“SMEs are the largest number of companies in an economy, but they are under-researched in the open innovation literature.”3 Ramos4
Rahman and observe that “to provide innovative
services or products to the outer periphery of the customer chain, SMEs play an important role” and that “focusing innovation for SMEs would lead to a newer dimension of innovation research for better business and economic growth.”
Open Innovation within SMEs has its own unique opportunities but also very specific challenges. SMEs can normally react much faster
to opportunities in the market and
make speedier decisions due to their smaller size and reduced ‘red tape’ in the company. SMEs also often specialise in a particular area whereas
larger companies tend to
have a much wider focus. This can be luring to these larger companies who can then leverage from specialised IP already created by the SME. Being entrepreneurial and more prone to exploring new ideas also helps when embarking on an Open Innovation journey. There are however also real challenges facing the SME. Smaller companies have limited resources at their disposal which could be further stretched when introducing Open Innovation. There is also the high cost associated with securing and enforcing IP, which could place the SME at risk when partnering with a larger company.
Agree strongly Agree slightly
I consider our organisation knowledgeable on the topic of Open Innovation
The Innovation Journal
Neither agree nor disagree Disagree slightly Disagree strongly
Gassmann and Enkel5
identified three core
Open Innovation processes being: • Outside–In: increasing the company’s own knowledge base through the integration of suppliers, customers and other external knowledge and technology sources.
• Inside–Out: externalising the company’s knowledge and innovations by selling IP and multiplying technology by transferring ideas to the outside environment. • Coupled: combining outside-in with inside- out processes.
Although a distinction is made between open and closed innovation as two separate concepts, it should be noted that the practical reality of Open Innovation is generally a state
which lies between fully open and
fully closed. Organisations will move from a state of closed innovation to a state of open innovation over time, but still retain closed innovation aspects. There will remain parts of the innovation process which will be closed to the external environment of the organisation through patents, internal know-how, and other proprietary knowledge. Open should therefore be understood as an organisation which applies Open Innovation concepts, together with closed innovation concepts. The level of openness may however vary.
describes innovation as an enabler of organisational competitive advantage, making it essential not just to excel, but even to survive in the market place. “Empirical studies demonstrate that innovative firms tend to have higher rates of profits, greater market value, better credit ratings and stronger chances of surviving in the market.”7 and Gassmann3
Drucker6 Enkel argue that “enriching
the company’s own knowledge base by integrating
suppliers, customers, and
external knowledge sources can increase a company’s innovativeness”.
September 2012 | Management Today 69
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