Researching Open Innovation in SMEs

The following sections are included:

• About the Editors
• About the Contributors
• Contents
• Introduction

This chapter provides a systematic review of the open innovation (OI) research carried out within the context of small and medium-sized enterprises (SMEs). The chapter should provide an accurate understanding of current literature about OI in SMEs, and it elaborates many future research avenues. The recent increase in the number of publications in this field shows that it has gained the attention of the academicians. The existing research shows that SMEs organize and manage OI in an entirely different way from large companies. SMEs get involved in OI based on their own strategic needs, and OI mechanisms have to be designed differently for SMEs.

The chapter maps the research through Web of Science — Core Collection database. We investigated the “OI in SMEs” literature from January 2003 till June 2017. A total of 118 articles, eight book chapters, and six books are analyzed. The discussion is mainly categorized into six broad themes: adoption of OI, the benefits of OI, challenges, role of networking, sectoral patterns, and the role of policymaking. The chapter concludes with several avenues for future research in the field.

This study explores the process of open innovation (OI) implementation in small and medium-sized enterprises (SMEs), with the aim of shedding light on the factors that may either enhance or undermine effectiveness in different contexts. The hypothesis of different paths of OI implementation is shaped across three theoretical dimensions: (1) the combination of open innovation approaches (the choice of the governance mode); (2) the type of knowledge exchanged (scientific knowledge, technological knowledge, product/ market knowledge); and (3) the sectoral innovation system to which the company belongs (characterized by different technological opportunities, innovation sources, and appropriability regimes). A multiple case study design has been adopted in order to investigate how and why the process of OI implementation in SMEs may be bounded by “hidden costs” hampering effectiveness. The study delivers four different paths of OI implementation (science-oriented, technology-driven, application-oriented, and community-driven) and demonstrates that SMEs in each path differently seek opportunities and face different risks.

Notwithstanding the paradigm of open innovation that was introduced and studied within large companies, in the last decade, studies on this concept in small and medium-sized enterprises (SMEs) have experienced a rapid growth (e.g., van de Vrande et al., 2009; Spithoven et al., 2013). However, several issues remain unexplored. Theories and models for the management of open innovation in this context are not well established in the literature, but are necessary for SMEs’ managers. The aim of this chapter is to understand, through a systematic review of the literature, if and how the specific characteristics and behaviors of SMEs affect their implementation of the open innovation paradigm. Specifically, a “4W open innovation model” including motives, facilitators and hindering factors (Why/why not), type of exchanged knowledge (What), practices and activities (hoW), and actors (With whom) is proposed. The results allow us to point out a future research agenda.

People at the grassroots level have been developing a growing number of frugal innovations (FIs). Many of them do not have formal education and access to science and technologies. FIs are playing important roles for inclusive development. Open innovation (OI) has been studied in the context of large firms, small and medium-sized firms, or high-tech industries. However, OI has not been explored in the context of FIs. In this chapter, I explore the role of OI in three FI cases that emerged in rural India. I also explore the role of these cases for inclusive development. The chapter enhances our knowledge about OI and expands the scope of OI to new application areas. I find that small firms that develop FIs at the grassroots level need more support in the development stage than in the commercialization stage. They need extensive engagement in OI activities, such as networking, collaboration with different partners, and scouting. FIs play a significant role in inclusive development.

This chapter aims to shed light on the role of the top executives in open innovation in small firms, providing a microfoundation framework for open innovation adoption, which future research will be able to empirically test. Recognizing that open innovation adoption implies an organizational routine change, we suggest that individuals’ characteristics, such as risk-taking propensity and endurance as well as their knowledge and network, play important roles in moderating open innovation adoption. We argue that the personal characteristics of top executives, such as innovativeness, and the views managers hold about openness can contribute to the development of an open innovation-friendly atmosphere, which, in turn, increases the momentum of organizational change. Also, top executives’ education and career experience can help firms to develop the necessary capabilities and personal relationships for expanding the company’s boundary. We validate this interpretation through explorative content analysis on data from 30 small firms.

Access to external knowledge to accelerate innovation is becoming a key business process as firms continue to recognize the importance of going beyond their boundaries when advancing products and services. This chapter considers the increasingly important case of technology-driven service innovation in the context of crowdsourcing for innovation. Drawing on an in-depth crowdsourcing for innovation project, this chapter analyzes the development of service innovation with the crowd. The data is anchored and grounded in observations, interviews, workshops, and an online idea platform. We contribute to an acknowledged aspect, neglected in the literature, understanding how small and medium-sized enterprises (SMEs) actually use crowds in service innovation, when moving from a product-based to service-based business.

Small and medium-sized enterprises (SMEs) often engage in relationships with external partners that complement their activities in innovating their products and services in order to maintain their market share in a competitive landscape. In this chapter, we present a case that focuses on SMEs’ perspective on managing and organizing intercompany collaboration within a regional business. We explore how purposefully managed mutual knowledge flows across organizational boundaries applied by SMEs contribute to the development of the ecosystem they are immersed in. Our key findings include insights into the advantages offered by being embedded within regional ecosystem boundaries, such as low transaction costs and reduced risks of opportunistic behaviors, environmental opportunities for external knowledge sourcing, or increase of the sphere of influence. We also highlight accompanied challenges, such as low autonomy and control over the partners, and indicate shared issues and responsibilities crucial for further ecosystem development. As a conclusion, we offer a set of recommendations both for managers and policymakers concerning general organizational requirements and governing structures.

Innovation studies have focused in the main on so called high technology (HT) firms that demonstrate a culture of continuous innovation evidenced by steady growth rates and profitability. HT firms invest significantly in R&D. Less explored are the significant number of so-called low-to-medium technology (LMT) firms and in particular those defined as small-to-medium sized enterprises (SMEs). Despite their low investment in R&D and relatively small size, LMT–SME firms continuously adapt and innovate to maintain a measure of growth and profitability. These firms that make up the majority of firms in developed economies have developed their own very different routines and practices that match their own particular needs and adapt to their own particular competitive environment. These routines include agile and continuous innovation and a focus on processes and services. These practices when studied and shared provide learning opportunities within the sector as a whole. This chapter presents the routines and practices of innovation within a number of case studies from the LMT–SME sector and in particular their agile approaches towards open innovation.

Little is known about open innovation (OI) of small and medium sized enterprises (SMEs) colocated in clusters, although these specific agglomerations seem to offer SMEs some fruitful opportunities for networking and open innovation. This chapter aims to fill this gap and contribute to a better understanding of the intermediate role of cluster governance in supporting open innovation practices of clustered SMEs. Following the framework of Lee et al. (2010) on open innovation intermediaries, we examine a single case study of the Technopole de l’Aube in the Champagne Region of France. We carried out 26 face-to-face semistructured interviews with technopolitan firms’ chief executive officers and governance’s members, between June 2014 and January 2015. Our findings highlight direct and indirect support for OI projects of the technopolitan SMEs. However, our case study also suggests that cluster governance has to pay more attention to the support of collaborative projects and to allocate additional resources for developing an organizational climate for OI.

Design has recently gained substantial attention among practitioners and scholars as a source of innovation. In contemporary business and academia, design is increasingly viewed as an important strategic asset. Moreover, the role of design and designers in generating value is growing in relevance to the point that they can be considered part of inbound open innovation strategies. Indeed, managing designers through open innovation processes is becoming particularly important for companies in several industries. This chapter aims to investigate the influence of the practices adopted by small and medium-sized enterprises (SMEs) in collaboration with external designers on the relationship between design investments and competitive performance. In doing that, the research focuses on the Italian furniture industry as empirical setting. The reason for this selection is twofold. First, because more than 95% of Italian furniture companies are small and medium-sized. Second, many Italian furniture companies collaborate with several external designers to the point that over 80% of the product portfolio is on average conceived by external designers. Analyzing the results coming from a survey conducted on SMEs of the furniture industry, different collaborative practices have been explored. In particular, the effect that three different design management approaches, named Styling, Thinking, and Meaning, have on SME performance as a result of collaborations with external designers is highlighted.

This chapter provides a detailed account of the evolution and internal dynamics (network relationships) at Q-Search, a Dutch ecosystem of small and medium-sized enterprises (SMEs) active in the human resources services industry. More specifically, the chapter explores how the personality of the entrepreneurial orchestrator reflects upon the SME ecosystem forming around her. Using multiple data sources — i.e., interviews, archival search, and direct observation — we first explore the various phases of the ecosystem’s 16-year evolution. Next, we examine the complex interplay between Q-Search’s goals in each phase, the orchestrator’s corresponding attributes/actions, SME partner roles, and the innovative value created. Our findings suggest that studying the psychology of entrepreneurial orchestrators can reveal a great deal about the networks and ecosystems they help shape. At Q-Search, the founding entrepreneur’s vision, authenticity/honesty, passion for a cause, personal initiative, social skill, persistence/grit, ability to conduct self-reflection, and self-efficacy and willingness to change, have proven critical for the ecosystem’s survival and performance.

Crowdfunding is currently booming, and it appears as a valuable alternative to finance startups and SMEs. In this chapter, we advise scholars to study the relationship between crowdfunding and open innovation. On the one hand, under this new way of financing, firms receive money as well as feedbacks and suggestions from crowdfunding investors who pledge money on the Internet. On the other hand, earlier open innovation activities and social networking allow SMEs to reduce information asymmetries and exploit the market of potential funders. Then, we take stock of contributions on the prominence of social capital in crowdfunding to discuss the linkages among crowdfunding, social capital, and open innovation. To this end, we define the concept of social capital and review the contributions, which study it in the crowdfunding realm. Finally, we describe three interesting cases of SMEs from the Crowdcube platform (goHenry, JustPark, Monzo), showing how these SMEs leveraged their social relations with extant customers and innovative users to raise equity capital.

Research on open innovation in firms has grown significantly over the last decade. While scholars have started to address the knowledge gaps around open innovation in small and medium-sized enterprises (SMEs), there is still much to be done to develop more systematic evidence on the open innovation practices of SMEs. Given this, and in order to develop a greater understanding of open innovation practices at the SME level, this chapter develops a methodology for capturing, measuring, and benchmarking open innovation practices of SMEs. The theoretical framework proposes and develops six composite indicators to measure the different elements of open innovation within SMEs. These six pillars of open innovation practices are knowledge and technology sourcing activities; innovation expenditure; sources of knowledge; human capital; innovation networks; and intellectual property protection. They allow the examination of this phenomenon across spatial, temporal, and firm-level dimensions. The theoretical framework proposed herein has the potential to provide useful insights on the open innovation activity of SMEs across different size, sectoral, and spatial measures. This has value for policymakers, practitioners, and academic scholars seeking to better understand the differences in open innovation activity at these levels. This can be achieved by utilizing data from Community Innovation Surveys as the main data source for measuring innovation in Europe. The harmonized nature of these surveys provides a unique opportunity for benchmarking and comparative analysis on open innovation activities of different sectors and regions utilizing the proposed framework of open innovation practices. A further impact of the methodology that we propose in this chapter is its potential integration with the annual European Innovation Scoreboard and Regional Innovation Scoreboards. Currently, such an approach is lacking from both these EU-level scoreboards.

Open innovation involves multiple parties to succeed in collaborative innovation. We propose to create a temporary form for collaboration during the innovation process, for example, a project consortium, a (public–private) partnership, a network, or any other (informal) type of collaboration. This collaboration then becomes the vehicle for the first steps of the innovation process, typically from idea to the development of a working prototype and a first implementation for a launching customer. The next stages of innovation will involve, for example, the creation of a viable business model, further development and implementation, scaling-up, and commercialization. Sometimes the form of the collaboration needs to change in these phases, for example, by creating a new organizational entity that will be the vehicle for scaling-up and commercialization.

In order to facilitate the creation of a consortium, partnership or network that can conduct an innovation project that can develop an idea into a prototype, we developed the Open Innovation Project Canvas, which can be used together with, for example, the Business Model Generation (BMG) or the Value Proposition Design (VPD) Canvases, both created by Osterwalder and Pigneur.

The Open Innovation Project Canvas is distinct and complementary in the following ways: (1) it focuses on collaboration, and it has the collaboration as focal entity — rather than having one (key) actor as focal entity, as is typical in BMG; (2) it focuses on the first phases of innovation, for example, from idea to prototype — not on operations (after the innovation project), as BMG typically does; (3) it focuses on project results, for example, a prototype — in addition to VPD, which typically focuses on a finished product and its production and delivery; and (4) it focuses on the project results’ value and identifying a party that can use these — in addition to VPD, which typically focuses on the finished product’s value.

Industrial innovation processes are becoming more open. The large, vertically integrated Research and Development laboratory systems of the 20th century are giving way to more vertically disintegrated networks of innovation that connect numerous companies into ecosystems. Since innovation policy ultimately rests on the activities and initiatives of the private sector, it is vital that policy follows this evolution.

Previous innovation policies relied on large companies to act as the engines of innovation in the EU. While large companies remain quite relevant to innovation within the EU, they themselves report that their processes involve many more small and medium-sized enterprises (SMEs) and other contributors outside their own walls. Therefore, innovation policy must also move outside the walls of these large companies and consider the roles of human capital, competition policy, financing, intellectual property (IP), and public data in promoting an environment of open innovation that is equally beneficial to SMEs.

In this chapter, we combine new research and analysis on open innovation with focused interviews of major participants in the European innovation system. The result is a series of recommendations for public policies that could, if implemented, improve the climate for open innovation to take place in the European Union — and thereby improve the competitiveness of the European economy overall. Taken together, these recommendations comprise an informal “charter” for EU open innovation policy.

The following section is included:

• Index