The open innovation model highlights the importance of using a wide range of sources of knowledge for a company’s innovation activities, including customers, collaborative firms, rivalsand academics. Research stresses the significance of balancing the use of internal and externalknowledge in R&D-processes, because critical knowledge can come from different sources.Commercial companies have to invest in basic research (exploration) to understand externalinformation better, and exploit this knowledge better in their business (exploitation). This ability iscalled the company’s absorptive capacity. Today’s companies need this capacity because there areseveral tied factors which erode the viability of the old closed innovation model.For many years now, the dominant business approach employed by the commercial softwareindustry has been proprietary software. Now this traditional approach is changing and a new way todevelop software is appearing. Open source development is the most prominent example of usingexternal sources in R&D. Companies are encouraging this new way of development more and more,when simultaneously building profitable business models around it. The study introduces twocompanies (Nokia, IBM), which use the open source in their business. Short design-build-testcycles, low costs of new releases, and a great number of ideas are common motives that pushcommercial companies near to open source communities. There are also some market factors,including technological convergence, growing product complexity, and interoperability of thesoftware, which push companies to consider the open innovation model and the open source as apart of this new approach.Open source development is also an interesting territory from the business point of view. Building acompetitive advantage around open source business is very challenging, but possible. According toventure capitalist, the most famous model is the open architecture (standards) model, where theopen source is used to build a mature software platform, and in-house development to buildproprietary parts to new products (IBM). But this is not the only possible option. Nokia hasdeveloped a whole new product (770 Internet Tablet) for new markets, which uses the Linuxoperating system. 770 is based mainly on open source software and represents the original idea of open source development.
: Open innovation, innovation management, open source