The Innovation Value Chain of Outbound Open Innovation Essay Sample

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Open innovation is the focus of academic attention. As one type of open innovation, outbound open innovation is central to the survival and growth of firms, and ultimately to the health of the economies of which they are part especially in the era of knowledge economy. This paper demonstrates the use of a conceptual framework and modeling tool, the innovation value chain (IVC), through the construction of an innovation value chain of outbound open innovation framework, and reveals the operation mechanism of desorptive capacity, and provides a theoretical basis for implementation of the outbound open innovation. Keywords: Outbound Open Innovation; Innovation Value Chain; 1.Introduction The pressures of globalization have forced firms around the world to change their innovative ways.

For years, firms have relied on the closed innovation model to be competitive and bring new product and services to the market (Chesbrough, 2006). Chesbrough and Crowther (2006) define two types of open innovation companies may engage in: inbound open innovation and outbound open innovation. In the case of outbound open innovation, companies do not only rely on internal paths to market, but also look for external organisations that are better suited to commercialise a given technology. In this paper, we focus on outbound open innovation. 2.Conceptual foundations Traditionally, most industrial firms focused on internally developing new technologies and applying them in their own products(March, 1991; Calantone and Stanko, 2007).

(Chesbrough, 2003) involves both inflows of knowledge to and outflows of paths to accelerate internal innovation knowledge to pursue external market for proprietary innovations(Chesbrough et al., 2006). We know that there are basically two ways to adopt open innovation in a company: the inbound process, which exploits external sources of innovation in order to integrate external know-how and innovation into the company; The outbound process, which utilizes external innovation opportunities with internal capabilities and resources. This outbound process, and Crowther(2006), refers to named outbound open innovation (OOI) by Chesbrough the practice of establishing relationships with external firms with the purpose to commercially exploit technological opportunities. The practice of OOI often takes the form of out-licensing agreements(Anand and Khanna, 2000), involve the exchange of knowledge disembodied from products in the form of technologies, patents, know-how open ideas.

However, i.e., prior open external innovation research has focused on inbound innovation, acquiring technology(Enkelet al., 2005; Van de Vrande et al., 2006). By contrast, the recent increase in outbound open innovation is a trend from practice, which has been relatively neglected by academic research (Lichtenthaler and Ernst, 2007). By way of outbound open innovation, firms attempt to achieve monetary and strategic  opportunities. Regarding monetary benefits, several pioneering firms, e.g., Texas Instruments, generated hundreds of millions of dollars in annual licensing revenues(Rivette and Kline, 2000). The practice of OOI is increasingly regarded as a strategic activity by firms, which can profit from their own innovations without investing in complementary assets(Teece, 1986). Not only small firms whose main business is to generate and sell technologies, make extensive of OOI practices but also large corporations such as IBM and Dupont have started to generate additional revenues from the out-licensing of their knowledge assets(Chesbrough, 2003; Arora et al., 2001).

From the above analysis we can conclude that the outbound open innovation can really improve enterprise performance. Then, we would like to know how is it to create value for those companies? It is a very sophisticated problem, previous researchers have not make an in-depth analysis for a long time. In order to unravel this ‘ mystery ’, we have to introduce the innovation value chain to help us unlock the ‘secrets’. Van de ven et al.(1999) pointed out that innovation is a variety of roles intertwined, and a complex process of intervention. The innovation process is poorly understood, and at the same time innovation is being enveloped in an unobservable ‘black box’. Subsequently, Hansen&Brkinshaw(2007), Roper, et al.(2008) and other scholars drew on porter’s value chain theory, and introduced the idea of the ‘chain’, the knowledge commercialization of the innovation process is seen as a flow value chain, the three main components including knowledge production, knowledge transfer and knowledge diffusion.

Until now, the understanding of the essence of the innovation process has been greatly enriched, and the ‘black box’ of the innovation process seems to have been gradually open. It is the time to appeal to the ‘black box’ evaluation of innovative production process should be extended to ‘white box’ evaluation. 3. Modelling Framework Firms may open up their innovation processes on two dimensions. While inbound open innovation refers to the acquisition of external technology in open exploration processes, outbound open innovation describes the outward transfer of technology in open exploitation processes. It goes without saying that open innovation can bring huge gains for the enterprise. However, unit now how outbound open innovation to create value for the enterprise has not been discussed in detail , this paper attempts to draw on the innovation value chain tools to elaborate the process of value creation of outbound open innovation.

Based on roper et al. (2008)’ division of the theory of the three stages of the innovation value chain, according to the characteristics of the outbound open innovation process, in this paper we creatively divide the innovation value chain of outbound open innovation into three stages (see figure 1): knowledge creation, knowledge output and knowledge control to explore outbound open innovation value creation process of the ‘black box’. Knowledge creation is a continuous and self-transcending process through which one transcends the boundary of the old self into a new self by acquiring a new context, a new view of the world, and new knowledge. In short, it is a journey ‘from being to becoming’. Nonaka, Toyama and Konno start from the view of an organisation as an entity that creates knowledge continuously, and their goal is to understand the dynamic process in which an organisation creates, maintains and exploits knowledge.

In the knowledge output stage, the enterprise own technology will be transfered to the outside of organizations boundaries in commercial or non-commercial way. The most common application of knowledge is to transfer or sale knowledge just like a product, thereby gain the knowledge value. In the knowledge control stage, we may improve enterprise performance through  the control of the knowledge. Finally, sum up the effect path of outbound open innovation on enterprise performance. In this three stages, each stage affect firm’s desorptive capacity, thereby to improve enterprise performance(see figure 2). Therefore, it is necessary to identify influential factors in each stage of the innovation value chain of outbound open innovation, those key factors will affect the level of firm’s desorptive capacity.

Knowledge Knowledge output 1.Selection 2.desorptive capacity Knowledge control 1.Feedback 2.Enterprise performance framework, but lack of empirical support. In subsequent research, through empirical data, we will further verify the mechanism of the innovation value chain of outbound open innovation framework operation mechanisms, in order to provide advice for enterprise practices of the outbound open innovation.


Anand, B. N. and Khanna, T. (2000). The structure of licensing contracts. Journal of Industrial Economics, 48, 103-135. Arora, A., Fosfuri, A. and Gambardella, A.(2001). Markets for Technology, Cambridge, Massachusetts: The MIT Press, 338 pp. Calantone, R. J. and Stanko, M. A.(2007) Drivers of outsourced innovation: an exploratory study. Journal of Product Innovation Management, 24, 230–241. Chesbrough, H. W.(2003). Open innovation: The new imperative for creating and profiting from technology. Boston: Harvard Business School Press. Chesbrough, H.(2006). The era of open innovation D. Mayle (Ed.) Managing innovation and change. Chesbrough, H.(2006) Open Business Models: How to Thrive in the New Innovation Landscape. Boston: Harvard Business School Press. Chesbrough, H. and Crowther, A.K.(2006) Beyond high tech: early adopters of open innovation in other industries, R&D Management, Vol. 36, No. 3, pp. 229-236. Hansen, M.T., Birkinshaw, J., 2007, The innovation value chain, [J] Harvard Business Review 85(6): 121~130. I. Prigogine, From Being to Becoming: Time and Complexity in the Physical Sciences, W. H. Freeman & Co, San Francisco, CA (1980). Laursen, K.,& Salter, A. (2006). Open for innovation: The role of openness in explaining Innovative performance among UK manufacturing firms. Strategic Management Journal,27:131–150. Lichtenthaler, U. and Ernst, H.(2007) External technology commercialization in large firms: results of a quantitative benchmarking study. R&D Management, 37, 383–397. March, J. G.(1991) Exploration and exploitation in organizational learning. Organization Science, 2, 71–87. Rivette, K. G. and Kline, D. (2000) Rembrandts in the Attic: Unlocking the Hidden Value of Patents. Boston: Harvard Business School Press. Roper S,Du J,Love J H.Modelling the Innovation Value Chain[J].Research Policy,2008,37(6-7) : 961-977. Teece, D. J.(1986). Profiting from technological innovation: implications for integration, collaboration, licensing and public policy. Research Policy, 15, 285–305. Van de Ven, A., Polley, D., Garud, R., Venkataraman, S., 1999, The Innovation Journey, [M] Oxford University Press, New York.

1.Creation Within a unit 2.Cross-units 3.external

Figure1. The flow chart of the innovation value chain of outbound open innovation.

Knowledge creation Desorptive capacity Knowledge control Enterprise performance

Knowledge output

Figure2. the framework of the innovation value chain of outbound open innovation. 4.Conclusions This paper serves as a literature review and reference to the leading works in the area of the innovation value chain of outbound open innovation, integrates many previous findings. In previous research and practice, we just ignored the importance of the outbound open innovation and has not been able to reveal the complete operation mechanism. Through the construction of an innovation value chain of outbound open innovation framework, this article reveals the operation mechanism of desorptive capacity and provides a theoretical basis for implementation of the outbound open innovation. Based on the relevant research literature derived from logical reasoning, this paper constructed an innovation value chain of outbound open innovation

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