Academic journal article European Research Studies

Open Innovation: Organizational Challenges of a New Paradigm of Innovation Management

Academic journal article European Research Studies

Open Innovation: Organizational Challenges of a New Paradigm of Innovation Management

Article excerpt

1. Statement of the Problem

Open innovation is a term coined by Professor Henry Chesbrough in his book, Open Innovation: The new imperative for creating and profiting from technology (2003, HBS press) that relates with the management of innovation processes. Open innovation is a paradigm that assumes that valuable ideas can come from inside or out of the company and can go to the market from inside or outside the company as well. This approach places external ideas and external paths to market on the same level of importance as that reserved for internal ideas and paths to market during the Closed Innovation era. At the heart of the open paradigm is the assumption that enterprises cannot conduct all R&D activities by themselves, but instead have to capitalize on external knowledge which can be licensed or bought (Gassmann, 2006). At the same time, open innovation assumes that internal ideas and knowledge can also be taken to market through external channels, outside the current business of the firm, to generate additional value (Chesbrough et al., 2006).

These movements of knowledge and ideas outside-in and inside-out, referring in the innovation literature as technology exploration--innovation activities to capture and benefit form external sources of knowledge to enhance current technological developments) and technology exploitation--innovation activities to leverage existing technological capabilities outside the boundaries of the organization--(Rothaermel y Deeds, 2004; Lichtenthaler, 2008) present two main general organizational problems for firms (3) named coordination and incentive problems. In this paper we analyze and describe several problems related with coordination and incentives.

2. Organizational Challenges of Open Innovation: Coordination and Incentives

Organizational design encompasses two key elements; one is the design of coordination mechanisms between activities and tasks and the other is the design of an incentives system that serves as reward system and to avoid opportunistic behaviour (Lopez et al, 2010). In this sense and using this essential framework of organizational design we apply it to analyze different problems that raise the management of open innovation related with coordination and incentives.

2.1 Coordination Problems

Coordination implies not only the design of mechanisms of interrelation between activities/firms/organizations for innovation (coordination post-contractual) but also the searching and selection of ideas, knowledge/collaborators for carry out the innovation activities (coordination pre-contractual). In this sense when firms implement an open system to innovation they face several problems. Some of these problems related with the coordination tasks are, the searching valuable ideas and knowledge outside, networking and divergence.

The problem of searching valuable ideas outside

One of the first coordination problems that face open innovation is the searching of external sources of ideas and knowledge to enhance current technological developments (coordination pre-contractual). This problem arise searching or information costs (of competitive intelligence). The importance of theses costs are very variable depending on the type and nature of innovation process. For example, these costs can be very high for a very complex innovation process and less costless for a more simple innovation development. Also, the searching costs include not only the production of information about suppliers but the own needs of the firm which not always are known clearly.

The problem of networking

When open innovation is operationalized through the collaboration of multiple partners the coordination tasks became more complex because of the increasing number of participants. Greenstein (1996) points out that openness increases costs because it requires the cooperation of multiple suppliers and /or complementors. …

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