Title: Investigating open innovation strategies: a simulation study

Authors: Irina Fiegenbaum; Martin Ihrig; Marko Torkkeli

Addresses: Lappeenranta University of Technology, School of Industrial Engineering and Management, Prikaatintie 9, FIN-45100 Kouvola, Finland ' The Wharton School, University of Pennsylvania, 418 Vance Hall, 3733 Spruce Street, Philadelphia, PA 19104, USA ' Lappeenranta University of Technology, School of Industrial Engineering and Management, Prikaatintie 9, FIN-45100 Kouvola, Finland

Abstract: Taking a knowledge-based approach to innovation, we distinguish between four different innovation strategies that vary in how knowledge is sourced and exploited: open innovation (OI), closed innovation, outbound OI, and inbound OI. We build an agent-based simulation model to explore the competitive performance profiles and innovation creation potential of these different strategies. Our simulation research allows for modelling the micro-foundations of open innovation and for studying innovation strategies in different market conditions. We find that the relative financial payoffs associated with the different innovation strategies vary over time: some strategies win out in the short-term, others in the long-term. Our results also suggest that a focused closed innovation strategy can lead to higher financial performance when all the resources are concentrated on internal R&D and commercialisation. Open innovation, and in particular the inbound side of it, is a beneficial long-term strategy, whereas closed innovation may be more profitable in the short run.

Keywords: open innovation; strategic management; knowledge assets; agent-based modelling; agent-based simulation; knowledge management; research and development; R&D; innovation strategies; agent-based systems; multi-agent systems; MAS; closed innovation.

DOI: 10.1504/IJTM.2014.064591

International Journal of Technology Management, 2014 Vol.66 No.2/3, pp.183 - 211

Available online: 19 Aug 2014 *

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