Research indicates open innovation gaining momentum among large U.S. and European companies
October 9, 2014
WEST LAFAYETTE, Ind. - Large U.S. and European companies embrace the concept of open innovation, but firms are still learning how to get better results by combining external input with internal ideas to advance their technology, processes or services, a new study co-led by a Purdue University researcher shows.
Purdue technology and innovation professor Sabine Brunswicker and Henry Chesbrough, a professor at the University of California, Berkeley, surveyed 125 large firms in the United States with annual sales in excess of $250 million. Their study concluded that open innovation is widely practiced and that companies are significantly boosting management support to enhance activity for the practice.
The study results are published in a paper titled, "A Fad or a Phenomenon? The Adoption of Open Innovation Practices in Large Firms," in the March-April edition of Research Technology Management. It represents the first large-scale survey to probe the extent to which open innovation is being practiced in large firms.
"Open innovation is adopted by firms from low-tech as well as high-tech sectors. For example, wholesale, trade and retail firms reported engaging in some form of open innovation," said Brunswicker, who also is director of the Research Center for Open Digital Innovation at Purdue's Discovery Park. "This suggests that open innovation is not just a high-tech phenomenon driven by firms in the information and communication technology sector."
Yet the degree of adoption varies across sectors, the study showed. In high-tech manufacturing sectors and for trade and retail firms, open innovation is more widely adopted than for low-tech manufacturing and financial services.
The term open innovation, which has been gaining momentum in recent years, builds on a concept from the 1960s when companies expanded their cooperative efforts in the research and development areas, coupling external input with internal ideas for advancing their technology or innovative processes and services.
Based on the research, Brunswicker and Chesbrough said 78 percent of businesses globally practice open innovation today and that no company that initially embraced open innovation has abandoned the concept to date. In addition, 71 percent of those businesses have increased management support and 82 percent have increased open innovation activity.
"Overall, our results indicate that open innovation is not yet pervasive among large companies, but it is widely practiced," said Chesbrough, executive director of the Center for Open Innovation and faculty director of the Garwood Center for Corporation Innovation in the Haas School of Business at UC-Berkeley.
The median open innovation experience among the survey sample was five years. More than 30 percent of the responding firms claimed that they had been practicing open innovation much longer, some even before 2003.
Interestingly, the study indicated that internal employees were considered the most critical source of innovation ideas, data countering the notion that open innovation may be a way to reduce internal research and development staff.
Indeed, the study shows that employees are a key element in their open innovation efforts, Brunswicker said. R&D managers and researchers are frequently concerned that open innovation is a way to eliminate personnel, so the continued importance of internal employees in the context of an active, open innovation program is worth highlighting.
In addition, the results suggest that firms are more likely to receive freely revealed information than they are to provide. In other words, large firms are net takers of such information. "This disparity suggests that startups, small and medium-sized companies, universities and others need to be alert to the possible exploitation of freely provided knowledge by large firms," Chesbrough said.
A number of factors may influence a firm's satisfaction with its open innovation efforts. As top management increases its support of the open innovation program, satisfaction with the experience also increases.
"This evidence suggests that open innovation is not a fad, but rather a persistent phenomenon," Brunswicker said. "On the other hand, although firms are positive about their open innovation programs, their positivity is just lukewarm. Yet the fact that no firm had abandoned open innovation in spite of these lukewarm perceptions suggests that firms are still learning how to get better results with open innovation."
Earlier this year, Brunswicker launched the Research Center for Open Digital Innovation in Purdue's Discovery Park, focused on equipping future systems designers, managers and leaders with new guidelines and database tools to solve complex problems in areas such as health care, regional development, financial services and smart manufacturing.
The center, which is affiliated with the well-established Burton D. Morgan Center for Entrepreneurship at Purdue, is building on the university's strengths in computational systems and modeling, technology, engineering, the sciences and entrepreneurship to advance research and offer research-based interdisciplinary graduate education in innovation.
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Henry Chesbrough, 510-642-4041, email@example.com
A Fad or a Phenomenon? The Adoption of Open Innovation Practices in Large Firms
Sabine Brunswicker Purdue University,
Henry Chesbrough, University of California, Berkeley
We surveyed 125 large firms in Europe and the United States with annual sales in excess of $250 million to examine the extent to which large firms are now practicing open innovation. Our results showed that open innovation is not a passing fad: 78 percent of the firms report practicing open innovation, none have abandoned it, and 82 percent of those practicing open innovation report that it is practiced more intensively today than three years ago. We also asked about specific practices for “outside-in” and “inside-out” open innovation. We found that customer co-creation, informal networking, and university grants were the three leading inbound practices in 2011; crowdsourcing and open innovation intermediary services were rated lowest in importance. Joint ventures, selling market-ready products, and standardization were the three leading outbound practices; donations to commons and spinoffs were least frequently used. We also found that large firms are more likely to receive freely revealed information than they are to provide such information.