Open Innovation Modeling Using Game Theory

By Asllani, Arben; Lari, Alireza | Academy of Information and Management Sciences Journal, July 2011 | Go to article overview

Open Innovation Modeling Using Game Theory


Asllani, Arben, Lari, Alireza, Academy of Information and Management Sciences Journal


INTRODUCTION

Open innovation approach is a paradigm for sharing the new technologies resulted from research and development by collaborators and partners. This approach treats research and development as an open system and assumes that firms can and should use both external and internal ideas as they advance their technology (Chesbrough, 2003a). The shift from closed to open innovation is a result of many changes occurring in the today's business world. These changes include the increasing availability and mobility of skilled workers, the growth of the venture capital market, the external options for ideas sitting on the shelf, and the increasing capability of external suppliers (Chesbrough 2003b).

From a risk perspective, the paradigm of closed innovation assumes that successful innovation requires control. Traditionally, companies would protect their own ideas during all stages of the new product development cycle: research, development, production, as well as marketing, distribution, servicing, financing, and supporting. The closed innovation approach leads companies to create their own research and development departments to be able to control their innovation process. Google is an example of understanding the risk-averse nature of closed innovation. Google does not share details about its search algorithms, "which is the single most important body of code at the company" (Gralla, 2010). Simultaneously, Google understands the significance of open innovation. Jonathan Rosenberg, Google's Senior Vice President for Product Management noted in a recent memo about "the meaning of 'open' as it relates to the Internet:

Open systems win. This is counter-intuitive to the traditionally trained MBA who is taught to generate a sustainable competitive advantage by creating a closed system, making it popular, and then milking it through the product life cycle. The conventional wisdom goes that companies should lock in customers to lock out competitors ... A well-managed closed system can deliver plenty of profits--but eventually innovation in a closed system tends towards being incremental at best ... Complacency is the hallmark of any closed system (Rosenberg, 2009).

On the other side, anxiety is the hallmark of any open system. In an attempt to gain advantages of new technologies at lowest possible cost and shortest possible time, firms which implement an open innovation approach have to take additional risks. There is always less control and more uncertainty when scientific community outside an organization becomes involved in the research and development of the organization's potential next technology. Open innovation approach is no longer designed around self sufficient "islands" to produce all the components of a final product. Instead, open innovation firms allow other firms to start producing some of the components that are required in their final product. Open Innovation approach is a development process that is highly open to ideas from many players and at all stages (Orszag and Holdren, 2009).

In his book about open innovation Henry Chesbrough (2003a, p. 13) compares the process of developing new technologies to a poker game. He quotes the phone interview with James McGroddy, an IBM research director:

   When you're targeting your technology to your current business,
   it's like a chess game. You know the pieces; you know what they can
   and cannot do. You know what your competition is going to do, and
   you know what your customer needs from you in order to win the
   game. You can think out many moves in advance, and in fact, you
   have to, if you're going to win. In a new market, you have to plan
   your technology entirely differently. You're not playing chess
   anymore; now you're playing poker. You don't know all the
   information in advance. Instead, you have to decide whether to
   spend additional money to stay in the game to see the next card. 

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Open Innovation Modeling Using Game Theory
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.