Open-innovation

Open innovation is a term promoted by Henry Chesbrough, adjunct professor and faculty director of the Center for Open Innovation at the Haas School of Business at the University of California, in a book of the same name, though the idea and discussion about some consequences (especially the interfirm cooperation in R&D) date as far back as the 1960s. The term was originally referred to 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". More recently, it is defined as "a distributed innovation process based on purposively managed knowledge flows across organizational boundaries, using pecuniary and non-pecuniary mechanisms in line with the organization's business model". The boundaries between a firm and its environment have become more permeable; innovations can easily transfer inward and outward.

The concept is also related to user innovation, cumulative innovation, know-how trading, mass innovation, crowdsourced innovation and distributed innovation.

The central idea behind open innovation is that, in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (i.e. patents) from other companies. In addition, internal inventions not being used in a firm's business should be taken outside the company (e.g. through licensing, joint ventures or spin-offs).

The open innovation paradigm can be interpreted to go beyond just using external sources of innovation such as customers, rival companies, and academic institutions, and can be as much a change in the use, management, and employment of intellectual property as it is in the technical and research driven generation of intellectual property. In this sense, it is understood as the systematic encouragement and exploration of a wide range of internal and external sources for innovative opportunities, the integration of this exploration with firm capabilities and resources, and the exploitation of these opportunities through multiple channels.

Open innovation offers several benefits to companies operating on a program of global collaboration:

Implementing a model of open innovation is naturally associated with a number of risks and challenges, including:

In the UK the Knowledge Transfer Partnerships (KTP) is a funding mechanism encouraging the partnership between a firm and a knowledge-based partner. A KTP is a collaboration program between a knowledge-based partner (i.e. a research institution), a company partner and one or more associates (i.e. recently qualified persons such as graduates). KTP initiatives aim to deliver significant improvement in business partners’ profitability as a direct result of the partnership through enhanced quality and operations, increased sales and access to new markets. At the end of their KTP project, the three actors involved have to prepare a final report that describes KTP initiative supported the achievement of the project’s innovation goals.

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