Abstract
Open innovation in enterprises has already obtained its acceptance at all levels of the business industry for adding worth to the business. The value could be in the form of economic expanse or enhancement of knowledge leading to a sustained financial base. Open innovation adopts various strategies to accomplish the task for enhancing the value gain. Varying by size, nature, pattern, or characteristics of the firm, various strategies are being adopted by enterprises. Though largely known to be familiar in corporate business houses, in recent years, open innovation is also becoming increasingly recognizable in small and medium enterprises (SMEs), and the trend is rapidly escalating. However, despite the potency of open innovation strategies, most of the enterprises are yet to find a sustained business model, especially for the SMEs working at the outmost periphery of that value chain. This chapter is trying to formulate a business model incorporating partnership approach from academia, research houses, intermediaries, practitioners, and other stakeholders.
TopIntroduction
Open innovation has emerged as a new paradigm where firms commercialize external and internal ideas, knowledge, expertise and or technologies and use both external and internal resources. In an open innovation process, models can be launched by taking ideas from internal or external sources and new technology can enter at various stages of the development process. Models can also go to the market in many ways, such as out-licensing of intellectual property or a spin-off venture in addition to traditional sales channels. Usually, open innovation combines internal and external ideas into architectures and systems whose requirements are typically defined by a business model. Eventually, the business model utilizes both external and internal ideas to generate business value, while defining internal mechanisms to claim some portion of that value (Chesbrough, 2003a: xxiv; West, Vanhaverbeke & Chesbrough, 2006). This notion of open innovation, was initially proposed by Chesbrough (2003a; b) and has rapidly gained the interest of both researchers and practitioners, illustrated by a number of special issue publications, dedicated conferences and a fast growing body of literature (Fredberg, Elmquist & Ollila, 2008). This new paradigm inspires enterprises to find the most appropriate business model to commercialize novel products or services, regardless of the existence of any model within the enterprise or must be sought externally (De Jong, Vanhaverbeke, Kalvet & Chesbrough, 2008).
The initiative of open innovation assumes that corporate innovation activities are more like an open system than the conventional (20thcentury) vertically integrated model. It was developed based on the observation of a handful of (large) innovative companies and their deviations from traditional exercise. In some respects, the open innovation model can be seen as a call to a return to the late 19th and early 20th century model of innovation, with a rich, diverse market for technology and small, external oriented R&D labs. Research on obtaining innovations includes searching, enabling, filtering, and attaining each category with its own specific set of mechanisms and conditions. Incorporating innovations has been mostly studied from an absorptive capacity perspective, with less attention given to the impact of competencies, society and culture (including not-invented-here). Commercializing innovations puts the most emphasis on how external innovations create value rather than how firms capture value from those innovations. Therefore, the interaction phase considers both feedback for the linear process and reciprocal innovation processes such as co-creation, network collaboration and community innovation (West and Bogers, 2014).
Depending on the demand and reality, open innovation is based on various principles. Among them, the prime ideology could be the necessity to tap external knowledge to enrich the knowledge of the internal experts; the second could be the essentiality of external R&D for an enterprise to generate significant value; the next could be the trend of research that may not be completely dependent on internal resources and profit would be the main aim of entrepreneurship, irrespective of the ideas; and the important one is the acquisition of strategies that are built on a sustained business model, before reaching to the market. (Chesbrough, 2003b; 2003c; De Jong, Vanhaverbeke, Kalvet & Chesbrough, 2008). Apart from other functions, the business model creates value within the value chain and captures a part of it for the focal firm (Chesbrough, 2006b).
The innovative conception of open innovation identified two modes of knowledge flow: the inbound (or “inside-out”) and the outbound (or “outside-in”) flow. However, the outbound mode is not directly related to user innovation, and so is not discussed further in this study. The inbound mode of open innovation involves the exploitation of purposive inflows of knowledge to accelerate internal innovation. Such a model combines externally and internally developed technologies to produce an offering that is commercialized by the focal company. Hence, key steps of this process include searching for external innovations, selecting and acquiring suitable innovations, integrating them into the firm’s R&D efforts, and bringing them to market (West and Bogers, 2014; Chesbrough, Vanhaverbeke and West, (Eds.). 2014).
Key Terms in this Chapter
Intellectual Property Management (IPM): It is the way of managing intellectual property like; patent renewals, integration, and market assessment either manually or using any automated system by the enterprise itself or by an intermediary. IPM involves IP development (planning and implementation of IP in a conducive environment through proper motivation); Market watch (seeking for opportunities by keeping track of other competitors and infringers); IP exchange (acquiring and selling of spin-offs and or joint R&D); and IPR protection (providing legal protection surviving trade secrets and other disciplinary measures).
Open Innovation Business Model: A form of business model involving inbound and outbound ideas defying boundaries of the companies to gain knowledge, expertise and value intended to be beneficial for the entrepreneurships.
Open Innovation Intermediaries: These are companies or agencies that help other companies implement various facets of open innovation, acting as an enabler or guide to explore the market for ideas without getting in over their heads. There are different kinds of open innovation intermediaries, with some acting as agents, thus representing one side of a transaction, while others take on the role of knowledge brokers or market makers.
Spin-Offs: They may refer to Corporate spin-off, a type of corporate transaction forming a new company or entity; Government spin-off, civilian goods which are the result of military or governmental research; Research spin-off, a company founded on the findings of a member or by members of a research group at a university; Spin-off (media), the process of deriving new radio programs, television programs, video games, or novels from already existing ones; or Spin-off product, a new product which uses the brand name of another product which already has a well-developed image. In case of a spin-off, a parent company distributes shares of a subsidiary to the parent company's shareholders. The shares are usually distributed on a pro rata basis and the subsidiary becomes a separate company. State law and the rules of the stock exchanges determine whether a company must seek shareholder approval for a spin-off.
Open Innovation Strategy: It could be treated as a mandate or a set of clear vision or a well-defined process incorporating people (employees, clients, suppliers, other stakeholders) in terms of new ways of working, incentives, fading distinction between work and (social) networks; operations ((e-)processes and (e-)infrastructure) in terms of web access, communities, facilitation of knowledge and creativity sharing; policy (written and unwritten rules) regarding intellectual property, privacy, outside communication; and culture (openness, learning, networking) to create the right (and safe) atmosphere.