Open or closed?
So, what is better when working with innovations: to use only the internal resources of the firm, thereby protecting its intellectual property, or to partially open the development for cooperation and get a great benefit as a result?
The open innovation model has several business benefits. First, it allows costs to be shared among the participants. This makes it cheaper for each party to develop, test, and bring new products to market. Second, it helps you bring products to market faster. We save time since the company doesn’t need to provide an entire development cycle. This, in turn, is a competitive advantage for the company. Third, it opens up new opportunities for future innovation. Cooperation and joint projects contribute to the emergence of new markets and sources of income .
On the other hand, this model also has its drawbacks. Open innovation always carries the risk of disclosing confidential information that is not intended to be shared. This can deprive the company of competitive advantage in a new market. Also, when multiple parties are involved, it is difficult to measure, track and regulate the contribution of each party to the overall project. Therefore, it can be difficult to divide the total profit.
Speaking of innovations created outside the company, it is extremely important that the company is able to find and integrate innovative ideas inside its internal processes. Several studies highlight the importance of the “absorptive capacity” in the firm – its ability to recognize the value of new information, assimilate and apply it for commercial purposes. This ability can and should be developed through continuous improvement of internal innovation processes. This can be viewed as both an advantage and a disadvantage: open innovations cannot be effective for a company on its own, only together with sufficiently developed internal processes [4, 5].