When Innovation Stumbles: Limits to Open Innovation?

Open innovation, especially the inbound kind, has been heralded as a method that can raise an organization’s innovation performance by increasing the number and diversity of options for a firm to consider. This effect can... [ view full abstract ]

Open innovation, especially the inbound kind, has been heralded as a method that can raise an organization’s innovation performance by increasing the number and diversity of options for a firm to consider. This effect can be used for both the problem search and the solution search. In this research we investigate how a single company has built its entire business around an open innovation concept, involving a large community of contributors in most process steps, ranging from problem search and selection, to partial solution generation and selection. The actual downstream development process, however, is handled mostly internally. We study the effectiveness of this process by comparing the market performance of 26 of the company’s products relative to the average of competing products with help of information on sales and quality reviews. In addition, we compare the efficiency of the process by analyzing a single project from the case company in detail, and comparing it with a similar project conducted inside of a traditional product development firm.
Overall, we do not find superior outcomes for the open innovation setup, although the variety of products it produces in a relatively small firm is remarkable. We argue, however, the power of the open innovation process that is clearly visible in the earlier phases, also carries with it the kernel of the problem that led to non-superior outcomes for many products (and even the ultimate bankruptcy of the firm). We close with a discussion of the difficulty of linking two conflicting business models to each other, and propose avenues for further research.