Open Innovation: Exploring Practices, Challenges, and Evolution

This report provides a comprehensive overview of open innovation, examining its emergence as a key approach to innovation management. It delves into the definition proposed by Chesbrough and discusses the debate of whether open innovation is a fad or a lasting phenomenon. The report explor...Read More

Running Head: OPEN INNOVATION
OPEN INNOVATION
Name of the Student
Name of the University
Author Note

1OPEN INNOVATION
Table of Contents
Introduction................................................................................................................................2
Literature Review.......................................................................................................................3
Open Innovation Practice.......................................................................................................3
Creativity of Members...........................................................................................................6
Categories of the Open Innovation Orientation.....................................................................7
Measurement of Open Innovation..........................................................................................9
Challenges in Engaging with Open Innovation...................................................................10
Evolving Open Innovation...................................................................................................11
Conclusion................................................................................................................................12
Reference..................................................................................................................................14

2OPEN INNOVATION
Introduction
Open innovation is the latest approach that overwhelmingly challenged the traditional
approach to the management of innovation and afterwards, it has emerged as the hottest
topics in the management science. The open innovation concept was firstly proposed in 2003
by the Chesbrough. This proposal had heavy impact on the academic and practical business.
Chesbrough stated that open innovation is the paradigm, which makes the assumption that the
entities should use internal and the external ideas and external and the internal paths to the
market, as entities looks for advancement of their technology (Chesbrough 2017).
Earlier companies used to rely on their internal resources, while conducting their
R&D activities and characteristically only the company, which had sufficient level of internal
resources, could be able to receive the revenue with the help of their own innovation.
However, currently, there are various leading organizations that are facing intense
competition from the newly emerged organizations that have become successful in the
commercialization of discoveries made by the others (Chesbrough and Brunswicker 2014).
The definition given by Chesbrough on open innovation is broader and quite
ambiguous and he himself not provided specific and clear example of the open innovation
practice. Hence, it is interpreted by the practitioners in different ways. Some of the
researchers believe that the open innovation is not the new approach. Researchers have both
praised as well as severely criticized this approach. Some researchers are in thought that it
will become dominant approach in the management of company, particularly in the industries
of technology. Others believes that interest in the approach of open innovation will die out
soon. Serious concerns have been raised in regard to lack of the empirical set of evidence
regarding open innovation benefits. Hence, this paper aims to discuss “whether open
innovation is a fad or phenomenon”.

3OPEN INNOVATION
Literature Review
Open Innovation Practice
It has been decade since open innovation concept was introduced first in the literature
of management and began practicing in the firms. Although, it has provided the new insights
and the beneficial directions in innovation management beyond the boundaries of entity in
the areas of the latest processes, products and technologies, the practitioners and researchers
both still faces some of the challenges, which requires to be addressed. During past, in the
literature of management, there were various techniques, approaches and trends that have
been put forward, however, today people listens about them anymore (Lopes and de Carvalho
2018). Hence, it can aptly ask that whether open innovation is fact or fad?
The term and concept of open innovation emerged in year 2003 and it has received
significant attention. Open innovation is adopted widely, especially in the high-technology
manufacturing sectors. The original definition of the open innovation by the Chesbrough is
“purposive uses of inflows and outflows of the knowledge for accelerating innovation in
one’s marker and expanding uses of the internal knowledge respectively, in the external
market. It has been said in the previous studies that open innovation depends on the business
model. The model of business is sources of value for the customers and companies focuses on
importance of the needs of customers (West and Bogers 2017). Hence, in order to activate the
model of business, firms try to find out the resources outside. In business model concept,
from customer’s need perspective, it is significant to understand that what kind of the values
companies should provide or for what purposes products should help the customers. The
companies try to identify the needs of customers and make an attempt for taking benefit of
the external technologies. Hence, there can be relationship between needs of customers and
utilization of the resources outside (von Briel and Recker 2017).

4OPEN INNOVATION
Open innovation is classified mainly into two different types. The first type is
“inbound open innovation” and second type is “outbound open innovation”. The inbound
open innovation through opening process of innovation in R&D can be explained as purpose
for acquiring various external resources. The outbound open innovation is defined as, by
placing specific projects and assets outside, it will be possible for saving money and time that
are taken for one’s own projects and get the opportunities for nurturing the relationship with
the external parties (Venturini and Verbano 2017). There is various benefit of open
innovation in process of new development of the product. The uses of external technology
help companies for reducing time as well as cost. When open innovation is adopted, then
companies makes uses of the technologies from external market. The companies will be able
to produce new products with the different available resources outside. The firms can utilize
different technologies or ideas and they can develop new unique services or products and can
easily differentiate with the other organizations (Varma et al. 2016).

5OPEN INNOVATION
Figure 1: Types of Open Innovation Practices
Henry Chesbrough and Sabine Brunswicker in 2013, has teamed up for addressing
that whether the open innovation is truly continuing phenomenon or fad. They conducted first
large survey of adoption of the open innovation among the big entities. This study draws
upon the survey dataset of the one hundred twenty-five responses from the senior executives
at the headquarters of larger and the listed companies in the US and Europe. Outcome of
survey supports trends towards the open innovation. There were only twenty-two percent of
executives, who specified that they don’t practice open innovation and there were seventy-
eight percent of the executives, who participated in the study, reported that they practice open
innovation (Vanhaverbeke, Cheng and Chesbrough 2017).
Since, the phenomenon emerged in 2003, the companies started experimenting with
the variety of practices for making uses of outflows and the inflows of knowledge in

6OPEN INNOVATION
innovation. This includes traditional practices, for instance alliance of R&D and more
recently evolving practices, for instance crowdsourcing, under which companies involve
large number of the external sources, consisting of non-experts through open call to the world
for solving the problems of innovation. For better understanding this, the study of
Chesbrough evaluates significance of ten different practices of inbound open innovation,
under which companies tap into the external knowledge for enriching their internal
capabilities (Torkkeli and Mention 2015). This study reports that the ideas of co-creation for
the services or products with the customers is top-rated inbound practices in significance. The
second and third was informal networking and the university research grants. The lowest
rated was crowdsourcing, which is key practice of the open innovation. Co-creation helps in
allowing to increase their ability for meeting the expectation of individual customer and
reducing time to market (Teplov, Albats and Podmetina 2019).
Creativity of Members
In open innovation context, there are some research studies that have mentioned
creativity in company, however, creativity in company highlights performance of the new
development of product. Creativity is explained as the condition in which organizational
members, while communicating their intentions with the others tries to achieving values and
purposes that is shared in company. In particular, it is defined as ability to generate the new
one, which did not previously exist. Creativity helps each member to develop inventions or
the new ideas (Tekic and Willoughby 2019). For getting ideas from the new angle in order to
develop creativity in company, it becomes important for facilitating environment to create the
new combination such as with the help of interacting with the research departments of
company or outside sources, members get the new combination. Meeting with the researchers
or attending international or domestic conferences plays vital role in making new
combination. Creativity in the members is significant in generating the new ideas in process

7OPEN INNOVATION
of developing new products or services. For generating new set of ideas, there should be
effective environment, which stimulates new combination (Rupo and Abbate 2016).
Open innovation is relatively a new concept that has emerged approx. ten years ago. It
has able to receive significant attention with leading organizations in US and the countries
like Europe and the other regions are already reporting success with it. It is since then, the
innovating companies have shifted from the traditional model of R&D, which was centered
on the brick and mortar infrastructures of R&D towards open approaches towards turning the
knowledge into value (Podmetina et al. 2016). It makes purposive uses of outflows and the
inflows of knowledge for accelerating the innovation in one’s markets as well as expanding
internal knowledge uses in the external markets. In today’s environment, there are various
success stories of the individual organizations, which have adopted the open innovation.
There are various innovating firms such as Eli Lily and IBM, who are the largest players,
which have shifted from R&D to the connect and the development for connecting know-how
and ideas all across the external and internal sources. Their shifting from “R&D” to “C&D”
has helped in reporting success by generating billions of dollars of the revenue. Open
innovation is defined differently by the different people. There are various evidences that
suggests strongly that the open innovation is not fad and it will not go away (Podmetina et al.
2015).
Categories of the Open Innovation Orientation
Supply Chain Oriented
The supply chain oriented open innovation includes supplier programs, supplier
awards, direct customer co-creation and others. It focuses on the knowledge flows in between
the suppliers and their customers as well as between collaborating or complementary
suppliers in the similar tier or across the tier in the given supply chain with the objective to

8OPEN INNOVATION
enhance innovation in the final output. It focusses is on development and implementation of
those non peculiar and peculiar mechanism, which will ensure the appropriate integration,
collaboration and coordination in the supply chain, so that intended results of innovation can
be reached out (Martinez 2014).
Technology Oriented
The technology-oriented open innovation includes university grants, developer
communities, contracted services or outsourced R&D. In increasing process of the open
innovation, different organizations find that the integrated set of the project management
practices for the coordination and control of project is crucial for the outcomes of technology
development. The development of technology is particular type of the exploratory project that
serves as foundation for the subsequent new development of project (Lukić 2014). The
technology development of projects includes the basic and fundamental research and
initiatives of technology platform, which are indeed critical for the organizations that are
technology-oriented. For instance, various manufacturing firms of Sweden are currently
exploring the development of inter-organizational technology in the areas such as electric
propulsion, Nano-materials or automated machines together with the organizations or with
the research institutions or universities by trying for creating the future value in order to
enable next generation innovation for the customers (Mahdad et al. 2019). Most of the
organizations is having limited resources as well as competencies on the pure internal basis,
hence, interfirm collaboration or the collaboration with the research institutes or universities
is potential solution. The open innovation concept in its core includes that activities of
technology development should be conducted in the partnership all across the boundaries of
organizations. These projects are referred as the projects of open technology development
(Lopes and de Carvalho 2018).

9OPEN INNOVATION
Ecosystem-Wide Oriented
Ecosystem-wide oriented open innovation includes third party developers and the
service providers, trusted partner network and complementary network partners. Earlier the
development of new products was haphazard affair that was based on combination of the
good instinct and past performance. The line of actions was consisting of specifying offering
then assembling team, design, build and then manufacture. However, in current rapidly
changing business environment, the management of innovation effectively has become a
necessity. Further, the long-term sustainability of company is determined by its ability for
addressing constantly changing economic environment and the market (Kuwashima 2019).
The open innovative ecosystem aims to strengthen local network between startups,
universities, local creative scenes and organizations. The ecosystem of innovation is used for
describing large and the diverse nature of the participants as well as required resources for the
innovation. Its main character being explored is the self-organizing property of the innovation
ecosystem, compared to mean for the co-creation and the market innovation of the innovation
(Hossain and Anees-ur-Rehman 2016).
Measurement of Open Innovation
Although it’s not easy anticipating results of the open innovation, it is possible for
measuring process itself. This is vital because of two different reasons. The first reason is that
it is vital for evaluating the ideas, during processes for following up on those which emerge
as possible solutions to problem. The second reason is that the metric of evaluation helps in
providing insights on how much strong is the participation and the direction into which it is
evolving. It allows to take necessary steps, for instance more intervention. The framework of
evaluation helps in setting the goals and elaborate more before starting the process and
keeping track during process. It shows the resources required for creating broader

10OPEN INNOVATION
environment of open innovation (Hong, Zhao and Stanley Snell, 2019). Further, there are two
metrics used for measuring open innovation, which are as follows:
 Qualitative Metrics: It includes quality of ideas, quality of dialogue, diversity of
participation and representation.
 Quantitative Metrics: It includes number of participation versus number of ideas,
number of votes, number of comments and number and frequency of the visits of
websites.
Challenges in Engaging with Open Innovation
Despite of all the potential benefits, there are ranges of challenges as well as
constraints with the open innovation, which limits the companies. It ranges from difficulties
in the identification of new sources of innovation, managing external relationship with the
sources of innovation, internal change of organization, protection of the internal critical
know-how, effectiveness of the protection of intellectual property and avoidance of the
already existing or external knowledge. Making of internal change of organization is
considered to be the most difficult one (Davari, Emami and Seyedi 2019).
Further, it’s not easy implementing open innovation. Open innovation is systematic
systemic shift, which requires re-thinking of various aspects of the business for utilizing it in
effective way. The research and development cannot alone fully implement the open
innovation. The other parts of company, in business development, in marketing and in the
supporting functions such as human resource management should get on board for it in order
to work in effective manner. Formal documentation of the processes of open innovation
helps, however growing the culture, which supports the open innovation is considered at least
as vital for its effectiveness (Chesbrough and Brunswicker 2014).

11OPEN INNOVATION
Open innovation has convincingly argued that the companies are dependent heavily
on adoption and development of open innovation in the processes and products for gaining
the competitive advantages and achieving the return that is above average. Today people are
living in the increasingly interdependent environment of globalized business. In this almost
no single business organization, neither with the vast resources can afford staying within its
boundaries of organization and develop all aims of the R&D without the collaboration with
the external sources (Dąbrowska and Fiegenbaum 2017). Although open innovation sounds
appealing in the theory, however, there is critical question that whether organization can hold
this approach by the help of allocation of their scarce time, energy and resources, particularly
the way they work with the other potential companies by sharing valuable intellectual
properties. If the companies perceive open innovation as fashion in the management, which
will fade away with the time, then it will likely to stick to the conventional strategic ways as
well as tools in the development competitive technologies and products. However, the current
environment of business and the practical competitive realities of the business organization
has taught that the organizations no longer afford for relying solely on its own innovation
sources (Brunswicker et al. 2016).
Evolving Open Innovation
As said by Woody Allen, “if not falling every now and again then it is a sign that one
is doing something very innovative”. Open innovation is relatively a new concept. The reason
of it to be increasingly practiced and adopted in both the smaller as well as larger companies,
in spite of the challenges in implementation of it, suggests that the companies are still
learning the way of getting good outcomes with the open innovation. Further, limitations for
the open innovation are hard to overcome. It is because of this companies are finding their
way to improve their existing practices for getting advantage from the open innovation.
Moreover, with increased digitalization, trends towards the sinking cost and big data for the

12OPEN INNOVATION
storage of data, distribution and analysis, the open innovation is now becoming even more
distributed phenomenon (Băjenescu 2019). The greater digital and the decentralized
innovation ecosystem are now evolving, under which varied set of the actors for co-creating
the novel solutions, which solve the complex issues and the large challenges of society in
areas of health and wellbeing. Hence, open innovation is emerging from the company-level
oriented concepts to distributed phenomenon in which the individuals are empowered,
boundaries of organization blur and the digital technologies creates new playing field for the
innovation (Annarelli, Battistella and Nonino 2017).
Figure 2: Open Innovation Adoption Across Different Industries
Conclusion
Therefore, the paper concludes that the open innovation is not passing fad. The
maximum number of organizations, who reported practicing open innovation. There are no
any case of organization that have rejected it and those who are practicing the open
innovation reports that they are practicing it in more intense way today, in comparison to past
three years. It has been analyzed that the open innovation is not a phenomenon because most

13OPEN INNOVATION
of the organizations, which have worked upon it have showed better results. The open
innovation is reality of current generation of business. The term given by Chesbrough has
simply explained what is really happening in the current business environment, as he has not
invented it. It is the reality that organizations are accepting as well as implementing it at the
snail pace. It has been analyzed that open innovation goes beyond converse paradigm to the
traditional crowdsourcing, innovation or management of the internal resources towards
innovation. Hence, it can be said from the research that the open innovation is not fad.

14OPEN INNOVATION
Reference
Annarelli, A., Battistella, C. and Nonino, F., 2017. Open Innovation practices for Product
Service System as a business model innovation. In ISPIM Conference Proceedings (pp. 1-
14). The International Society for Professional Innovation Management (ISPIM).
Băjenescu, T.M., 2019. Open Innovation in Technology Upgrading. FAIMA Business &
Management Journal, 7(2), pp.15-30.
Brunswicker, S., Bagherzadeh, M., Lamb, A., Narsalay, R. and Jing, Y., 2016. Managing
open innovation projects with impact. Whitepaper Series.
Chesbrough, H. and Brunswicker, S., 2014. A fad or a phenomenon?: The adoption of open
innovation practices in large firms. Research-Technology Management, 57(2), pp.16-25.
Chesbrough, H., 2017. The future of open innovation: The future of open innovation is more
extensive, more collaborative, and more engaged with a wider variety of
participants. Research-Technology Management, 60(1), pp.35-38.
Dąbrowska, J. and Fiegenbaum, I., 2017. Open Innovation and Culture: A System Dynamics
Model. In Open Innovation: Unveiling the Power of the Human Element (pp. 29-55).
Davari, A., Emami, A. and Seyedi, S., 2019. Investigating the Effect of Inbound and
Outbound Open Innovation on Discovery and Exploiting. Open Innovation and
Entrepreneurship: Impetus of Growth and Competitive Advantages, p.51.
Hong, J.F., Zhao, X. and Stanley Snell, R., 2019. Collaborative-based HRM practices and
open innovation: a conceptual review. The International Journal of Human Resource
Management, 30(1), pp.31-62.
Hossain, M. and Anees-ur-Rehman, M., 2016. Open innovation: An analysis of twelve years
of research. Strategic Outsourcing: An International Journal.

15OPEN INNOVATION
Kuwashima, K., 2019. Classification for measuring the impact of open innovation on
practice. Annals of Business Administrative Science, p.0190314a.
Lopes, A.P.V.B.V. and de Carvalho, M.M., 2018. Evolution of the open innovation
paradigm: Towards a contingent conceptual model. Technological Forecasting and Social
Change, 132, pp.284-298.
Lukić, J., 2014. Role of big data in open innovation practices: The case of Serbian ICT
industry. Ekonomika preduzeća, 62(5-6), pp.294-304.
Mahdad, M., De Marco, C.E., Piccaluga, A. and Di Minin, A., 2019. Harnessing adaptive
capacity to close the pandora’s box of open innovation. Industry and Innovation, pp.1-21.
Martinez, M.G., 2014. Co‐creation of value by open innovation: Unlocking new sources of
competitive advantage. Agribusiness, 30(2), pp.132-147.
Podmetina, D., Hafkesbrink, J., Teplov, R., Dabrowska, J. and Petraite, M., 2015. What skills
and competences are required to implement open innovation?. In ISPIM Conference
Proceedings (p. 1). The International Society for Professional Innovation Management
(ISPIM).
Podmetina, D., Teplov, R., Albats, E. and Dabrowska, J., 2016. Open Innovation: Do you
really do what you think you do?. In ISPIM Conference Proceedings (p. 1). The International
Society for Professional Innovation Management (ISPIM).
Rupo, D. and Abbate, T., 2016. The strategic link between intellectual capital and open
innovation: A conceptual framework. Contemporary issues in economics, business and
management, pp.271-280.
Tekic, A. and Willoughby, K., 2019. Co-creation–child, sibling or adopted cousin of open
innovation?. Innovation, 21(2), pp.274-297.

16OPEN INNOVATION
Teplov, R., Albats, E. and Podmetina, D., 2019. What does open innovation mean? Business
versus academic perceptions. International Journal of Innovation Management, 23(01),
p.1950002.
Torkkeli, M. and Mention, A.L., 2015. Open innovation & the emergence of a new field:
Empowering future generations. Journal of Innovation Management, 3(2), pp.5-8.
Vanhaverbeke, W., Cheng, J. and Chesbrough, H., 2017. A profile of Open Innovation
managers in multinational companies. Exnovate. org.
Varma, A., Jukic, N., Pestek, A., Shultz, C.J. and Nestorov, S., 2016. Airbnb: Exciting
innovation or passing fad?. Tourism Management Perspectives, 20, pp.228-237.
Venturini, K. and Verbano, C., 2017. Open innovation in the public sector: Resources and
performance of research-based spin-offs. Business Proc. Manag. Journal, 23(6), pp.1337-
1358.
von Briel, F. and Recker, J.C., 2017. Lessons from a failed implementation of an online open
innovation community in an innovative organization. MIS quarterly executive, 16(1), pp.35-
46.
West, J. and Bogers, M., 2017. Open innovation: current status and research
opportunities. Innovation, 19(1), pp.43-50.