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Abstract
This paper provides a review of the current state of academic and policy-level debates on “open innovation” by elaborating on the relevance of the concept of open innovation for innovation policy-making in catching-up economies. The paper shows that paradoxes and contradictions exist between the “mainstream” innovation discourse and the development challenges of the catching-up countries that have lead to “de-contextualization” of the innovation policy discourse. The paper argues that applying the concept of open innovation in its ideal-type form to the catching-up context is likely to reinforce these de-contextualization tendencies. This problem can be remedied by more conscious attention to the basic contradictions and paradoxes, which requires a more comprehensive and systemic analytical focus on innovation and technological development at the levels of firm, industry and policy.
Acknowledgements
The research for this paper was partially funded by Estonian Science Foundation grants 8418 and 7577.
Notes
1. For the role of open innovation in small and medium-sized firms, see Van de Vrande et al. (2009). For the role of open innovation outside high-tech sector, see Chesbrough and Crowther (Citation2006) and Chesbrough (2011). For the relevance of open innovation strategies outside the core technology economies, i.e. China, see Liu (2008).
2. The failure of EE and LA innovation and development policy is recognized at least in the academic debates, while the public and policy discourse has usually followed a perception that the development of LA has been a failure and the development of EE more of a success story, see also Kattel et al. (2009), Tiits et al. (2008).
3. For a comparison between EE and LA, see Kattel and Primi (2010) and Karo and Kattel (2010b).
4. Further, Mowery (2009) has argued that the recent debate on innovation (i.e. changes in industrial R&D processes and strategies and the emergence of open innovation debates) is a historically recurrent process that in the late nineteenth and early twentieth centuries revealed itself in traditional industries and in the late twentieth and early twenty-first centuries in the new industries based on ICT and biotech, for example. Therefore, it cannot be seen as a paradigmatic change, but rather as a path-dependent development that according to Mowery has also been heavily dependent on public policies.
5. Methodologically this has been paralleled by a concentration on either firm-level case studies (of mainly successful/innovative firms) or more systemic studies of industries and systems of innovation to encompass the dynamic inter-linkages between firm-level capabilities and socio-economic capacities. Concepts of clustering, agglomerations, linkages and others highlight the mutually reinforcing effects of these levels. Analytically and for the sake of policy analysis, though, the different implications of these levels are of importance as the impacts of one on the other are, as this paper argues, contextual.
6. The concept of open innovation in brief argues that, in addition to the traditional modes of innovation relying on the firm-level capacities, the new modes of innovation that seek to benefit from the external capacities (and internally underutilized internal capacities by putting them on the market) are becoming an integral and equally important part of the business and R&D strategies of companies. Thus, open innovation does not fully replace the old, but complements it with something new.
7. The open innovation concept has been linked (Chesbrough et al. 2008) to several levels of analysis: firm level; inter-firm level; level of institutional set-up. In the same line, Vanhaverbeke (2008) has offered a five-level distinction: intra-organizational networks; firm level; dyad level; inter-organizational networks; and national/regional innovation systems. However, a literature overview on open innovation by Fredberg et al. (2008) has suggested that, so far, the topic of open innovation has mainly been analyzed as a pure innovation issue, and other related aspects and consequences of organizing open innovation have not been included in the open innovation literature. Therefore the overview indicates that there are only few attempts to look at the industrial dynamics and beyond the firm level in discussing open innovation (see e.g. Berkhout et al. Citation2006, Bromley Citation2004, Christensen et al. Citation2005, Cooke Citation2005a, Vanhaverbeke 2008). Works by de Jong et al. (2008) and Vanhaverbeke et al. (2008) are the first comprehensive attempts to look at the public policies fostering open innovation. Yet both of these accounts are sensitive to the need to look further into the developing country specificities.
8. We use here Nelson and Winter (1982), and Rodrik (2007), respectively, as perhaps the most succinct and well-known expressions of both evolutionary and neoclassical thinking and analysis on innovation and development. While neither exhausts the possibilities of evolutionary or neoclassical thinking, both can be viewed as canonical for each tradition, at least in the catching-up context.
9. For excellent summaries on the differences between the two schools, see Cimoli et al. (2006) and Drechsler (2004).
10. As expressed by Dosi and Soete (1988, p. 418): “Technology … cannot be reduced to freely available information or to a set of ‘blueprints’: on the contrary, each ‘technological paradigm’ with its forms of specific knowledge yields relatively ordered cumulative and irreversible patterns of technical change”.
11. See e.g. Sachs (2008, p. 205), who argues that “the very science and technology that underpin prosperity in the rich world are potentially available to the rest of the world as well”. Similarly, the World Bank asks (2008b, p. 3; see also World Bank 2008a, p. 18): “[w]hy is it that existing proven technologies are frequently not adopted by people who presumably would benefit most from these technologies?”.
12. As importantly, in evolutionary understanding, technology is a man-made comparative advantage that creates havoc in the Ricardian comparative advantage model (for a brilliant case study, see Murmann and Landau 1998). What technological development shows is that the key is not trade as such but what kind of trade and with whom (see Gomory and Baumol 2004 and Palley 2006 for excellent discussions).
13. Key figures in this tradition are Freeman (1974, 1987), Freeman et al. (1982), Freeman and Louçã (2001), Dosi (Citation1982) and Perez (1983, 2002).
14. Also, Chesbrough's original work and theorizing (2003, 2006, 2008a, 2008b) is closely linked to observed practical problems that modern companies have been facing, some being firm-level (e.g. problems of discrepancies between motivation and reward systems of R&D units vs business units, resulting in the underutilization of internal patents, the shelving of ideas and therefore the creation of corporate costs), others being caused by developments at the socio-economic level (e.g. the increasing practice of university patenting of public research, resulting in further barriers to the diffusion of knowledge and slowing down the speed of innovations). The research so far has concentrated mainly upon what particular firms can do in a generic environment that is influenced by both internal and external factors, but the variables found in the generic environment are largely taken as given or exogenous to the strategies of firms.
15. Chesbrough (2003, Figures 1-1 and 1-3, 2008b) has argued that the open-innovation approach provides a solution to the perceived problems of rising costs of innovation (increasing costs) and shorter product life on the market (decreasing revenues) by transforming R&D and IP strategies so that the increasing costs of innovation are avoided through the leveraging of external development, and decreasing revenues are re-established by creating new revenues through licensing, spin-offs, sales/divestiture, etc. Therefore, the argument advocates supplementing the basic/core business model or core competencies, based on internal investments in development and revenues from their “own market”.
16. This argument is also linked to the discussions of asymmetric knowledge capabilities of Cooke (2005a, 2005b) or learned organizational capabilities of Chandler (1990, 2005), but also more generally to the consensus of innovation theories that we have analyzed above. Also, this would support an argument that open innovation strategies seem to be particularly useful for increasing the competitiveness or technological advantages – by accommodating business models to the changing external conditions – of companies that have already achieved a considerable first-mover advantage and have accumulated significant technological and organizational capabilities through cumulative learning. Suffice it here to mention the description by Chandler (2005) of the foundations of development of RCA in consumer electronics and IBM in computer industry, but also the description by Mowery (2009) of the development of US industry at the beginning of the twentieth century. In understanding these developments, the key factor is the importance placed on the initial starting position – the level of learned organizational capabilities; the existence of barriers to entry; the potential to benefit from economies of scale and scope, i.e. first movers creating their industries by establishing integrated learning bases that embody their technical and functional capabilities (Chandler 2005) – compared with existing but also emerging competitors. We would argue that the open innovation approach does not explicitly emphasize these factors, but clearly takes them into account. At the same time, Amsden and Chu (2004) recognize that the innovation theory coming closest to understanding the context of catching-up economies is the theory of first mover advantage, but it still needs to be refined (they propose the theory of second mover advantage) to understand the contextual differences, which are reflected in capability and incentives differences and policy needs.
17. Chesbrough (2006) argues that the openness of business models results in two types of benefits: outside-in processes and overcoming the problem of “not invented here” would enable the companies to “purchase-in” technologies, patents and knowledge needed for increasing the value-added of the core processes of companies; inside-out processes and overcoming the problem of “not sold here” (which can be seen to be a more fundamental transformation in the business model proposed by the open innovation concept) would enable companies to create extra value from their core processes and technologies (through licensing, etc.) and from selling the redundant technologies and knowledge that have resulted from the loose coupling between the R&D processes and business models. Companies in catching-up countries are by definition dependent on the outside-in processes, but their core problem is the challenge of moving up the value-chain in production and technological development.
