How and Why do Companies Perform Open Innovation?: -a comparative study of Norwegian SMEs and large companies

The purpose of this master thesis is to investigate how and why Norwegian small and medium sized enterprises (SMEs), compared to large Norwegian companies, implement Open Innovation strategies. The emphasis is on the companies? approach to Open Innovation, the Open Innovation processes they carry out and the advantages they can obtain trough Open Innovation. Few researchers have focused on Open Innovation in a SMEs context and even fewer have addressed similarities and differences between SMEs and large firms that implement the strategy. In addition there is almost no research conducted about how and why Norwegian companies implement Open Innovation. As 99% of the companies in Norway are SMEs, it is interesting to investigate how and why these companies adapt the strategy and what they gain from the Open Innovation processes.Organizations need to handle an accelerating pace of change, turbulent economic times and greater competition. The Internet makes it easier to share knowledge and ideas hence opportunities are increasing. However, the new knowledge landscape also represents new challenges for companies. To achieve competitive advantage companies must revolutionize their innovation business models in order to stay ahead of competitors. Henry Chesbrough introduced the term Open Innovation in 2003, focusing on how companies should open up their business models to cope with the changing business environment. He emphasized how firms can and should use external ideas as well as internal ideas and paths to market when developing their technologies. Open Innovation is divided into three main processes; outside-in, inside-out and coupled processes, the latter being a combination of outside-in and inside-out. The processes represent different flows of information and knowledge across the firm´s boundaries. The literature presents several advantages that companies may gain through Open Innovation processes. The advantages are presented through nine different processes; employee involvement, customer and user involvement, external networking, external participation, outsourcing R&D, venturing, inward IP-licensing and coupled processes. The literature shows that most advantages are gained through outside-in processes and focus most on customer and user involvement, in addition to employee involvement. To investigate the theoretical findings in a Norwegian context in order to answer the research questions, four Norwegian companies were selected for a multiple case study. Two large Norwegian firms; Statoil ASA and FINN.no AS and two Norwegian SMEs; Rocketfarm AS and Vom og Hundemat AS, represent the four case firms. Empirical evidence has been collected and analyzed in order to investigate both differences and similarities in how Norwegian SMEs and large firms implement Open Innovation processes and which advantages they can gain from these processes. The main empirical findings of how Norwegian SMEs perform Open Innovation compared to large Norwegian companies are connected to the companies´ need for innovation departments and tools, and the companies´ strategic orientations. SMEs do not need innovation departments or tools to manage Open Innovation processes. However, the large companies need this because of their hierarchical structure. The study also shows that the SMEs and large companies have different strategic orientation. SMEs have a defender orientation, while the large companies have an analyzer orientation. The similarities are that both SMEs and large companies perform Open Innovation most frequently through outside-in processes and both need to have an Open Innovation approach including an open culture to succeed. The main empirical findings connected to why Norwegian SMEs perform Open Innovation compared to large companies show that SMEs and large companies gain some different advantages. Large companies gain nine advantages that SMEs do not gain. This is because of the firms large bases of internal resources, which able the firms to interact in several collaborations with various partners in the industry. SMEs gain three advantages that the large companies do not gain. This is because of the companies? closeness to the market, in addition to their less complex processes internally compared to larger companies. However, 26 advantages are gained by both the SMEs and the large companies investigated. The study shows that most advantages are gained through the outside-in processes; employee involvement, customer and user involvement, and external participation. The study implies that both Norwegian SMEs and large companies should use Open Innovation strategies in order to obtain and maintain competitive advantages, and continues growth. As the investigation is limited to four case companies, the results from this study are not generalizable for other than the case firms investigated. However, the study might indicate how other SMEs and large companies perform Open Innovation, and should be further researched