On Thursday morning, I kicked off the track with a keynote linking open innovation and open source software. My slides will be (now are) available online.
As I found out, most of the audience was familiar with the original Chesbrough book Open Innovation, but were not using the concepts in their research. This is an issue I’ve encountered before. Some of it is because Chesbrough’s choice of terminology is oh descriptive and generic — adding “open” as a modifier to “innovation” can and has been used by other researchers in a sense not consistent with Henry Chesbrough’s definition. In other cases, there is an attempt to piggyback on the recent popularity of the buzzword in industry and academia.
So I want to highlight one small part of my talk — that which contrasts the innovation models of Chandler, Chesbrough, Scotchmer and von Hippel.
Alfred Dupont Chandler, Jr. is America’s greatest business historians, the one primarily responsible over the past 40 years for our understanding of how and why the modern American (and later, multinational) corporation developed. In books such as the The Visible Hand (1977) and Scale and Scope (1990), he showed how companies of the late 19th century and early 20th century diversified and integrated to command dominant positions in their respective markets.
Most of the companies he selected had significant administrative (organizational) innovations that helped define our modern conception of how to build a large corporation. While railroads or Sears Roebuck did not have a significant product innovation effort, it was impossible to write about the US (or German) chemical industry without considering the role of the internal industrial R&D lab in the success of the large firm.
Such vertical integration of R&D to product development and distribution is the exact opposite of what the original Open Innovation book was attacking. It’s not that open innovators (such as IBM) can’t have in-house R&D, but their innovation strategies should not be defined only in terms of progressing internal technologies to internal investigations to a firms own R&D funnel. Over and over again, I illustrate this using Figures 1.1 and 1.1 from Chapter 1 (by Chesbrough) of our 2006 book.
But open innovation overlaps heavily with two other streams of research on innovation. Researchers on each side often omit the links, either because they don’t know them, because they are emotionally or intellectually invested in one paradigm, or (legitimately) for parsimony or compactness. Still, both paradigms have strong links back to open innovation.
The better known of the two is the user innovation paradigm of MIT’s Eric von Hippel. Promulgated with his 1988 book (Sources of Innovation) and a series of journal articles, von Hippel focused on the idea that firms could tap into both the knowledge and desire of users to solve their own needs. In some cases, it’s a classic win-win, as users get a better solution and producers gain a broader (or deeper) solution to sell.
The user innovation paradigm is the theoretical basis for a large stream of open source software research (particularly from Karim Lakhani), as it is an excellent fit to the entire Apache experience. (As far as I know, the only research that interprets OSS through open innovation paradigm is my own work with Scott Gallagher). Von Hippel has combined his earlier work, the open source work, and other evidence along the way in his 2005 book Democratizing Innovation.
The other stream is the concept of cumulative innovation. Some of this ties back to the cumulative processes of public science (analyzed, by among others, Paul David). But perhaps the most single-minded pursuit of the topic has been by Suzanne Scotchmer, both in her 2004 book and in various papers.
So who does innovation? Below is a table I prepared summarizing the four perspectives:
Chesbrough’s 2003 book certainly acknowledges the influence of von Hippel’s earlier book. Our 2006 book acknolwedges both books — although the mention of the later book is cursory only because it came out about the same time as we sent our manuscript to Oxford (October 2005). Conversely, many of the current user innovation researchers have a potential open innovation angle if they chose to pursue it.
† In my original slides, I limited von Hippel to user innovation, but my audience reminded me that his 1988 book also included supplier innovation — which has been de-emphasized in subsequent work by von Hippel and his followers.
Focal Firm Suppliers Customers Rivals Chandler X
Chesbrough X X X X Scotchmer X
X von Hippel X †
So far, I’m not aware of anything that links Chesbrough to Scotchmer — perhaps because one is management and one is economics, or perhaps because the former favors strong IP rights and the latter is more about weakening (at least slightly) IP protection.
Right now, I don’t know how I’m going to pursue this comparison, but it seemed useful to my fellow researchers attending the conference and the track.
Update: Ironically, as I was preparing to come to Europe, Al Chandler died at the age of 88. But the Chandlerian approach towards understanding large firms will long survive him.