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Profiting from External Innovation: A Review of Research on Open Innovation

Profiting from External Innovation: A Review of Research on Open Innovation

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02/03/2013

 
 
Profiting from External Innovation:A Review of Research on Open Innovation
Joel West
KGI, The Claremont Colleges535 Watson DriveClaremont, CA 91711 USATel.: +1-909-293-8550 joel@openinnovation.net
Marcel Bogers
University of Southern Denmark Mads Clausen Institute for Product InnovationAlsion 2, 6400 Sønderborg, Denmark Tel.: +45 6550 1284E-mail: bogers@mci.sdu.dk 
September 13, 2011
Introduction..................................................................................................................................................1
 
The Domain of Open Innovation Research................................................................................................2
 
Methods........................................................................................................................................................4
 
Overview.......................................................................................................................................................6
 
Obtaining External Innovations................................................................................................................10
 
Integrating External Innovations...............................................................................................................14
 
Commercializing External Innovations....................................................................................................18
 
Feedback and Reciprocal Mechanisms.....................................................................................................21
 
Discussion...................................................................................................................................................25
 
References..................................................................................................................................................32
 
Footnotes.....................................................................................................................................................42
 
Tables and Figures.....................................................................................................................................43
 
Suggested Citation:
West, Joel and Bogers, Marcel, “Profiting from ExternalInnovation: A Review of Research on Open Innovation,” presented at the9th International Open and User Innovation Workshop, Vienna, Austria,revised September 13, 2011, http://ssrn.com/abstract=1949520
  Abstract:
In 2003, Chesbrough coined the term “open innovation” as a new paradigm for industrial innovation. In this paper, we review and synthesize the growing literature that followsChesbrough by studying the commercialization of external innovations — one of the key openinnovation practices. This paper provides a comprehensive overview and process model of openinnovation. We classify prior studies in open innovation according to a four-phase process modelfor inbound open innovation that includes obtaining, integrating and commercializing externalinnovation, as well as work on nonreciprocal innovation flows. Finally we identify threeopportunities for future research, including greater focus on business models, examination of thelater and reciprocal phases of the commercialization process, and research into the limits andmoderators of open innovation.
 Acknowledgements:
We thank Linus Dahlander, Christina Raasch and Jonathan Sims for their helpful suggestions. The usual disclaimers apply.
 
 
- 1 -
P
ROFITING FROM
E
XTERNAL
I
NNOVATION
:A R 
EVIEW OF
ESEARCH ON
O
PEN
I
NNOVATION
 
INTRODUCTION
For most of the 20th century, the practice and theory of technological innovation emphasizedcontrol of innovations within the firm. In fact, the need to fund and control such innovations haslong been assumed to be a major reason for the existence of the modern industrial corporation(Chandler, 1977; Freeman, 1982). Chesbrough (2003a, 2006a) broke from this tradition byarguing firms should consider external sources for obtaining and commercializing innovationthrough a process he termed “open innovation.”Even though some of the principles of open innovation long predate Chesbrough’s work (cf.Mowery, 2009; Trott & Hartmann, 2009), the renewed interest in how firms can profit fromexternal innovation has lead to a sizable stream within open innovation research that hasexploded during recent years. While recent review articles have provided an overview of severalattributes of open innovation, such as different sources of innovation and types of openness(Bogers et al, 2010; Dahlander & Gann, 2010), a comprehensive review of the research thatfollows Chesbrough’s (2003a) conception of open innovation as a way to profit from externalsources of innovation is still lacking. In this paper, we therefore aim at providing acomprehensive review of the rapidly growing body of research on open innovation. We focus oninbound open innovation which is one of the key practices of open innovation (Chesbrough,2003a; Enkel et al, 2009; West & Gallagher, 2006), As we show in our study, profiting fromexternally created innovations is the most often studied commercialization path in openinnovation research.
 
 
- 2 -Here we present a systematic review of prior studies in open innovation from 18 topmanagement and innovation journals. We present and interpret these studies through a four- phase process model for inbound open innovation that includes obtaining, integrating andcommercializing external innovation.. By reviewing the open innovation literature along these phases, we show how the practice of open innovation builds upon and extends the linear modelof innovation through feedback and reciprocal mechanisms. From the review it also becomesapparent that research in the different phases introduces concepts from related field — such as,respectively, innovation communities, absorptive capacity and business models — althoughlinkages across phases and with the broader body of innovation literature are often lacking.Based on our review and synthesis, we provide a discussion of our results and identifyopportunities for future research. Key areas for future research within “open innovation” includegreater use of the business model, examination of the later and reciprocal phases of thecommercialization process, and research into the limits and moderators of open innovation.
THE DOMAIN OF OPEN INNOVATION RESEARCH
The concept of “open innovation,” as is currently being used, was introduced in 2003 byHenry Chesbrough in his book of the same name (Chesbrough, 2003a). Based on his earlier research on Xerox PARC (Chesbrough & Rosenbloom, 2002) as well as interviews at IBM, Inteland Proctor & Gamble, Chesbrough argued that firms needed innovation strategies whichallowed for innovation flows across firm boundaries.In our study, we use the Chesbrough (2006a: 1) definition:Open Innovation is the use of purposive inflows and outflows of knowledge toaccelerate internal innovation, and expand the markets for external use of innovation,respectively. Open Innovation is a paradigm that assumes that firms can and should useexternal ideas as well as internal ideas, and internal and external paths to market, as theylook to advance their technology.

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