[3] More recently, it is defined as "a distributed innovation process based on purposively managed knowledge flows across organizational boundaries, using pecuniary and non-pecuniary mechanisms in line with the organization's business model".
[12] Open innovation offers several benefits to companies operating on a program of global collaboration: Implementing a model of open innovation is naturally associated with a number of risks and challenges, including: In the UK, knowledge transfer partnerships (KTP) are a funding mechanism encouraging the partnership between a firm and a knowledge-based partner.
KTP initiatives aim to deliver significant improvement in business partners’ profitability as a direct result of the partnership through enhanced quality and operations, increased sales and access to new markets.
[17] To do so, startups can work in tandem with other institutions including large companies, incubators, VC firms, and higher education systems.
In the inbound open innovation model, startups can gain access to technology that will allow them to create successful products.
[17] This approach involves developing and introducing a partially completed product, for the purpose of providing a framework or tool-kit for contributors to access, customize, and exploit.
This approach is common in markets with strong network effects where demand for the product implementing the framework (such as a mobile phone, or an online application) increases with the number of developers that are attracted to use the platform tool-kit.
[13] While mostly oriented toward the end of the product development cycle, this technique involves extensive customer interaction through employees of the host organization.
Companies are thus able to accurately incorporate customer input, while also allowing them to be more closely involved in the design process and product management cycle.
[19] Similarly to idea competitions, an organization leverages a network of contributors in the design process by offering a reward in the form of an incentive.
What drove this idea is that, in the early twentieth century, academic and government institutions were not involved in the commercial application of science.
Modern research of open innovation is divided into two groups, which have several names, but are similar in their essence (discovery and exploitation; outside-in and inside-out; inbound and outbound).
The cathedral represented the conventional method of employing a group of experts to design and develop software (though it could apply to any large-scale creative or innovative work).
Fasnacht's adoption for the financial services uses open innovation as basis and includes alternative forms of mass collaboration, hence, this makes it complex, iterative, non-linear, and barely controllable.
[31] The increasing interactions between business partners, competitors, suppliers, customers, and communities create a constant growth of data and cognitive tools.
Open innovation ecosystems bring together the symbiotic forces of all supportive firms from various sectors and businesses that collectively seek to create differentiated offerings.
Accordingly, the value captured from a network of multiple actors and the linear value chain of individual firms combined, creates the new delivery model that Fasnacht declares "value constellation".
[32] West researched open innovation ecosystems in the software industry,[33] following studies in the food industry that show how a small firm thrived and became a business success based on building an ecosystem that shares knowledge, encourages individuals' growth, and embeds trust among participants such as suppliers, alumni chef and staff, and food writers.
A digital platform is essential to make the innovation ecosystem work as it aligns various actors to achieve a mutually beneficial purpose.
[37] Basically there are three dimensions that increasingly converge, i.e. e-commerce, social media and logistics and finance, termed by Daniel Fasnacht as the golden triangle of ecosystems.
[39] Bogers, M., Zobel, A-K., Afuah, A., Almirall, E., Brunswicker, S., Dahlander, L., Frederiksen, L., Gawer, A., Gruber, M., Haefliger, S., Hagedoorn, J., Hilgers, D., Laursen, K., Magnusson, M.G., Majchrzak, A., McCarthy, I.P., Moeslein, K.M., Nambisan, S., Piller, F.T., Radziwon, A., Rossi-Lamastra, C., Sims, J.