Open Innovation, when firms borders perish

Open innovation is a relatively new approach to developing a business model for managing innovation within companies and public organizations. It was introduced by Chesbrough1as a business model concept with a more flexible approach to innovation management that would stimulate the flow of external knowledge into the company as well as the transfer of internal know-how and technology to external parties. This in turn would increase the effectiveness of innovation management and thus the innovation outcome and eventual revenue and profits.This open innovation approach has added a new perspective on conducting innovation activities. Before, innovation was mainly an internal, in-house R&D activity for most firms.In particular, for large firms in the 1980s and early 1990s, the main strategy was to grow larger through diversifying into related markets. The internal R&D department then contributes through developing platform technologies that are applied in a variety of products in each of the lines of business. Following this strategy, R&D departments could learn from one line of business and apply that to another line of business. In this approach the company would benefit from R&D department economies of scope. The returns of R&D are then expected to be high, since the findings from single R&D activities could benefit various kinds of products and multiple lines of business.Despite these positive contributions of internal R&D and closed innovation, the open innovation approach has gained much interest among firms, especially among large firms.Similarly, smaller firms such as SMEs (small and medium-sized enterprises) and start-ups and research organisations such as universities and academic institutes do benefit as well from the trend of more open innovation. The search for more flexibility in their R&D activities has turned the interest of established firms toward small and innovative firms that are developing new technologies, as well as research organisations that are conducting basic research and new technology development. These considerations result in a number of interesting questions to investigate, such as, what are the reasons that large companies changed their innovation toward a more flexible and open innovation approach? What actually is an“open innovation” approach and how does it differ from traditional in-house R&D and innovation activities? What are the (dis)advantages and the associated challenges of open innovation?Furthermore, it is an approach that emerged in developed countries. The question at hand is also how it manifests in emerging countries. Is it relevant as well and how do SMEs in emerging countries engage in open innovation activities? In order to answer these questions, we discuss the principles of open innovation and how it becomes more beneficial for mostly small firms within emerging economies. We then discuss the case of Turkey and the effects of innovation strategy and university collaboration on the performance of Turkish SMEs.