Understanding the advantages of open innovation practices in corporate venturing in terms of real options
Article Type: Abstracts From: Strategic Direction, Volume 25, Issue 6
Vanhaverbeke W., Van de Vrande V., Chesbrough H.Creativity and Innovation Management, December 2008, Vol. 17 No. 4, Start page: 251, No. of pages: 8
Purpose – argues that an internally-oriented, centralized approach to innovation is obsolete and that open innovation, in which useful knowledge is widely disseminated and ideas that cannot be used are sold to other organizations, should take its place. Explores how a real options approach to managing open innovation enables the benefits of open innovation to be realized. Design/methodology/approach – defines a real option as a small initial investment in a new technology, which offers an organization the option to invest in it further when more is known about its potential or to keep it for later. Focusing on corporate venturing, explains how the real options approach offers a way of managing open innovation and for developing organizational learning. Findings – concludes that the real options approach to open innovation enables organizations to have an early involvement in new technologies or business opportunities which might otherwise might have been too risky to proceed with; delay financial commitment as they take a step-by-step approach to investing in the new technology or business opportunity; make an early exit if the innovation does not work out; and delay the exit if it spins off the innovation. Also argues that this process increases the learning and absorptive capacity of the firm. Research limitations/ implications – Sets out areas for research. Originality/value – explores the advantages of taking a real options approach to innovation.ISSN: 0963-1690Reference: 38AC569DOI: 10.1111/j.1467-8691.2008.00499.x
Keywords: Innovation, Organizational learning, Research and development
