1. When Does OI Work?
OI started as a normative managerial theory in a book from HBS Press. So one limit on OI is on when it works and when it doesn’t work.
The question of unintended side effects for open innovation is one area where we need a lot more work since academics are still publishing open innovation success cases for the most part. Companies are trumpeting their successes; consulting firms are packaging open innovation services for interested clients – none of these groups so far have had much to say about open innovation failures.
As Marcel Bogers and I surmised in citing this lack of open discussion of managerial failure:
Finally, little is known about the failures of open innovation. Chesbrough speculates that this is because companies and consultants are trumpeting their successes and hiding their failures, thus making it difficult for researchers and managers to learn from those failures (Pop, 2012).
2. What Is and Isn’t OI?
Perhaps Chesbrough’s first OI definition was published in 2006:
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. Open Innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology (Chesbrough 2006: 1)
The latest Chesbrough definition of OI is
open innovation is a distributed innovation process based on purposively managed knowledge flows across organizational boundaries, using pecuniary and non-pecuniary mechanisms in line with each organization’s business model. (Chesbrough & Bogers, 2014: 27).
It allows for non-firm organizations to utilize OI, although (unfortunately) it implies that the external partner must be an organization — ruling out out organizations sourcing innovations from individuals (e.g. crowdsourcing).
Still, from this, I would suggest at least two limits on the definition of open innovation.
- Open. Knowledge flows across firm boundaries are needed for it to be “open”. By this measure internal contests may use OI (or crowdsourcing) principles, but do not involve firms being open (in the sense of having permeable firm boundaries).
- Innovation. I sometimes see “open innovation” papers with no evidence of an actual innovation (at least as defined by Chris Freeman or the pioneers of innovation studies.) Getting a crowd to provide free user generated content on your website may be (or once have been) an innovative business model, but it’s not open innovation.
3. What are the Limits to OI’s Theoretical Predictions?
There is a minor debate whether OI is a theory, paradigm, framework, phenomenon, or something else. (A similar and much longer argument exists over the “resource-based view” vs. “resource-based theory”). That said, empirical (including qualitative) OI academic research over the past 10+ years has contributed to theory by making causal claims about what happens and what doesn’t.
Every theory in any field has boundary conditions — conditions when the theory applies and when it does not. These are the limits of the theoretical predictions that can be made by a theory (or paradigm etc.)
Sometimes these limits demark a frontier: I would argue that crossing firm (organization) boundaries is an essential prerequisite. At the same time, that frontier can change:
- Chesbrough’s 2003 HBS book emphasized economic transactions between organizations, but West & Gallagher (2006) identified the importance of individuals as a source of innovation (and that they might have non-economic motives).
- The HBS book assumed that OI only applied to profit-making firms, but Chesbrough and Di Minin (2014) have shown how the principles of OI have been applied in government and not-for-profit settings.