internal
chooses to invest in co-operation with suppliers and
company resources with the critical resources of other
customers and to integrate the external knowledge supply chain members, such as customers or suppliers, gained. This can be achieved by, e.g., customer and
by extending new product development activities across
supplier integration, listening posts at innovation organisational boundaries (Fritsch, Lukas, 2001). clusters, applying innovation across industries, buying
Suppliers can enhance the buyer’s product and project
intellectual property and investing in global knowledge
success by contributing their capabilities to innovate and
creation. As seen in the IBM industry solution lab case,
develop new products. The Austrian company Magna
IBM invests heavily in contact with customers, Steyr, one of the major suppliers to the automotive suppliers and other external knowledge sources. One of
industry, is integrated into parts of the innovation
the main functions of the solution lab in Rüschlikon is
process of most automotive OEMs in Europe. Whereas
to collect and integrate external knowledge in research
American automotive companies, like General Motors
projects and find co-operation partners for joint or Chrysler, bind their co-developing suppliers with ventures. Access to this valuable knowledge is one of
contracts to secure exclusivity, European automotive
the main assets that the lab can offer IBM research and
companies, like Volkswagen, BMW or Saab, gain value
is the reason for Rüschlikon’s high status within IBM’s
from Magna Steyr’s increasing competence after each
research (see the GTO process for an example). Cisco
new project with a competitor. In the meantime, Magna
invests in young start-up companies in order to monitor
Steyr’s competence has increased so significantly that it
their attractiveness and innovations. Besides evaluating
is able to develop not only parts of the car, but the whole
their acquisition potential Cisco also directs the car as proved with the development of the new Saab company development towards Cisco standards and
Recent conceptual contributions (Wynstra et al.,
Opening up the internal innovation process by 2001) and benchmarking research (Ragatz et al., 1997)
integrating suppliers and/or customers is not new. The
have begun to further explore the success factors and
literature on inter-firm collaboration in general and on
critical issues of successful supplier involvement in
supplier relationship management in particular
product development. Supplier involvement can provide
buying firms with substantial benefits that range from
more “operational” benefits, such as the earlier institute responsible for the early phase of the innovation identification of technical problems, fewer engineering
process. Besides systematising the innovation process,
change orders, or the availability of prototypes, to more
the Creative Centre also searches for and connects with
“strategic” benefits, such as better utilisation of internal
key customers in order to integrate their knowledge and
resources, access to new or supplementary product and
process technologies, reduced technical and financial
Innovation methods that involve customers and
risks, improved product features, or shorter time-
enable companies to deduce their needs before
tomarket for new products (Clark, 1989; Birou, Fawcett,
customers are even aware of them are therefore widely
1994; Handfield et al., 1999; Dröge et al., 2000; Ragatz
discussed. Prahalad and Ramaswamy (2000) developed
et al., 2002). Some conceptual and empirical evidence
a co-creation model based on dialogue, access, risk
hints at the importance of suppliers’ innovative reduction, and transparency of information between capabilities as a major determinant for a collaborative
customers and company. Von Zedtwitz and Gassmann
development (Wasti, Liker, 1997; Wynstra et al., 2001;
(2002) provide guidance on how to manage customer-
Boutellier, Wagner, 2003; McCutcheon et al., 1997;
oriented research and the interface between research
Handfield et al., 1999). DaimlerChrysler’s “Score” scientists and development teams. Leonard and Rayport initiative offers suppliers incentives to reduce the provide the concept of emphatic design (1997) in which company’s R&D costs through innovative ideas and
customers are shadowed in their daily behaviour to
improved processes. Suppliers who suggest identify their needs through their actions, while von improvements can gain a position as long-term Hippel developed the lead user method (1986) which DaimlerChrysler partners, but are also rewarded with a
argues that some customers are more appropriate to co-
develop new products and services than others. Other
Arguments related to early customer integration in
authors tried to implement the latter method and analyse
product development are equally widely discussed in
its success in different industries (e.g. Herstatt, von
theory, but not as widely researched (Brockhoff, 2003,
Hippel 1992; Lilien et al., 2002; Thomke, von Hippel
p. 464). Although researchers tend to be careful in
2002). Hilti AG, manufacturer of building equipment
promising radical innovations through customer like drills, is famous for its intensive integration of lead integration, this might be seen as the ultimate aim in
users into its innovation process. But also Zumtobel
order to gain a competitive advantage (Brockhoff, Staff AG, an innovative lighting manufacturer, 2003). Henkel has established “focus groups” to obtain
integrates well-known, independent architects in order to
ideas on actual needs directly from customers and to get
gain knowledge of design trends and combines this with
customers to rank these needs on a strategy problem
modern lighting demands for mass-manufacturing.
map. DuPont integrates customers and suppliers into
In summary, suppliers and customers should be
their research and development activities on a project
integrated as valuable sources of knowledge and
level. The company targets specific partners for specific
competence that are needed for product development.
projects and describes itself as an early adopter of
Other potentially valuable sources of external
knowledge in the new product development are IP-
Empirical studies show the relevance of an early
licensed patents and technological knowledge gained by
customer integration within a company’s innovation
linking the company to regional innovation clusters. BT
process (Peplow, 1960; Enos, 1962; Knight, 1963; Exact deploys networks with 40-50 different universities Freeman, 1968; Meadows, 1969; Utterback, 1971; world wide simply to keep up with new developments in Berger, 1975; Boyden, 1976; von Hippel, 1976; different regions of the world. Lionetta, 1977; van der Werf 1982; Shaw, 1985; Voss,
The internal knowledge transfer and diffusion within
1985; Biegel, 1987; Gemünden et al., 1992, 1996;
R&D have been recognised as a major management
Riggs, von Hippel, 1993 and Slaghter, 1994). Prahalad
challenge for international companies (e.g., Chiesa,
and Ramaswamy (2000) describe how customers moved
1996; Kuemmerle, 1997; Gassmann, 1997). Recent
from being passive recipients of product development in
research on international R&D reveals strong evidence
the 1970s and early 80s towards demanding to play a
of technology sourcing as a motive for foreign direct
more active role in the 21st century. “Consumers can
investments (e.g., von Zedtwitz, Gassmann, 2002;
now initiate the dialogue; they have moved out of the
Kuemmerle, 1999). BMW’s Palo Alto Technology
audience and onto the stage” (p. 80). Consumers can
Office (PAYTO) in Silicon Valley has the mission to
now be co-creators of values because they are seen as a
permanently look out for new trends, highly specialised
source of competence. Bayer Polymers, one of the main
and unique technical knowledge and technologies and to
columns in Bayer’s new organisational structure, seek and establish contacts with potential external established the Creative Centre as the organisational
Kuemmerle (1997, 1999) distinguishes between the
Taylor, 1998). The fundamental advantages of using
‘home-base-exploiting’ and ‘home-base-augmenting’ of
external innovation sources are seen in the access to new
foreign direct investments. The former is undertaken to
and complementary knowledge and in the access to
support manufacturing facilities in foreign countries, or
unique resources. The German Ministry of Economics
to adapt standard products to the demand there, while
and Labour, in close collaboration with the German
the latter is foreign direct investment undertaken to
Chamber of Industry and Commerce (DIHK), the
access and tap unique knowledge and resources from
Frauenhofer-Gesellschaft (FhG) and the German
regional knowledge-intensive centres of excellence. Federation of Industrial Cooperative Research BMW’s Technology Office in Tokyo, founded 1981 and
Associations (AiF) set up 18 listening posts as match-
comprised of 30 employees today, gathers trends and
makers with local companies in 18 different world-wide
application knowledge. Japanese employees act as door
innovation clusters in order to support collaboration and
openers to the Japanese scientific community and to
to gain German companies access to regional
competing as well as non-competing companies with
the aim of tapping their tacit and embedded knowledge.
Some of the investigations also emphasise external
Patel and Vega (1999) push this conceptual model
sources’ potential to generate radical new knowledge
further and suggest a ‘revealed technological advantage’
(Coombs, Hull, 1998). Hermes (1993) suggests using
index with four categories of international technological
external technological sources in three cases: (a) when a
activity. Almeida’s (1996) investigation of patent company lacks internal resources, (b) when the external citations confirms that foreign firms make more use of
technology position is better, or (c) when technological
sector-specific knowledge than domestic ones do. He
knowledge can be easily transferred and market barriers
concludes that Korean and European multinationals
are low. ABB integrates the mechatronic knowledge of
source knowledge from US firms in order to upgrade
spin-offs from the Technical University Zurich (ETH) in
their technological abilities in areas in which they are
weak. BASF, located in Germany and one of the major
Integrating external sources of knowledge and
companies in the chemical industry, has realised the
competence, such as co-operating with suppliers and
importance of tapping external knowledge by opening
customers and/or integrating external knowledge (gained
its company boundaries. Within its department of e.g. through listening posts) in an attempt to open up the research planning and university relationships more than
innovation process, can be a company’s major
800 external partnerships are maintained to identify and
competence. Whereas the literature discusses the
evaluate ideas. The company integrates partners like
methods and key factors for integrating external
universities, start-ups and current as well as potential
knowledge sources independently, we summarise them
customers in order to combine their different into one archetype of open innovation processes. Our competencies to enrich its own innovation process.
research shows which companies gain most value from
One way of tapping tacit and embedded knowledge
focussing on the outside-in process as a main process in
from regional centres of excellence that many their open innovation approach. transnational companies have exploited to reduce the
The outside-in process reflects companies’ experience
need for huge financial investments, is to launch that the locus of knowledge creation does not necessarily technological listening posts (Patel, Vega, 1999; Weil,
equal the locus of innovation. Companies that decide on
2000; Gassmann, Gaso, 2004). Hitachi installed the outside-in process as key are mainly from low tech technology outposts in Dublin (Ireland) and Cambridge
industries, e.g., companies that expect spillovers from
(UK) in 1988 to participate in leading universities’
higher tech industries such as companies producing
microprocessors in cars or electronic equipment like
The relative importance of internal and external switches. Schurter AG, a small company in Lucerne,
sources is determined by a company’s technological
Switzerland, but one of the leaders in this business,
position (Hermes, 1993) and varies across different
gains external knowledge for innovation through co-
industries (Klevorick et al., 1995). Numerous authors
operation with universities, lead customers and
have analysed the factors that most influence the complementary companies. Also companies in air selection of an optimal external technological sourcing
conditioning and automation processes focus strongly on
mode (Roberts, Berry, 1985; Pisano, 1990; Audretsch et
the outside-in process. Varioprint AG, a small company
al., 1996; Chiesa, Manzini, 1998; Croisier, 1998; in scenic Appenzell in Switzerland, is a leading supplier Nagarajan, Mitchell, 1998; Robertson, Gatignon, 1998;
of printed circuit boards (PCB) with up to 24 layers that
Veuglers, Cassiman, 1999) as well as the ratio between
are used in almost every electronic device. With its 128
internal and external technological acquisition employees the company operates in a highly volatile (Colombo, Garone, 1996; Veuglers, 1997; Lowe, market with an estimated value of 30 billion Swiss
Francs. The market is characterised by rapid change and
To summarise the results, the next table shows the
driven by technological development. The company has
most important characteristics of companies focussing
10 Swiss, 200 German, 500 European and about 2,000
on the outside-in process as the major process in their
Chinese competitors. The strongest threats come from
open innovation strategy as well as providing examples
the Asian competitors who are able to produce large
volumes cheaply. A market consolidation is expected in
the next few years and it is assumed that only
Characteristics: Outside-in process:
approximately 100 companies will be left in 2005. In
this market, Varioprint generates 90% of the turnover
through 45 loyal customers, of which the most
important ones are integrated as lead customers within
Varioprint’s innovation process. Relations and co-
operation with customers and suppliers are very
important as customers drive the technological
development at Varioprint. Without their knowledge of
innovation, Varioprint would not be able to stay competitive against their Asian rivals.
In the past these outside-in companies were Table 1: Characteristics and company examples of the outside-in
characterised by a small or medium company size. They
act as knowledge brokers or knowledge creators for bigger companies, or as the next in the value chain. Today, company size is less relevant, e.g., even C) Inside-out Process
DaimlerChrysler re-focussed on knowledge brokerage in 2004.
Companies that choose the inside-out process as a key
The modularity of the products that the company
process focus on the externalising of the company’s
produces is also an important criterion. We found that
knowledge and innovation in order to bring ideas to
companies with highly modular products, e.g., in the
market faster than they can through internal
elevator industry like Otis or Schindler, gain advantage
development. Deciding to change the locus of
by choosing the outside-in process as key.
exploitation to outside the company’s boundaries means
A high knowledge intensity can additionally be generating profits by licensing IP and/or multiplying
identified as characteristic of companies specialising in
technology by transferring ideas to other companies. As
outside-in processes, because their need for knowledge
already mentioned in the beginning, commercialising
cannot be satisfied by using their internal abilities only,
ideas in different industries (cross industry innovation)
e.g., 3M, Bosch, Proctor & Gamble and Siemens. and therefore focusing on the inside-out process in open Examples can be found in the Biotech and IT industry,
innovation can increase a company’s revenue
but also in the consumer goods industry. In order to
immensely. The pharmaceutical industry (companies
scan ideas outside corporation’s boundaries, Henkel has
like Norvartis Pharma, Pfizer or Roche) is specifically
linked itself to the service of the external, web-based
well known for substances that were initially aimed at
forum “InnoCentive”, which in turn connects experts
one ailment, but became better known or equally
from major companies world wide, and matches top
successful when used for other ailments. Three examples
scientists to relevant R&D challenges around the globe.
are Viagra, initially developed to control blood pressure,
It provides an on-line forum that enables major but became a great success as a sexual aid, Botox, companies to reward scientific innovation through developed as a nerve toxin, but used to reduce wrinkles financial incentives. Companies (“seekers”) can post
in beauty therapy, and Erythropoitin (EPO), developed
challenges on the website, offering rewards of up to
as a blood diluent, but became known as a doping
$200,000, and wait for other companies to offer substance in professional cycling and is currently used in solutions (“solvers”). The problem-solving companies
then receive the rewards, whereas the seeking
Besides commercialising ideas outside the own
companies only have to pay a small fee for posting the
industry or market, outsourcing can be used to channel
challenges. Proctor & Gamble intensively uses its knowledge or ideas to the external environment. customers’ knowledge for innovation. In 2002 Outsourcing comprises the acquisition of knowledge on customers already initiated 10% of the company’s a market basis (Grandstrand et al., 1992; Haour, 1992; innovation and it aims to increase this percentage to
Ulset, 1996; Mangematin, Mesta, 1999; Veuglers,
Cassiman, 1999) and the licensing of technologies from
a second party (Atuahene-Gima, 1992; Leonard-Barton,
order to multiply technology is Schindler. The No. 2 in
1995). The benefits of outsourcing are many, including
the elevator market world wide has developed aramid
gaining access to new areas of knowledge cables to replace elevators’ steel cables. These cables (complementary knowledge), managing capacity contain carbon fibres to enable remote diagnosis and problems (more flexibility), concentration of core therefore support elevators’ service and safety. The competencies, speed (reducing time-to-market), and the
patents for non-elevator applications have been sold for
sharing of costs (Haour, 1992). DaimlerChrysler has
$6 million and thus financed the whole R&D project.
outsourced the varnishing of their cars in Rasstadt,
The different approaches within the inside-out
Germany, to the chemical company BASF. Whereas
processes can be summarised as: leveraging a
BASF was paid for the tons of varnish used in the past,
company’s knowledge by opening the company’s
the new business model is based on payment for the
boundaries and gaining advantages by letting ideas flow
number of cars varnished. The outsourcing of to the outside. The inside-out process as a major process varnishing does not only offer the advantage of in an open innovation strategy, creates a substantial DaimlerChrysler benefiting from the leading company
advantage for companies that fulfil certain criteria.
in this sector’s latest developments in varnish, but also
The open innovation paradigm and especially the
the outsourcing to an expert in this field of all inside-out process within this approach, support the idea environmental demands that the German authorities set.
that the locus of invention and innovation need not
Intellectual property management mainly means necessarily equal the locus of exploitation. Companies
patent management, which fits a company’s innovation
that decide on the inside-out process as key are mainly
strategy. As illustrated in the IBM case study, both the
basic research-driven companies, like IBM, with wide
creation of new ideas and patents as well as an effective
applications. These companies aim at decreasing the
licensing strategy can be part of this strategy. The
fixed costs of R&D and sharing the risks as
empirical study by Ernst and Omland (2003) provides
pharmaceutical companies like Novartis and Hoffmann
evidence of patent management’s influence on a LaRoche do when outsourcing parts of their company’s success. Literature on the topic of licensing
development process. Also branding can be a reason to
is especially scarce (e.g. Arora, 1996; Freeman, 1968;
focus on the inside-out process when there are core
Arora and Gambardella, 1996; Mansfield et al., 1977)
competencies for development and commercialisation
and often focused on special industries, e.g., Arora
but no brand for products in the intended market.
(1997) who analyses licensing strategies in the chemical
Ascom, an international provider of services for
industry. He points out the benefits that can be derived
telecommunications systems, integrated voice and data
from the financial advantages of making money through
communications, wireless and corded security solutions
a license, or by providing a small financial stake.
and networked revenue collection systems, joined forces
Solvay required the licensees of its ammonia-soda
with the sports utilities manufacturer Mammut in order
process to share any improvements with it, and these
to develop the lightest and most modern avalanche
improvements were in turn shared with Solvay’s other
search equipment. Ascom is using Mammut distribution
licensees (Arora, 1997, p. 394). “This helped Solvay
channels and brand in order to commercialise the
retain control, as well as enable its process to remain
competitive against rivals” (Haber, 1958, p. 89; Haber,
Wanting to set a technological standard can be a
reason for outsourcing the commercialisation of a
Long ago Haber (1958, p. 199) pointed out that
technology, or for being a supporting partner in the
licensing can be a powerful strategy in remaining a
value chain with new technology or knowledge. Cisco
market leader and in creating competitive advantage
successfully provides partners with its technology in
(for the impact of licensing on the market structure, see
order to support their technology to set a new standard.
Arora, 1997, p. 395ff.). Hounshell and Smith (1988, p.
Siemens used their incubators as market-incubators for
177) support this argument with their analysis of Du
the same reason. Spillovers as positive side effects of an
Pont’s sophisticated cellophane licensing strategy innovation that can be commercialise successfully in (guarantees 2% of the royalty on sales up to the quota
other industries as well, are a characteristic of the inside-
and 30% on sales above the quota), which implied that
it was profitable to produce more than the agreed upon
These cross-industry innovations emerge when
amount, as was indeed the case. Taylor and Silberton
companies integrate, or license technology which is
(1973) report that although most of the licensing already established in their own industry but new to agreements that they analysed had transfer of know-how
another industry. Processors which are already old
as the major objective, most involved patents as well. A
technology in the IT industry can be integrated
recent example of licensing patents to other industries in
successfully into cars or elevators after some months -
all industries in which product lifecycles are longer and
universities and research institutes (Bailetti and
the demands for speed and processor capacity are less
Callahan, 1992; Conway, 1995; Cockburn, Henderson,
than in information technology. This becomes relevant
1998; Santoro, Chakrabarti, 2001). Hitachi’s Cambridge
when a 0,13 Mikron semiconductor factory costs Laboratory (HCL), through its co-operation with approximately $2 billion and needs to be written off
Cambridge University, discovered the “Fento-Second
over a five-year period. Investment in the next Ultra-Fast Quantum Device”. This device will uses the generation processors is more valuable when a company
“wave” nature of an electron to achieve ultra-fast
like Intel can use cross-industry innovations to switching devices for both high-end telecommunication commercialise its innovation in other markets.
and ultra-fast computing in the 21st century.
The following table summarises the characteristics
Co-operation is usually characterised by a profound
and some examples of companies that choose the inside-
interaction between parties over a longer period of time
out process as a key process in following an open
(Pisano, 1990; Hagedoorn, 1993; Tao, Wu, 1997; Littler
et al., 1998; Fritsch, Lukas, 2001. The German MTU
Aero Engines and the American engine manufacturer
Characteristics: Inside-out process:
Pratt & Whitney mirror the structure of their
organisations in order to facilitate co-operation and
communication on every organisational layer. This
interaction tends to result in an intensive exchange of
knowledge and a process of mutual learning (Hamel,
1991; Lane and Lubatkin, 1998) that result in context-
specific and implicit knowledge (Birkinshaw and Fey,
2001). The benefits of co-operation are seen in an improvement in the competitive position and in a risk minimisation, but not in a reduction of development
Table 2: Characteristics and company examples of the inside-out Process
time (Kirchmann, 1994). DaimlerChrysler’s listening post in Moscow aims to establish links between the company’s central research centre in Germany, where 90% of its researchers are located, and Russian scientists
(especially in the field of algorithms and material
Companies that decide on the coupled process as a key
process, combine the outside-in process (to gain
The transfer of research into knowledge through
external knowledge) with the inside-out process (to
alliances and joint ventures is a relatively recent
bring ideas to market). In order to do both, these
phenomenon. Kogut (1988) was the first to explicitly
companies co-operate with other companies in strategic
argue that joint ventures could be motivated by an
networks. At BMW’s PAYTO, teams of three people
organisational learning imperative. He proposed that a
have 90 days to identify, explore and develop new
joint venture "(.) is used for the transfer of
projects. A recent innovative example is the new BMW
organisationally embedded knowledge which cannot be
car control mechanism –iDrive – in their 7-series which
easily blueprinted or packaged through licensing or
was developed in close co-operation with different market transactions" (Kogut, 1988, p.319). More or less industries. It combines joystick technology developed
simultaneously, Westney (1988) and Hamel (1991)
by the local game industry with easy cockpit control of
developed related perspectives on the ways in which
more than 700 functions. To co-operate successfully, a
learning can be achieved through alliances and joint
give and take of knowledge is necessary, therefore a
ventures. Since that time there has been a proliferation
coupling of the outside-in and inside-out processes is
of research into the knowledge transfer process across
key for success. In industry innovation coupling can be
alliance and joint venture boundaries (e.g. Inkpen,
a strategic option, e.g., in alliances with shared IP.
Crossan, 1996; Doz, 1996; Mowery et al., 1996). The
Co-operation refers to the joint development of common thread in the results of these studies is that the
knowledge through relationships with specific partners,
ability to re-evaluate and learn is key for success.
such as consortia of competitors (Hagedoorn, 1993;
Biotechnology is seen as a major input for
Chiesa, Manzini, 1998; Ingham, Mothe, 1998), pharmaceutical R&D. World wide pharmaceutical and suppliers and customers (von Hippel, 1988; Hakanson,
biotechnology firms have formed 400 to 500 new
Johanson, 1992), joint ventures and alliances (Kogut,
alliances every year since 1996 (Gassmann, Reepmeyer
1988; Hamel, 1991; Mowery et al., 1996) as well as
et al., 2004). Eli Lilly started the development of recombinant human insulin in co-operation with
Genentech; the resulting product Humulin became the
Characteristics: Coupled process:
first biotechnology product when launched in 1983. As
a result of intensive co-operation between strategic
alliances, it is not unusual for pharmaceutical companies
to have biotechnology holdings (Novartis owns about
40% of Chiron, Roche owns about 60% of Genentech).
The objectives of most companies that focus on the
coupling of the outside-in and the inside-out processes
are to set standards or a dominant design for their
products. A recent example can be seen in the strategic
alliance of suppliers, consumer goods companies and retailers to produce RFID chips. Because the technology is new and will be relevant in future, the members of the
Table 3: Characteristics and company examples of the coupled process
alliance, such as Metro, Unilever and Henkel, are aiming to participate in standard setting and development.
Also companies that can achieve increasing returns
by multiplying their exploitation choose the coupled
process as a core one. An example is the mobile industry in which new technologies like MMS, UMTS or polyphone ring tunes can only set a standard and lead
Besides implementing core processes to enable
to high revenues when all or most telecom companies
integration of external knowledge, to exploit ideas
such as Sony, Ericson, Siemens and Nokia implement
outside the firm or to co-operate within joined
them. The technology provider needs to work with the
innovation processes, the company needs certain
mobile industry in a strategic alliance in order to ensure
capability to apply the open innovation approach
that the new technology will be implemented in the new
effectively. For each of the core processes a different
capability is needed. The absorptive capability has to be
Alliances with complementary partners can also lead
complemented with multiplicative and relational
to valuable input in order for a co-operative innovation
process to occur. Examples are Canon and HP, which
Absorptive Capability related to the Outside-in
joined forces to develop printers and EADS, the Process. Technology knowledge generation and European version of NASA, which is forced to jointly
application processes are increasingly sophisticated,
develop satellites with various European partners. broad and expensive. Furthermore, the “ability of a firm Boeing developed the Boeing 777 with companies in
to recognise the value of new, external information,
seven different countries, with hundreds of assimilate it, and apply it to commercial ends is critical decentralised teams and managed to reduce the errors in
to its innovative capabilities” (Cohen, Levinthal 1990),
since many organisations lack the ability to listen to
Companies working in strategic alliances or joint
their external world and efficiently process the signals
ventures know that one major success factor for co-
received. The efficiency of both knowledge generation
operation is the right balance of give and take. A crucial
and application is contingent on the concept of
precondition for working in co-operative innovation
processes is the capacity to integrate foreign knowledge
Multiplicative Capability related to Inside-out
into a company’s own knowledge and technology and to
Process. The exploitation of knowledge outside the
externalise it in order to enable the partner to learn.
company is related to the company’s capability to
Success is based on a company’s ability to find and
multiply and transfer its knowledge to the outside
integrate the right partner that can provide the environment. The capability to multiply innovation by competencies and/or knowledge needed to gain a external exploitation is strongly connected to firm’s competitive advantage in the own industry.
knowledge transfer capability and the selection of
appropriate partners. Only if the company is able to codify and share its knowledge with the external entity, will the commercialisation of ideas be successful. But also the strategic selection of partners that are willing and able to multiply the new technology is an important element of the multiplicative capability of the firm.
Relational Capacity related to Coupled Process. The
important to gain advantage by means of an open
notion of “relational capacity” as a source of innovation strategy. Nike, as a sport clothes competitive advantage relates to Singh’s idea that a
manufacturer, has a low demand for tacit knowledge as
company’s value is strongly related to its capability to
well as a low interface complexity, which enables the
build and maintain relationships with partners in order
company to outsource its production to China.
to enable joint development in strategic alliances (Dyer,
Companies like Bühler (grain milling process) or MTU
Singh, 1998; Johnson, Sohi, 2003). A company can be
and Pratt & Whitney (aerodynamic design of rotors in
differentiated by the networks to which it is connected
turbines) are characterised by the high degree of tacit
and the alliances and joint ventures that it can knowledge required for their innovation, combined with undertake. Therefore, the relationships with other a high complexity of interfaces. They can therefore use companies, complementary companies and competitors
the open innovation approach to increase their
can be a firm’s major assets and a necessary innovativeness. precondition for the linked process within an open
Companies that can use positive external effects
(spillovers) by licensing their IP, as the IBM case and
Further research needs to investigate the capabilities
companies in the chemical industry (e.g., Solvay,
needed to conduct open innovation successfully more
BASF), illustrate, are predestined to determine the
inside-out process as a core process within their open innovation strategy. Table 4 summarises the characteristics identified as core to gain an advantage from an open innovation approach.
Besides these core characteristics of industries and
companies predestined to use an open innovation
Besides keeping the processes and capabilities of open
approach to increase their innovativeness, it is important
innovation in mind, the determinant perspective helps to
to take into account whether the open innovation core
process will take place in a bilateral or multilateral
Open innovation can be summarised as an approach
that enriches companies’ innovativeness, but is also
limited to companies with special products or industry
Open Innovation Closed Innovation
characteristics. The following discussion of open
Approach Approach
innovation companies’ general characteristics can help
managers to decide whether this approach can improve
their innovativeness and therefore gain them
- highly complex interfaces - low complex interfaces
A high product modularity is one required - creating positive
characteristic with which to exploit the advantages that
an open innovation approach provides. Companies in modularised types of manufacturing industries such as
Table 4: Characteristics to follow an open or closed innovation
Kone, Thyssen and Otis can increase their approach innovativeness by opening up their innovation process.
Also the multiplication of innovation in order to reach
For companies within the chemical industry, like increasing returns is an important characteristic of open
Novartis, with a low modularity, the advantages of an
innovation. Will the value gained through an innovation
be higher by increasing the number of partners using this
Industry speed is another characteristic that can technology in their products and therefore increasing the
indicate whether companies can gain an advantage from
number of potential customers for these products? The
open innovation. Industries such as companies fax machine and the MMS technology used in mobiles
providing network technology and services, e.g. Cisco,
are only some examples of the number of users defining
can gain a huge advantage by integrating external the market success and the company’s revenues.
knowledge, or through co-operative innovation Without the multiplication of these technologies through
processes with partners. On the other side of the co-operation with as many partners as possible (e.g.,
spectrum, companies with a low industry speed, like
Ericson, Sony, Motorola and Siemens), the design would
providers of building materials, e.g. YTONG, do not
never have become dominant. Technologies like
need to focus on faster innovation processes.
Bluetooth or RFID are other examples of multiplying
Also the tacit knowledge required to innovate and the
technology as a major success factor. In order to develop
complexity of interfaces are characteristics that are
a dominant design as well as to set standards, it is
One of the major contributions of the open innovation
crucial to multiply the linkage to partners with an open
approach is the perception that the locus of knowledge
innovation approach. The security industry (e.g. KABA)
and the locus of innovation need not necessarily be the
where no single access control is dominant, is therefore
highly fragmented and a negative example of where a
Although opening up the innovation process seems
closed innovation approach hinders success.
directly related to innovation success, we argue that
On the other hand, exclusivity can also be a major
there are significant benefits achieved by a serious
advantage and a prerequisite for a company’s choice of
discussion on when the open innovation approach
partner. Only when companies like BMW first include
new technologies and innovative features (like the
The future of innovation is not about outsourcing all
sourcing of the brake-and-steer-by-wire technology internal innovation activities, but about following a from the TU Vienna where it was based on a bus safety
flexible innovation strategy to allow companies to create
system), can they differentiate themselves from their
more and better innovation by combining various
competitors and maintain their market position in the
strategies, such as outsourcing ventures, reintegrating
automotive industry. They therefore need to co-operate
new businesses, scanning and integrating new
in bilateral partnerships with guaranteed exclusivity. In
technologies, commercialising patents, connecting
order to increase their innovativeness they are heavily
external sources to the internal innovation process and
dependent on focussing on including external launching new collaborations during the required period. knowledge in an outside-in process in their research.
Obviously, there is a need for future research. The
For both kinds of co-operations – bilateral or most important points can be summarised as following: multilateral – open innovation can be a successful
• a theory of the firm could be developed based on
approach for a company meeting the required
our first steps towards a framework for open
• a quantitative survey on a wider scale is needed
to evaluate the empirical significance of the presented findings which are based on qualitative
• transfer and relevance of these concepts
Our research in different areas related to the opening of
(archetypes) to SMEs, which are typically
the innovation process reveals the following
managed by openness because of their lack of
We identify three archetypes of core processes in companies following an open innovation approach: the outside-in process, inside-out process and coupled process;
This article revisits the open innovation approach from a process, capability and Allen, T.J. (1977) Managing the Flow of Technology - determinant perspective. It therefore creates a
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holistic picture of the open innovation approach
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