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Introduction to the Open Innovation Paradigm

This chapter introduces the teacher and the student to the open innovation paradigm. It points out the rationale for open innovation from the historical point of view and describes the differences between closed and open innovation. As open innovation has been observed in numerous contexts, this chapter addresses theories related to open innovation on one side and practical implications on the other. We discuss the incentives for firms to engage in open innovation, as well as the shortcomings from engaging in it. Competitiveness results from generating value propositions that differ from competitors’ value propositions. Innovation increases the customers’ value propositions and generates revenues for innovators or owners of innovation (Schumpeter, 1934). Innovation also generates value to the society, even if the innovator does not capture the majority of its profits (Teece, 1986). This chapter first defines innovation and then explains how open innovation helps firms to innovate easier and faster. Section 3.1.1. “Why open innovation?” defines innovation and describes how fi rms innovate. It augments the historical perspectives on innovation by depicting the differences between linear technology-driven innovation, linear market-driven innovation and the chain link model of innovation, thereby portraying the rationale for the theory of open innovation. Section 3.1.2. “What is open innovation?” defines open innovation by presenting the differences between open and closed innovation on one side, and inbound, coupled and outbound innovation on the other side. Section 3.1.3. “Main incentives for open innovation” explains how firms benefit from engaging in open innovation, as well as the conditions that need to be satisfied for fi rms to extract value from open innovation. Section 3.1.4. “Open innovation in a broader context” describes theories that adopt or can be associated with open innovation. Section 3.1.5. “Critique to open innovation theory” exemplifies the drawbacks of the open innovation theory by explaining theoretical shortcomings and managerial implications.

open innovation ; closed innovation ; theoretical models ; governance modes ; innovation incentives

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