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Enterpanuship and Innovation

Comment:
this is a purely critique paper “not essay” . the class name is Enterpanuship and innovation
follow the below
Write a critic of the paper/s selected. The critic should address the pros ?and cons of the paper, comment on future development in field ?selected by applying the case to UAE, use an example to illustrate your ?answer.? please i need a detailed high level cretquie. for Assessments of Hypotheses,Assessment of model framework,Assessments of Methodology,Data collection,Statistical methods,Application of this research in the UAE context

also undescore the importance of the business model that was mentioned many time on the attached article

The report is to be submitted as a professional business document and ?must therefore follow the instructors guide below for written ?assignments. Your report must start with the assignment / project cover ?sheet. As with all written submissions, please ensure that you keep a ?duplicate copy. ?
the paper is attached. you can use other journal to support. the class ppt is attached as well

USE APA referencing all the way

you can use other journals to support the paper

ARTICLES
Open Innovation:
Past Research, Current Debates, and Future Directions
by Ulrich Lichtenthaler
Executive Overview
The concept of open innovation has recently gained widespread attention. It is particularly relevant now
because many firms are required to implement open innovation, despite the difficulties associated with
managing these activities. After providing a definition of open innovation delimiting it from open source,
an overview of prior research is given, which identifies the following important topics of earlier open
innovation research: technology transactions, user innovation, business models, and innovation markets. In
light of current controversial debates about the value of the open innovation framework, we evaluate the
literature and assess whether open innovation is a sustainable trend rather than a management fashion. On
this basis, we present a conceptual framework that provides the foundation for discussing critical open
innovation processes and their implications for managing open innovation at the organizational, project,
and individual level. Thus, we assess the multilevel determinants of the make-or-buy, integrate-or-relate,
and keep-or-sell decisions in opening up the innovation process. Then, we propose a research agenda based
on this conceptual framework with particular emphasis on the organizational antecedents and performance
consequences of open innovation and on important research design issues. Finally, we discuss implications
for management education and practice, and we provide a conclusion and outlook.
T
raditionally, industrial firms developed new
technologies for their own products internally
(Ahlstrom, 2010; March, 1991; Wyld, 2010;
Wyld & Maurin, 2009). Thus, most companies
pursued relatively ?closed? innovation strategies,
meaning limited interactions with the outside environment.
The only exceptions could be found
many years ago in industries (e.g., chemicals)
where the particular industry structure encouraged
active technology transactions in early periods
(Arora & Gambardella, 2010; Lamoreaux &
Sokoloff, 1998). In recent decades, these strategies
have begun to change as firms across industries
have increasingly acquired external technologies
to complement their internal knowledge bases
(e.g., by means of strategic alliances or in-licensing,
which involves acquiring the right to use
external knowledge) (Beamish & Lupton, 2009;
Cassiman & Veugelers, 2006; Teece, 1986; von
Hippel, 1988). A similar development could recently
be observed in knowledge exploitation.
Firms across industries started to actively commercialize
their technological knowledge, either exclusively
or in addition to using it internally for
their own products by means of out-licensing or
strategic alliances, where firms allow external
partners to use some of their own technology. On
this basis, firms may achieve monetary benefits
(e.g., licensing revenues) and non-monetary benefits
(e.g., gaining access to external technology
The author would like to thank Associate Editor Chung Ming Lau and
two anonymous reviewers for their insightful comments and suggestions
during the review process. A prior version of this paper was presented at the
2010 annual meeting of the Academy of Management in Montreal.
* Ulrich Lichtenthaler (lichtenthaler@bwl.uni-mannheim.de) holds the Chair of Organization at University of Mannheim, Germany.
2011 Lichtenthaler 75
Copyright by the Academy of Management; all rights reserved. Contents may not be copied, e-mailed, posted to a listserv, or otherwise transmitted without the copyright holder?s express written
permission. Users may print, download, or e-mail articles for individual use only.
by means of cross-licensing) (Gassmann, 2006;
Grindley & Teece, 1997).
In light of these developments, in 2003
Henry Chesbrough coined the term ?open innovation?
(Chesbrough, 2003) to describe innovation
processes in which firms interact extensively
with their environment, leading to a
significant amount of external knowledge exploration
and exploitation (Chesbrough, 2003; van
de Vrande, Lemmens, & Vanhaverbeke, 2006). In
addition, firms increasingly maintain knowledge
outside their organizational boundaries over time,
and this dynamic perspective points to interorganizational
relationships as an extension of firms?
internal knowledge bases (Grant & Baden-Fuller,
2004). Despite its growing importance, many
firms experience severe challenges in actively
managing the processes of open innovation
(Lichtenthaler, 2008; van de Vrande, de Jong,
Vanhaverbeke, & de Rochemont, 2009), although
some pioneering companies, such as
Procter & Gamble and Eli Lilly, have achieved
great benefits from it (Huston & Sakkab, 2006;
Schwartz & Huff, 2010). Yet even the successful
firms had to overcome major challenges at the
beginning of their open innovation initiatives
(Chesbrough, 2007; Laursen & Salter, 2006), and
there are major interfirm differences in how open
innovation is successfully managed.
Thus, practitioners and academics alike need a
better understanding of open innovation processes
in order to grasp the benefits while avoiding potential
negative side effects. Accordingly, this paper
focuses on developing a multilevel conceptual
framework for organizing open innovation in
firms, specifically focusing on the project and individual
level in addition to the firm level, thus
extending earlier research (e.g., Lichtenthaler &
Lichtenthaler, 2009). We address important crosslevel
interdependencies and discuss the need for
sufficient fit between open innovation processes
and a firm?s corporate strategy and culture. We
further extend earlier research by linking our
framework to important management mechanisms
for open innovation (e.g., incentive systems) that
have often been neglected in previous research.
Moreover, we establish a research agenda to stimulate
the discussion of successful open innovation
management. Finally, we discuss important implications
for management practice and management
education.
Definition of Open Innovation
T
here is a continuum of multiple innovation
approaches, with very closed approaches on
one end and open approaches on the other
(Trott & Hartmann, 2009). These two extremes
were captured by Chesbrough when he asserted
that ?[F]irms 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? (Chesbrough, 2003, p. xxiv). This
original understanding was further clarified in
2006, when Chesbrough and colleagues stated
that ?open innovation is the use of purposive
inflows and outflows of knowledge to accelerate
internal innovation, and expand the markets for
external use of innovation, respectively? (Chesbrough,
Vanhaverbeke, & West, 2006, p. 1). Inbound
open innovation is an outside-in process
and involves opening up the innovation process
to knowledge exploration. Here, external knowledge
exploration refers to the acquisition of knowledge
from external sources. For instance, many
large pharmaceutical firms (e.g., Eli Lilly) now
acquire a substantial portion of their technologies
from external partners such as biotechnology firms
(Schwartz & Huff, 2010). In contrast, outbound
open innovation is an inside-out process and includes
opening up the innovation process to
knowledge exploitation. External knowledge exploitation
relates to the commercialization of technological
knowledge. For instance, Philips Electronics
has recently generated several hundred million
dollars in licensing revenues annually (Alexy,
Criscuolo, & Salter, 2009).
Firms may combine outside-in and inside-out
processes, integrating inbound and outbound open
innovation (e.g., in alliances; see Gassmann &
Enkel, 2010). In addition to external exploration
and exploitation, recent work has emphasized that
firms increasingly maintain knowledge externally.
External knowledge retention refers to maintaining
knowledge outside a firm?s organizational boundaries
over time (Lichtenthaler & Lichtenthaler,
2009) using interorganizational relationships as an
76 Academy of Management Perspectives February
extension of the internal knowledge bases (Grant
& Baden-Fuller, 2004). For instance, Cisco Systems
manages a large alliance portfolio, which
provides privileged access to the alliance partners?
knowledge without the need for immediately
transferring the external knowledge (Kale & Puranam,
2004).
In light of the severe challenges many firms
face in managing open innovation, recent work
has pointed to a process-based understanding of
open innovation (Lichtenthaler & Lichtenthaler,
2009). Based on this perspective and earlier definitions
(Chesbrough, 2003; Chesbrough et al.,
2006; Gassmann & Enkel, 2010; Laursen &
Salter, 2006), we provide the following definition,
which links the open innovation framework to
related literatures, such as knowledge management,
organizational learning, and firm boundaries
(Grant & Baden-Fuller, 2004; March, 1991;
Santos & Eisenhardt, 2005): Open innovation is
defined as systematically performing knowledge exploration,
retention, and exploitation inside and outside
an organization?s boundaries throughout the innovation
process. The concept of open innovation explicitly
considers the trend toward interorganizational
innovation processes (Vanhaverbeke, Van
de Vrande, & Chesbrough, 2008), but internal
activities are also critical to open innovation processes.
For instance, firms need to internally develop
prior technological knowledge, which is required
for absorptive capacity, in order to
successfully rely on inbound open innovation processes
(Cohen & Levinthal, 1990).
Open innovation is sometimes conflated with
the related notion of open-source software development.
?While open-source shares the focus on
value creation throughout an industry value
chain, its proponents usually deny or downplay
the importance of value capture? (Chesbrough et
al., 2006, p. 2). The role of the business model in
capturing value enables a firm to profit from open
innovation. Because of the primary emphasis of
open-source software development on value creation,
many open-source activities do not seem to
constitute central activities according to the open
innovation framework if a firm-level perspective is
taken. Thus, open-source is not necessarily a part
of open innovation. However, if firms rely on
open-source approaches to develop products that
are then commercialized internally or externally,
they follow an open innovation approach because
the business model enables them to capture value
from open innovation (West & Gallagher, 2006).
Prior Research Into Open Innovation
A
cademic work on open innovation began to
emerge following Chesbrough?s (2003) original
book, Open Innovation: The New Imperative
for Creating and Profiting From Technology (e.g.,
Almirall & Casadesus-Masanell, 2010; Christensen,
Olesen, & Kjaer, 2005; Dahlander &
Gann, 2010; Fleming & Waguespack, 2007; SaurAmaral
& Amaral, 2010), with several special
issues of academic journals devoted to the topic
(e.g., R&D Management and the International Journal
of Technology Management) (Enkel, Gassmann,
& Chesbrough, 2009; Gassmann, 2006; van de
Vrande, Vanhaverbeke, & Gassmann, 2010). Beyond
the studies that use the specific term ?open
innovation,? there are many influential studies in
the general field of interorganizational innovation
(e.g., absorptive capacity; see Cohen & Levinthal,
1990) that enhance our understanding of open
innovation.
Characteristics of the Open Innovation
Framework
The concept of open innovation highlights three
issues that may allow for important contributions
of open innovation research. First, the open innovation
literature advances prior research by explicitly
integrating inward and outward knowledge
transfer (Chesbrough, 2006). Many firms rely
on both inbound and outbound open innovation
simultaneously (van de Vrande et al., 2009). In
addition, some open innovation activities specifically
include both processes (Lichtenthaler,
2008). Examples are cross-licensing agreements,
in which firms transfer some of their own technology
to get access to external knowledge
(Grindley & Teece, 1997). In addition, the open
innovation literature has addressed the possibility
of maintaining knowledge outside a firm?s boundaries
(Dittrich & Duysters, 2007). This comprehensive
perspective on critical knowledge management
processes is essential because of
2011 Lichtenthaler 77
potential interdependencies. For instance, an
active acquisition of external technology may
limit a firm?s opportunities to commercialize its
own knowledge (Lichtenthaler & Lichtenthaler,
2009).
Second, open innovation research points to the
simultaneous internal and external organization of
critical knowledge-management processes (Chesbrough,
2003). Accordingly, it helps overcome
prior research, which often assumed ?either-or?
decisions about whether to perform specific
knowledge management tasks internally or externally.
One example in knowledge exploration is
make-or-buy decisions (Geyskens, Steenkamp, &
Kumar, 2006): While firms may decide to internally
generate or externally source one particular
technology, a firm-level perspective usually points
to simultaneous internal and external knowledge
exploration (Cohen & Levinthal, 1990). The fact
that it is often hardly possible to generate all
relevant knowledge internally demonstrates the
complementary character of the internal and external
organization of knowledge management
processes (Cassiman & Veugelers, 2006).
Third, the open innovation framework helps
integrate technology management research with
the innovation management literature. In particular,
open innovation directly links concepts from
technology management (e.g., external technology
acquisition) to new product development
(Chesbrough et al., 2006; Laursen & Salter, 2006;
Tsai & Wang, 2008). In the past, the new product
development literature has often focused on activities
inside the firm (Page & Schirr, 2008). In
contrast, earlier technology management research
often examined specific technology management
processes (e.g., R&D) and technological change
without directly relating the analyses to a firm?s
innovation processes (e.g., Afuah, 2001).
Tentative Streams of Open Innovation Research
A tentative systematization, which is neither mutually
exclusive nor collectively exhaustive, leads
to the following four lines of open innovation
research: technology transactions, user innovation,
business models, and innovation markets.
These streams of research illustrate the three
characteristics of open innovation research
identified above (see Figure 1). The first line of
research addresses technology transactions. In particular,
prior works have examined inward technology
transfer and R&D alliances, and absorptive
capacity research has highlighted the need for
developing an internal organizational capability
(Lichtenthaler & Lichtenthaler, 2009). There is
also a growing body of work on outward technology
transfer and external knowledge exploitation
(Chesbrough, 2007; Fosfuri, 2006). In addition,
some studies have investigated the importance of
retaining knowledge over time outside a firm?s
boundaries (Dittrich & Duysters, 2007; Zaheer,
Go? zu?bu?yu?k, & Milanov, 2010). Earlier research
into the role of interorganizational innovation
networks may provide important contributions to
the field of open innovation (Ahuja, 2000). Much
of the work on technology transactions focused on
inbound open innovation (Zhao & Anand, 2009,
p. 963). Thus, outbound open innovation has
been relatively neglected (Chesbrough, 2003;
Lord, Mandel, & Wager, 2002).
Figure 1
Illustrative Overview
78 Academy of Management Perspectives February
The second stream of research studies user innovation,
and it primarily examines how firms may
collaborate with users in the external exploration
of new knowledge and ideas (von Hippel, 1988).
Recent work has examined how firms can profit
from user innovation and user communities in
open innovation processes (Bogers, Afuah, & Bastian,
2010; West & Lakhani, 2008). For instance,
many medical equipment technology firms actively
integrate users into their innovation processes
(Lettl, Herstatt, & Gemuenden, 2006). In
addition, prior open innovation research has examined
the role of toolkits for idea competitions
(Piller & Walcher, 2006). This stream of open
innovation research strongly builds on earlier
work on the role of communities in supporting
innovation (Franke & Shah, 2002).
The third line of research addresses the role of
business models in the context of open innovation,
and it focuses primarily on exploiting knowledge
in open innovation processes (Chesbrough, 2006;
van der Meer, 2007). More specifically, earlier
work has examined whether appropriability enables
or retards open innovation activities (West,
2006). The issue of appropriability is essential
when firms open up their innovation processes
(Helfat, 2006). In addition, the role of intellectual
property in the context of open innovation seems
to be more complex than it may initially appear
(Alexy et al., 2009). An additional topic that has
received some attention is corporate venturing as
a way of innovating, particularly in large, established
firms (Vanhaverbeke et al., 2008).
The fourth stream of research addresses innovation
markets (Chesbrough, 2007). This line of
thought focuses on ways to facilitate open innovation,
especially concerning the ease of interfirm
technology transfer. While most other lines of
research concentrate on inbound open innovation,
this stream of work is relatively balanced in
addressing inbound and outbound processes
(Arora & Gambardella, 2010). For instance, prior
studies have examined the role of intermediaries
in facilitating technology exchanges (Howells,
2006). In this context, Internet marketplaces for
intellectual property and technology auctions
have received some attention because they constitute
potentially promising new types of intermediaries
for interfirm technology transfer (Chesbrough,
2006). A growing overall importance of
innovation markets can be observed in multiple
studies (Arora & Gambardella, 2010).
Tentative Assessment of Open Innovation
Research
The three characteristics of the open innovation
framework addressed above may provide the basis
for important theoretical contributions by open
innovation research. In addition, the concept of
open innovation has a clear managerial impact
because it has further strengthened awareness of
the importance of innovation in many firms
(Chesbrough et al., 2006; Trott & Hartmann,
2009). Currently, however, there are some debates
about the value the open innovation framework
adds to earlier work (di Benedetto, 2010; Groen &
Linton, 2010; Linstone, 2010; von Hippel, 2010).
In this regard, the open innovation framework has
also been criticized. For instance, it was recently
argued that open innovation is old wine in new
bottles (Trott & Hartmann, 2009). Many of the
elements of the open innovation approach are
visible in the industrial research system of the
United States in the late 19th and early 20th
centuries (Mowery, 2009). However, some studies
suggest a recent increase in open innovation practices.
While many firms? innovation processes
have been opened up to at least some degree for a
relatively long time, these works illustrate a growing
openness of many firms in recent years (Chesbrough,
2007; Davis & Harrison, 2001; van de
Vrande et al., 2009). This long-term perspective
points to the sustainability of open innovation
processes.
Consistent with these observations, the open
innovation concept does not fulfill several of the
criteria that typically characterize management
fashions (Abrahamson, 1996; Kieser, 1997). It
further does not fulfill several of the criteria for a
new theory (Sutton & Staw, 1995; Zahra &
Newey, 2009). While the open innovation concept
includes many new conceptual insights and
theoretical arguments, it does not (yet) represent
a coherent new theory according to accepted standards
(Bacharach, 1989; Van de Ven, 1989;
Whetten, 1989). In addition, it may be argued
2011 Lichtenthaler 79
whether the open innovation framework displays
relevant characteristics for being considered a paradigm
(Kuhn, 1962). Thus, open innovation may
rather be considered a framework (Chesbrough et
al., 2006), which characterizes a number of approaches
to managing innovation. ?A framework
is less rigorous than a model as it is sometimes
agnostic about the particular form of theoretical
relationships which may exist? (Teece, 2006, p.
1138).
Prior open innovation research was often based
on theoretical considerations and single case studies,
or it analyzed very specific issues in large-scale
studies. More general work has usually focused on
either external knowledge exploration or exploitation
without taking an integrative perspective
(e.g., Cassiman & Veugelers, 2006; Cohen &
Levinthal, 1990; Fosfuri, 2006). To date, the number
of quantitative studies into opening up the
innovation process in different directions is relatively
limited (e.g., Lichtenthaler, 2008; van de
Vrande et al., 2009). As academic research is only
starting, it is too early to consider a potential
reification of the open innovation concept (Lane,
Koka, & Pathak, 2006), but an overview of the
open innovation literature clearly shows a strong
need for further theoretical and empirical work.
This research deficit is emphasized by the discrepancies
between increasing technology transactions
on one hand and many firms? major managerial
difficulties on the other. Earlier open
innovation research focused on inbound processes,
whereas outbound processes have received
less attention. A particularly important limitation
seems to be an insufficient theoretical foundation
along with an insufficient consideration of earlier
work into related fields, such as user innovation
and absorptive capacity.
Conceptual Framework for Open Innovation
O
ur conceptual framework builds on recent
work that distinguished knowledge exploration,
retention, and exploitation as three critical
processes to arrive at an integrative view of
managing knowledge in the context of open innovation
(Lichtenthaler & Lichtenthaler, 2009).
As we have discussed above, all three processes
can be organized internally or externally?that is,
within a firm?s organizational boundaries or together
with external partners (see Figure 2). Internal
knowledge exploration describes the generation
of new knowledge inside the firm (e.g.,
inventions resulting from research). External
knowledge exploration describes knowledge
sourcing from external partners. Internal knowledge
retention results from the need to store
knowledge over time. External knowledge retention
relates to knowledge that is maintained in a
firm?s interorganizational relationships, such as alliances.
Internal knowledge exploitation refers to
the internal application of knowledge in a firm?s
own products. External knowledge exploitation
refers to outward knowledge transfer (e.g., technology
licensing).
To successfully manage these activities, companies
need to develop relevant organizational
capabilities at the firm level. Together, these different
organizational capabilities or capacities
form the basis for a dynamic capability of managing
open innovation (Lichtenthaler & Lichtenthaler,
2009; Teece, 2007). The firm-level perspective
emphasizes the importance of developing
organizational capabilities, which affect a company?s
strategic decisions at the level of single innovation
projects. At the project level, companies
can hardly develop organizational capabilities, but
Figure 2
Conceptual Framework
80 Academy of Management Perspectives February
they may draw on their firm-level capabilities to
manage innovation projects and to make critical
project-level decisions, such as make-or-buy
(Chesbrough, 2003). In turn, these decisions are
influenced by the underlying attitudes of a firm?s
employees at the individual level, and these attitudes
may constitute important microfoundations
of innovation capabilities (Gavetti, 2005; Teece,
2007).
There are further microfoundations of open
innovation capabilities, such as a dedicated alliance
function with full-time alliance management
employees (Kale & Singh, 2009), but the role of
employee attitudes has been recently highlighted
in the context of open innovation (Chesbrough,
2006). In particular, employee attitudes often
characterize large parts of an organization, and
they may constitute important barriers to successfully
implementing open innovation processes
and the corresponding project-level decisions
(Lichtenthaler, Ernst, & Hoegl, 2010).
Our framework therefore focuses on these critical
individual-level microfoundations of firmlevel
organizational capabilities.
Accordingly, the framework acknowledges that
?innovation is inherently a multilevel phenomenon?
(Gupta, Tesluk, & Taylor, 2007, p. 888).
Consequently, the adoption of open innovation
processes may be determined by drivers at multiple
levels. In particular, management mechanisms at
one level (e.g., organizational routines at the firm
level) may not pay off because of inhibiting factors
at other levels, such as attitudes at the individual
level. These employee attitudes may constitute
either important microfoundations of or major
barriers to developing organizational capabilities
at the firm level. Prior research has therefore
pointed to the relevance of multiple levels of
analysis. For instance, a recent study has shown
that many firms do not succeed in implementing
outbound open innovation processes because of
employee attitudes that are protective with regard
to outward technology transfer (Lichtenthaler et
al., 2010). In the following presentation of the
multilevel conceptual framework, we use the innovation
activities of Procter & Gamble in recent
years as an illustrative example.
Firm-Level Capabilities
Regarding knowledge exploration, internal processes
are critical in the context of open innovation
(Lichtenthaler & Lichtenthaler, 2009). At
the organizational level, firms therefore need to
build up inventive capacity, which refers to the
ability to internally explore knowledge? that is,
to generate new knowledge inside the organization.
Usually, a firm sets up knowledge exploration
processes after perceiving unexploited opportunities.
Subsequent to generating new knowledge, firms
have to integrate this new knowledge into their
knowledge bases by establishing links to existing
knowledge.
While inventive capacity refers to internal exploration,
absorptive capacity relates to the ability
to explore external knowledge. This understanding
of absorptive capacity focuses on knowledge
exploration?that is, potential absorptive capacity
(Zahra & George, 2002) and exploratory learning
(Lane et al., 2006)?according to recent reconceptualizations
of Cohen and Levinthal?s (1990)
original work. For instance, in 2000, Procter &
Gamble formulated a firm-level strategy for actively
opening up its innovation process with the
goal of acquiring 50% of all innovations from
external sources (Huston & Sakkab, 2006). At
the same time, Procter & Gamble kept investing
in internal research in order to build up the necessary
prior knowledge for absorptive capacity
based on a strong inventive capacity (Dodgson,
Gann, & Salter, 2006).
Concerning knowledge retention, transformative
capacity describes a firm?s ability to internally maintain
knowledge over time (Garud & Nayyar, 1994).
Firms need to actively manage their knowledge storage
by assigning resources to keep the knowledge
?alive? and avoid loss over time. After recognizing
an opportunity to exploit retained knowledge, it
needs to be reactivated, internalized, and synthesized
with additional knowledge (Garud & Nayyar, 1994;
Smith, Collins, & Clark, 2005).
Beyond the internal knowledge base, a firm?s
interorganizational relationships (e.g., alliances)
may be considered as an external mode of knowledge
retention. Similar to internal knowledge retention,
external networks have to be maintained
2011 Lichtenthaler 81
and managed over time by means of connective
capacity, which focuses on externally maintaining
knowledge and which does not assume immediate
inward knowledge transfer. Instead, firms ensure
privileged access to external knowledge without
directly acquiring it (Grant & Baden-Fuller,
2004). For example, Procter & Gamble formulated
an open innovation strategy and started to
intensify its long-term relationships with other
firms. This strategic move resulted in increased
external knowledge retention in alliances and
other types of relationships (Sakkab, 2002).
In knowledge exploitation, innovative capacity is
related to matching inventions with the context of
their final market (March, 1991). While a firm may
generate many innovations from a limited amount of
new knowledge, a firm may also lack the ability to
exploit a large knowledge base that it has generated
and maintained. As knowledge may be explored
internally or externally, innovative capacity also
represents the realized (i.e., exploitative) component
of absorptive capacity (Lane et al., 2006; Zahra &
George, 2002).
With regard to external knowledge exploitation,
desorptive capacity relates to outward technology
transfer, which is complementary to internal knowledge
application in a firm?s own products. After
identifying external knowledge exploitation opportunities,
which is often considered the essential
managerial challenge, a firm transfers its knowledge
to the recipient (Lichtenthaler & Lichtenthaler,
2009). Concerning knowledge exploitation, Procter
& Gamble has encouraged its employees to identify
new application opportunities for its technologies in
order to strengthen its firm-level innovative capacity
(Sakkab, 2002). Consequently, Procter & Gamble?s
number of new product introductions has increased
substantially in recent years, and its R&D productivity
has grown by nearly 60% (Huston & Sakkab,
2006). In addition, the firm attempts to increasingly
exploit its technologies externally because it uses
only about 10% of its technology internally (Sakkab,
2002).
Project-Level Decisions
At the level of single innovation projects, a firm
often has the option to perform the critical knowledge
management processes internally or externally.
Regarding knowledge exploration, this issue
is the make-or-buy decision (Cassiman & Veugelers,
2006). In knowledge retention, managers are
confronted with the integrate-or-relate decision,
which describes the possibility of integrating
knowledge into the internal knowledge base or
relying on interfirm relationships as an external
mode of knowledge retention. In knowledge exploitation,
a firm faces the keep-or-sell decision,
which describes the issue of utilizing knowledge
internally or transferring it to external partners
exclusively or in addition to its internal application
(Lichtenthaler & Ernst, 2006). In one particular
project, the internal and external processes
may constitute substitutes. For example, a firm
may decide on the ?make or buy? of one particular
technology.
However, at the organizational level, the internal
and external organization of the processes are
often complementary, and firms usually do not
make either-or decisions (Cassiman & Veugelers,
2006; Grant & Baden-Fuller, 2004). Instead, most
medium-size and large firms simultaneously make
and buy in knowledge exploration, integrate and
relate in knowledge retention, and keep and sell
in knowledge exploitation. This complementarity
is emphasized in the conceptual open innovation
literature (Chesbrough, 2003; Chesbrough et al.,
2006). The interfaces and interactions that derive
from the assumed complementary relationships
underscore the firm-level coordination requirements,
which call for an integrative innovation
management (Lichtenthaler & Lichtenthaler,
2009). Firms may partly compensate for lower
levels of an internal process (e.g., internal knowledge
exploration) by relying on the complementary
external process (e.g., external knowledge
exploration), and vice versa (Cohen & Levinthal,
1990; Zahra & George, 2002). However, firms
usually cannot fully replace their internal activities
by opening up their innovation processes
(Cassiman & Veugelers, 2006; Chesbrough,
2006).
Concerning knowledge exploration, for instance,
Procter & Gamble facilitated buy decisions
in make-or-buy situations in single innovation
projects based on the strategic principle that
external knowledge exploration was a specific ob-
82 Academy of Management Perspectives February
jective of its innovation strategy (Huston &
Sakkab, 2006). In a similar vein, relate choices
were emphasized in integrate-or-relate decisions
by strengthening the portfolio of interfirm relationships.
Moreover, external knowledge exploitation
was encouraged at Procter & Gamble.
Based on the new policy for keep-or-sell decisions,
basically all technologies of Procter & Gamble
may be licensed at the latest five years after patent
grant and three years after product market introduction
(Sakkab, 2002).
Individual-Level Attitudes
Besides firm-level capabilities and project-level
decisions, a firm?s open innovation processes may
be strongly influenced by the attitudes of individual
employees. The role of these employee attitudes
has been highlighted in the open innovation
literature (Chesbrough, 2003). While earlier
work has concentrated on ?not-invented-here? attitudes
in knowledge exploration (Katz & Allen,
1982), Chesbrough (2003) suggested the complementary
concept of ?not-sold-here? attitudes in
knowledge exploitation. Our conceptual framework
illustrates that further positive or negative
attitudes toward the critical knowledge management
processes may be relevant in the context
of open innovation. These employee attitudes
may constitute important individual-level microfoundations
of the organizational capabilities.
However, inappropriate attitudes may also
inhibit the development of organizational capabilities
(Gavetti, 2005).
In knowledge exploration, not-invented-here
attitudes describe a situation in which a firm?s
employees have negative attitudes toward externally
exploring knowledge (Katz & Allen, 1982).
These attitudes may derive from limited or negative
experience with inward knowledge transfer
and from inappropriate incentive systems (Chesbrough,
2003). To build up absorptive capacity at
the organizational level, for instance, Procter &
Gamble set up incentive systems to reduce notinvented-here
attitudes. In contrast, ?buy-in? attitudes
refer to positive attitudes toward externally
exploring knowledge (Menon & Pfeffer, 2003).
These positive attitudes may stem from the aim
to reduce complexity, an underestimation of the
managerial difficulties of absorbing external
knowledge, and a lack of confidence in the firm?s
own expertise. In other words, ?The other person?s
dessert always looks better? (Laden, 1996, p. 10).
Regarding knowledge retention, ?not-connected-here?
attitudes refer to settings in which a
firm?s employees have negative attitudes toward
externally retaining knowledge. These attitudes
may result from a lack of trust in the potential
partners in interorganizational relationships
and from an overemphasis on the managerial
challenges in interfirm collaboration. Even
more important, however, may be confidentiality
considerations (Lichtenthaler & Ernst,
2006). Therefore, Procter & Gamble encouraged
individual employees to consider external knowledge
retention more actively (Sakkab, 2002). ?Relate-out?
attitudes, in contrast, describe positive attitudes
toward externally retaining knowledge.
These attitudes may derive from a strong internal
focus on a firm?s core competencies and a strong
emphasis on flexibility. They may develop in
fields of high technological complexity and uncertainty
(Lichtenthaler & Ernst, 2006).
In knowledge exploitation, ?not-sold-here? attitudes
describe situations in which a firm?s employees
have negative attitudes toward externally
exploiting knowledge (Chesbrough, 2003). These
attitudes may derive from the fear of strengthening
competitors by selling corporate crown jewels
(Rivette & Kline, 2000). In particular, these attitudes
are strengthened by limited experience with
external knowledge exploitation and the inefficiencies
in the markets for technology (Lichtenthaler
& Ernst, 2006). To facilitate the implementation
of its strategy by means of a strong
desorptive capacity, Procter & Gamble has taken
several steps to reduce employees? not-sold-here
attitudes, including establishing incentive systems
that value the identification of licensing opportunities
(Huston & Sakkab, 2006). In contrast,
?sell-out? attitudes refer to positive attitudes toward
externally exploiting knowledge. Although
these attitudes are relatively unlikely in light of
limited outward technology transfer in most firms
at present, these attitudes could derive from the
aim to follow pioneering firms in active licensing
and from financial pressure on the R&D and in-
2011 Lichtenthaler 83
tellectual property departments in some firms
(Lichtenthaler & Ernst, 2006).
Integrated Perspective
The difficulties of many firms in successfully managing
open innovation processes underscore the
need to develop organizational capabilities for
managing these processes. The conceptual framework
suggests that firms may influence their transaction
costs in innovation markets over time by
developing absorptive, connective, and desorptive
capacities. These capabilities enhance the management
of a firm?s innovation-related collaborations
with external partners based on learning
effects (Cohen & Levinthal, 1990). Thus, the
internal or external organization of innovation
activities is not exclusively determined by transaction
costs, which are partly endogenous, and
firms may actively try to shape them. Instead,
transaction costs and capabilities likely co-evolve
over time (Jacobides & Winter, 2005).
Accordingly, firms need to address multiple
determinants at distinct levels, from the individual
to the organizational, to enhance their open
innovation management. For instance, Procter &
Gamble strengthened its absorptive capacity by
setting up dedicated organizational structures and
establishing incentives for employees who initiated
inbound open innovation transactions. On
this basis, the firm reduced not-invented-here attitudes,
which had limited its absorptive capacity.
Consequently, Procter & Gamble?s make-or-buy
decisions at the innovation project level were
increasingly made in favor of the buy option to
acquire external knowledge (Huston & Sakkab,
2006). This transformation of Procter & Gamble?s
innovation processes was successful only after the
firm considered the multilevel determinants of
opening up its innovation processes. An exclusive
focus on organization-level determinants would
most likely have been insufficient.
This example underscores the importance of
cross-level interdependencies in open innovation.
By establishing specific management mechanisms
and designing appropriate tools, processes, and
structures, firms may enhance their organizational
capabilities for managing the different open innovation
processes. However, the potential positive
effects of organizational design choices at a particular
level may well be limited by intervening
factors at other levels. Accordingly, managers and
researchers need to consider both top-down and
bottom-up effects across multiple levels. For instance,
the top-down effects of a corporate open
innovation strategy at the firm level may be impeded
by conflicting employee attitudes at the
individual level. In a similar vein, the bottom-up
effects of change management mechanisms to encourage
open innovation at the individual level
may be limited if a firm does not develop critical
firm-level capabilities because it lacks top management
commitment to open innovation.
In addition, firms often do not benefit immediately
from establishing particular management
mechanisms for strengthening open innovation,
such as new incentive systems (Lichtenthaler,
2008). For instance, Procter & Gamble experienced
an initial learning period of several years
until its open innovation initiative provided substantial
benefits (Huston & Sakkab, 2006). The
conceptual framework helps illustrate that particular
management mechanisms, such as idea
evaluation tools, primarily strengthen a firm?s
organizational capabilities for managing open
innovation, which may in turn enhance performance.
A firm?s performance does not increase
automatically if particular open innovation mechanisms
are initiated, such as a new hiring policy.
Instead, it increases as a result of learning effects,
which need some time to materialize. Thus, the
management mechanisms at multiple levels primarily
help firms establish proficient processes,
which enhance performance by facilitating capability
development.
In this regard, the framework helps understand
the distinct capabilities and skills that firms need
to develop internally at multiple levels to become
successful in implementing open innovation.
Thus, it provides a systematic and integrative view
of the different tasks and processes that companies
need to address to organize for open innovation.
By systematizing the critical open innovation activities,
the framework indicates how firms can
build on their existing organizational processes to
facilitate the implementation of open innovation
practices. For instance, firms can rely on their
84 Academy of Management Perspectives February
existing processes for managing strategic alliances
or technology licensing in order to ease successful
external knowledge exploration or exploitation.
Thus, firms do not have to develop entirely new
processes for managing open innovation. Instead,
firms may integrate open innovation activities
with their existing organizational processes to allow
for an effective and efficient transformation
toward open innovation.
The relative importance of the different open
innovation processes depends on a firm?s corporate
strategy and organizational culture. The more
important the processes are for innovation success,
the higher the required level of the organizational
capabilities is. There is not one single best
approach to managing a firm?s open innovation
activities, which depends on internal and external
factors (Lichtenthaler & Lichtenthaler, 2009).
For instance, a strong intellectual property policy
may facilitate or aggravate open innovation activities
depending on the particular situation (Alexy
et al., 2009). Firms therefore need to develop the
organizational capabilities in alignment with their
corporate strategy (Chesbrough, 2006). If a firm?s
strategy is directed at internally developing radical
technological innovations, for example, the firm
needs to build up a strong inventive capacity to
arrive at technological breakthroughs. Thus, decisions
on investing in the capabilities need to be
considered thoroughly based on a firm?s strategy,
because investments independent of the internal
and external environment do not necessarily increase
innovation performance. Instead, a successful
open innovation program requires fit among a
firm?s strategy, organizational capabilities, and
their determinants at multiple levels.
The conceptual framework further points to
the need to balance the development of the organizational
capabilities. For instance, the managerial
challenges of external knowledge exploration
and exploitation differ substantially. In external
knowledge exploration, firms need to identify suitable
technologies, whereas external knowledge
exploitation requires the identification of profitable
applications and potential markets for a firm?s
own technologies. Thus, firms have to balance the
development of the knowledge exploration, retention,
and exploitation capabilities. The framework
also emphasizes the importance of balancing the
internal and external processes, which may be
substitutes at the project level but are often complementary
at the organizational level (Cassiman
& Veugelers, 2006; Grant & Baden-Fuller, 2004).
For example, inventive capacity is critical to develop
prior technological knowledge, which allows
a firm to identify suitable external knowledge
sources based on its absorptive capacity. Most
firms will be unable to completely refrain from
open innovation, but they will usually also be
unable to fully replace their internal activities
with external activities because of the complementary
character of the internal and external
processes.
Accordingly, firms may well achieve benefits
from an organizational integration of open innovation
processes. First, firms may capture synergies
by aligning the internal and external processes.
For instance, the identification of markets for a
firm?s technologies is similar in internal and external
knowledge exploitation. Second, firms may
benefit from aligning knowledge exploration, retention,
and exploitation because an excessive
emphasis on one of the processes will most likely
be detrimental in the long term (March, 1991).
An integrated approach to managing open innovation
processes is difficult to observe and imitate
because it is less obvious than the individual processes.
Thus, competitors will profit only if they
succeed in imitating a firm?s entire open innovation
processes. Consequently, successful open innovation
may be an important foundation for
achieving a sustainable competitive advantage.
Agenda for Future Research
T
he previous sections have shown that there is a
strong need for further research into open innovation.
Therefore, we establish a research
agenda based on the multilevel conceptual framework
we developed above. Instead of pointing out
a comprehensive list of research topics, we highlight
some particularly important issues that deserve
attention in the near future. These issues
relate to the following six broad fields.
First, we need a clearer understanding of the
characteristics of open innovation. In this regard,
we also need further insights into practices and
2011 Lichtenthaler 85
tools for managing open innovation processes. A
recent study provides interesting insights (van de
Vrande et al., 2009), but further work is needed to
fully capture open innovation initiatives (Helfat,
2006). While the conceptual framework highlights
knowledge exploration, retention, and exploitation
as critical processes, a better understanding
of the activities and tools underlying
these processes is needed. For instance, external
knowledge exploration is often a complex process
that needs to be further systematized. In addition,
interactions of these processes deserve particular
attention (Lichtenthaler & Lichtenthaler, 2009).
An example is the interaction of innovative capacity
and desorptive capacity in knowledge exploitation
processes. In addition, the international
dimension of open innovation deserves further
analysis because many open innovation processes
involve foreign partners (Muethel & Hoegl,
2010), but cultural issues have been largely neglected
so far.
Second, future studies may develop typologies
of innovation activities to identify some archetype
approaches toward opening up the innovation
process (Gassmann & Enkel, 2010). For instance,
it would be interesting to examine relationships
between opening up knowledge exploration and
knowledge exploitation, such as cross-licensing
transactions (Grindley & Teece, 1997). In particular,
the link between open innovation and a
firm?s corporate strategy and organizational culture
needs to be highlighted as a particularly fruitful
avenue for further work. There are many different
degrees of openness that may be equally
successful depending on the internal and external
environment. Accordingly, it will often be impossible
to provide a general answer to the question of
how open a firm?s innovation process should be.
Instead, a firm?s particular situation, especially its
corporate strategy and culture, needs to be considered.
As most firms are increasingly unable to
conduct all innovation activities in-house, some
degree of openness is often inevitable. At the
same time, the importance of the internal processes,
which are complementary to the external
processes, illustrates potential limits to open innovation.
Third, the performance effects of open innovation
at the multiple levels of our framework are a
critical field of study (Laursen & Salter, 2006; van
de Vrande et al., 2009). The impact of opening up
the innovation process on a firm?s innovation and
financial performance needs to be addressed for
several reasons. On one hand, evidence for positive
performance effects will further demonstrate
the legitimacy of open innovation as an important
research field. On the other hand, the analysis of
performance effects is critical to offer a better
understanding to firms that attempt to profit from
innovation by specifically designing their innovation
processes. For instance, future work could
examine the performance effects of the six organizational
capabilities and employee attitudes described
in our framework. These types of studies
may also contribute to a better understanding of
the benefits and risks of open innovation. Earlier
work has primarily examined potential benefits;
the risks of open innovation have been largely
neglected. An example of a potential benefit is
shorter development times based on external
knowledge exploration; an example of a risk is the
danger of strengthening competitors by selling
corporate crown jewels in external knowledge exploitation
(Chesbrough, 2003; Rivette & Kline,
2000). In particular, these studies need to consider
potential internal and external contingency factors
in the performance effects of open innovation.
For instance, the appropriability regime and
the innovation markets, which differ considerably
across industries, may be critical environmental
contingency factors (Arora & Gambardella, 2010;
Teece, 1986). On this basis, future research may
identify important boundaries of open innovation.
Fourth, the determinants of successful open
innovation deserve particular attention. There is
substantial interfirm heterogeneity in capturing
value from open innovation (Lichtenthaler,
2008), and a deeper understanding of these interfirm
discrepancies is critical. Based on our conceptual
framework, future studies may examine
the determinants of open innovation performance
at multiple levels. Analyses of individual-level
variables may contribute to identifying microfoundations
of managing open innovation (Lau &
Ngo, 2004). Project-level studies will deepen our
understanding of decision-making processes in in-
86 Academy of Management Perspectives February
novation projects. Firm-level studies may provide
important insights into the organizational capabilities
for managing open innovation. In this
regard, future research may link the open innovation
capabilities to formerly separated mechanisms,
such as organizational culture, incentive
systems, and intellectual property strategies,
which may affect a firm?s organizational capabilities
for managing open innovation. Moreover, the
underlying drivers of opening up the innovation
process deserve further analysis. While some potential
drivers have been mentioned in earlier
work, such as increasing technological complexity
and growing environmental turbulence (Chesbrough,
2003), a thorough understanding of the
drivers is essential to evaluate the performance of
open innovation initiatives.
Fifth, there is a need for further work on all
four streams of open innovation research (i.e.,
technology transactions, user innovation, business
models, and innovation markets). In particular,
the management of technology transactions
deserves further attention based on our
conceptual framework. It has to be emphasized
that most prior open innovation research has
focused on inbound open innovation (i.e., external
knowledge exploration), whereas external
knowledge retention and external knowledge exploitation
have been relatively neglected. For instance,
there is a clear research deficit concerning
desorptive capacity (Lichtenthaler & Lichtenthaler,
2009). Moreover, research into user innovation
has provided important insights. Besides further
work on this topic, other external innovation
sources, such as universities and suppliers, deserve
more attention. In a similar vein, the identification
of profitable business models in the context
of open innovation is an important research avenue.
It could be particularly interesting to study
the relationship between outbound open innovation
processes and different types of new products,
such as radical product innovations (Colarelli
O?Connor, 2006). Finally, research has only started
to examine innovation markets, such as innovation
intermediaries. Along with the growing importance
of these markets in practice, further work into market
mechanisms is needed, such as the role of
patents (Bessen & Meurer, 2008; Ziedonis, 2008).
By integrating insights from these four streams of
prior research with the overall open innovation
framework, researchers may achieve cross-fertilization
effects that provide important new insights.
Sixth and finally, a better theoretical foundation
of open innovation research is needed. Our
conceptual framework provides a first step in this
direction. In particular, open innovation studies
need to be sufficiently grounded in prior research
into both open innovation and related fields.
There is a lot to learn from earlier research into
related topics, including user innovation and absorptive
capacity. A cumulative development of
open innovation research that integrates earlier
findings is essential to arrive at a coherent body of
knowledge about open innovation.
While a lot of prior work is managerially oriented,
more rigorous academic studies are needed.
Besides a more thorough theoretical grounding,
sufficient emphasis has to be paid to the empirical
research design. In particular, more longitudinal
research is necessary to understand changes in
firms? innovation processes over time. For instance,
longitudinal studies are critical to examine
the performance effects of open innovation because
some benefits and risks (e.g., strengthening
competitors through external knowledge exploitation)
materialize only after some time. In addition,
longitudinal studies may help examine the
role of a dynamic capability in transforming the
six organizational capabilities for managing open
innovation over time (Lichtenthaler & Lichtenthaler,
2009; Teece, 2007). This longitudinal
perspective may be taken in both qualitative analyses
(e.g., case studies) and quantitative analyses
(e.g., surveys and secondary data examinations).
Moreover, cross-level analyses based on the organizational,
project, and individual levels in our
framework are a particularly fruitful avenue for
further work (Gupta et al., 2007).
Implications for Management Practice
B
esides clear suggestions for further research,
this framework has direct managerial implications.
Above all, opening up the innovation
process may positively affect a firm?s innovation
success and financial performance if the open innovation
activities are managed effectively. Open
2011 Lichtenthaler 87
innovation is not an entirely new strategy in many
industries, and prior quantitative research into the
performance effects of open innovation has only
begun to emerge (Laursen & Salter, 2006; Lichtenthaler,
2008). However, the successful examples
of some firms, such as Procter & Gamble, suggest
that open innovation may be a sustainable trend
and that it may provide the basis for achieving a
competitive advantage (Huston & Sakkab, 2006).
Accordingly, open innovation may be an important
means to extend a firm?s strategy space, and it
may help managers identify new opportunities and
avoid competitive threats by enabling strategic
innovation.
To achieve the potential benefits of opening up
innovation processes, however, managers have to
acknowledge the need to develop organizational
capabilities to successfully manage open innovation.
It is unrealistic to expect immediate performance
increases as a consequence of opening up
the innovation process. The cross-level nature of
our conceptual framework illustrates the challenges
in managing open innovation. Consequently,
managers need to address multiple determinants
at distinct levels to facilitate the
development of organizational capabilities. This
transformation will usually require an initial
learning period, and anecdotal evidence suggests
that managers should allow at least two to three
years before the positive effects of open innovation
practices materialize (Chiaroni, Chiesa, &
Frattini, 2010; Huston & Sakkab, 2006; Lichtenthaler
& Lichtenthaler, 2009). However, the
development of firm-level capabilities may well be
impeded by opposing factors at the other levels.
To avoid excessive initial learning periods, managers
may try to build on a firm?s existing organizational
processes and structures rather than
implementing entirely new open innovation processes.
By adapting a firm?s managerial processes
for alliances and other forms of collaboration,
learning requirements may be reduced, and a more
effective and efficient transformation toward open
innovation may be enabled. In particular, the
alignment of open innovation with existing organizational
processes may reduce barriers that could
arise from cross-level interdependencies in innovation.
To facilitate the successful implementation of
open innovation processes, managers may proceed
along the following stages. Initially, it will often
be beneficial to focus on a firm?s existing networks,
which can be further strengthened to extract
their full value for open innovation. By
collaborating with similar partners in related industries,
managers may ensure some quick-win
open innovation deals that facilitate the organizational
transformation by proving the benefits of
open innovation. On this basis, managers may
extend and broaden their firm?s open activities to
achieve additional opportunities (Chiaroni et al.,
2010; Gro?nlund, Ro?nnberg Sjo?din, & Frishammar,
2010). Then managers can address the effectiveness
and efficiency gains that may be captured
by integrating the internal and external processes
as well as the knowledge exploration, retention,
and exploitation processes. After establishing
these organizational approaches, managers may
use their firm?s enhanced organizational capabilities
to achieve further cross-industry opportunities
of open innovation. In addition, managers may
extend their own firm?s capabilities by collaborating
with innovation intermediaries. However,
these external services may usually be used only as
a complement rather than a substitute for a firm?s
internal capabilities for managing open innovation
(Chesbrough, 2006; Lichtenthaler & Ernst,
2008).
Implications for Management Education
T
he open innovation framework has important
implications for designing management education
in the field of open innovation. Because of
the cross-functional character of innovation processes,
it is worth considering insights from open
innovation research in various courses, including
technology and innovation management, marketing,
strategy, and organizational behavior. In addition,
management educators may design specific
open innovation classes and training sessions. Although
open innovation will not constitute the
core topic of most classes, a broad range of students
should be aware of its associated opportunities
and risks. In this regard, our conceptual framework
may help structure management education
in the field of open innovation. In particular, prior
88 Academy of Management Perspectives February
open innovation research underscores the following
insights for management education.
First, students need to become aware of the fact
that innovation is increasingly interorganizational
and that open innovation is a requirement rather
than an option for many firms. An exclusive focus
on internal innovation in management education
(e.g., in marketing and innovation classes) would
be misleading because many firms now spend a
substantial portion of their overall R&D expenditures
on open innovation.
Second, students need to understand the opportunities
for gaining and sustaining a competitive
advantage based on a firm?s interorganizational
relationships. Open innovation may be an
important strategic move to profit from a firm?s
networks. For instance, it may help companies to
further benefit from their particular internal
strengths, such as by generating additional revenues
from licensing based on a strong technology
portfolio. In addition, open innovation may allow
firms to reduce the negative effects of potential
internal weaknesses, such as cutting new product
development time by acquiring technology from a
network partner. These topics may well be integrated
in existing corporate strategy courses.
Third, the cross-functional character of open
innovation processes, which goes considerably beyond
R&D, needs to be highlighted. This need to
examine open innovation across different organizational
functions applies to general management
students, but it is also critical in targeted management
classes for students in other disciplines, such
as engineering. For instance, awareness of the
open innovation framework may help reduce potential
not-invented-here tendencies of future
R&D employees.
Fourth, our conceptual framework underscores
that firms need to develop organizational capabilities
for successfully managing open innovation.
Accordingly, educators may address specific tools
for increasing firms? proficiency in managing open
innovation processes, such as tools for easing user
integration. In addition, it is worth addressing
potential barriers to the transformation of innovation
processes, such as resistance to change.
These issues are particularly worth discussing in
organizational behavior classes.
Fifth, students need to understand the differences
between value creation and value capture in
interfirm collaborations. For instance, an interfirm
technology alliance that is successful from an
alliance perspective does not necessarily lead to
enhanced financial performance from the perspective
of the focal firm. Instead, firms need to ensure
that they profit from open innovation by using
business models that are aligned with their open
innovation practices (Chesbrough, 2006). In this
regard, students may examine not only the role of
open innovation in large high-technology firms. It
is also worth studying the role of small and medium-size
firms and the importance of business models
for open innovation in service companies.
These business model issues can be well integrated
in existing entrepreneurship classes.
Finally, management educators need to point
out the important role of intellectual property,
especially patents, in facilitating open innovation.
In open innovation processes, patents often serve
as an enabler of technology transfers and not only
as a means to exclude competitors (Chesbrough,
2003). Accordingly, management education may
play an important role in helping firms fully exploit
the opportunities of opening up their innovation
processes.
Conclusion and Outlook
O
pen innovation is a growing trend in many
firms across industries. While most prior research
and most management initiatives have
focused on external knowledge exploration, the
two additional ways to open up the innovation
processes? external knowledge retention and external
knowledge exploitation?are gaining in importance.
Open innovation is not a recent trend.
It reflects a longer evolution of many firms? innovation
activities. Thus, open innovation seems to
be a sustainable development rather than a management
fashion. For many firms, open innovation
is a requirement and not merely an option
because they cannot do everything in-house. The
need to open up the innovation process at least to
some degree will most likely intensify in the future.
While firms often do not have any choice
other than to open up, firms differ in their ability
to capture value from open innovation. Accord-
2011 Lichtenthaler 89
ingly, firms need to develop particular organizational
capabilities for managing open innovation
processes. Our conceptual framework has shown
that these capabilities are affected by determinants
at multiple levels. For example, the development
of absorptive capacity at the firm level
may be aggravated by the attitudes of individual
employees. If employees display not-inventedhere
tendencies, the development of organizational
routines for enhancing absorptive capacity
will be difficult. In contrast, the successful development
of these capabilities may allow firms to
capture the benefits while avoiding the risks of
opening up the innovation process. However,
the development of organizational capabilities
often takes several years (Kale & Singh, 2009).
It is therefore important to avoid unrealistic
expectations concerning the benefits from open
innovation.
In particular, academics and managers should
not oversimplify the implementation of open innovation
strategies. Besides establishing open innovation
strategies, firms need particular managerial
capabilities, which differ substantially from
internal innovation capabilities. At the same
time, internal activities are critical because
open innovation usually does not result in a
complete outsourcing of innovation activities.
Instead, a firm?s internal activities are critical to
developing organizational capabilities for managing
the collaborations with external partners.
Consequently, interdependencies between internal
and external processes constitute a major
managerial challenge. Most companies have become
aware of the relevance of open innovation,
although not all of them yet act according
to these insights. Others, however, have not yet
recognized the importance and are in danger of
missing substantial benefits.
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