OPEN INNOVATION

Open Innovation

Open Innovation & Its Implications

Introduction

There has been increasing interest in open-source based innovation projects over the past couple of years. Here, the term “open source” is used to describe any innovative and/or research and development related project in which the innovator has, a priori, waived rights to the critical knowledge component of the innovation, for example a programming code, design principle, chemical formula, etc. Instead, the innovator makes the knowledge generally available to those interested via other means of diffusion, such as the Internet, journals or magazines, conferences or exhibitions, news lists or professional associations. An innovation refers to any new or significantly improved change resulting from research and development, whether improving existing insights and/or knowledge, or improving the functionality, performance or other value to the user, and/or the exploitation of entrepreneurial opportunities. Put another way, the term “innovation” is used in its broadest sense to refer to R&D related cases of intellectual capital, physical products, as well as processes related to production.

Three generic and sectoral examples of open source development are identified. Specific cases have been included from the following sectors: two specific cases from the industrial sector (the iron industry/steel pump engine and US steel production), one case from the sport equipment industry (surf/snow and skateboard manufacturers) and two specific cases from the software industry (The Homebrew Club and the Free Software Movement).

However, the cases differ with respect to time, technology, means of communication and threats to rival proprietary innovations. Notwithstanding, what the cases of open source innovations identified in this paper have in common is that the innovators have waived their private property rights to the innovation in question.

Open source innovators challenge mainstream economic theories of innovation in as much as they do not appear to require a return on their own investment of time and money, as prescribed in the proprietary rights approach to intellectual property (Demsetz, 1967; Teece, 1986). Moreover, open source innovators make no attempt to prevent free-riding, which has been one of the concerns of classical collective action theorists (Oliver and Marwell, 1988).

However, being involved in an open source innovation project does not necessarily preclude the existence of privately owned spin-off innovations resulting from the project. Open source software projects occasionally offer such opportunities in their license agreements, for example[1].

This makes a case for various hybrid models, in which elements from each generic model of agency can be integrated into new and hybrid models of agency. von Hippel and von Krogh (2003) have recently launched a similar idea under the label of the “private-collective innovation model”. In the following, we will elaborate this idea further while continuing to refer to the term “hybrid”, since this more precisely describes what they really are (offspring).

The hybrid innovation model is thus the offspring of two fundamentally different, coexisting agency models, enabling the entrepreneur to combine and integrate various elements from each archetypal model. During the innovations reported from the nineteenth century, various legal regulatory schemes coexisted, such as traditional patents and pools of jointly ...