Key Challenges of Open Innovation: Lessons from Open Source Software,” working paper

“Open innovation ” has been suggested as a new paradigm for corporate innovation, in which firms focus on identifying, exploiting and integrating external knowledge into their internal R&D activities. We identify three key challenges to effective open innovation: identifying new and creative ways to exploit internal innovation, incorporating external innovation into company product development, and motivating outsiders to supply an ongoing stream of external innovations. To illustrate these points, we discuss a specific example of open innovation: open source software. We show how firms use open source to support their innovation strategies in the software browser, operating system, server, and game markets. From this, we identify four approaches — pooled R&D, spinouts, selling complements and attracting donated complements — and discuss how they address the three key challenges. We conclude with suggestions as to how these principles can be applied to other industries, as well as new questions raised by this study