Open Innovation and Globalization

Final report: Open Innovation in Global Networks can be found here.

Over the past decade the intensity and multiplicity of trans-border economic transactions have accelerated. With this globalisation a more competitive global economy unfolds. In this changing environment business strategies are being reformulated. Some interesting trends appear to be:

  • Firms are turning to a more open model of innovation that makes more extensive use of research results that originate from outside their firms’ boundaries, whether in the public or private sectors (OECD, 2001).
  • Innovation is being “democratized”, which means that users of products and services—both firms and individual consumers—are increasingly able to innovate for themselves (von Hippel, 2005).
  • Increasing globalisation of R&D (esp. of multinational firms), industry structure and value chains. Open innovation is extending across national boundaries, R&D is becoming more footloose, industry-science relationships and technological communities are globalizing, and new global players are emerging, challenging OECD economies to remain competitive.
  • Business R&D is increasingly linked to business strategy. Business R&D investments are no longer made in a support role that is only indirectly linked to business objectives, but are driven by increasingly linked to the development of new products, processes, and services, and firms actively seek to demonstrate financial returns on their R&D investments.

The open innovation model is a much more dynamic and less linear approach where companies look inside-out and outside-in. Increased R&D cooperation and higher reliance on external sources have become important ways of knowledge sourcing in order to generate new ideas and bring them quickly to the market. At the same time companies commercialise both their own ideas as well as innovations from other entities, in which academic research occupies a major place. Companies may also spinout technologies and intellectual property that were internally developed but are determined to be outside the core business and better developed and commercialized by others. Multinationals heavily link up to startup-firms, spin-offs and the public R&D system through their permeable boundaries. Companies. Solid boundaries are transformed into a semi-permeable membrane that enables innovation to move more easily between the external environment and the companies internal innovation process. The project aims to identify how globalization changed companies’ business strategies (e.g. organization of R&D, strategic alliances and localization decisions on R&D) and what can be learned from that for policy. The project will help explain the changing nature of innovation (within manufacturing and services) and its strategic importance to OECD countries. And it should lead to a sounder basis for policies to strengthen growth, employment and productivity in OECD countries in a context of increased outsourcing and globalisation.

Date of expiration: Mid 2008