Real Contents and Channels of Open Innovation
6.4 Closed Innovation of SMEs
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6.4.2 Risks of Self R&D Under Closed Innovation System
A self R&D case under closed innovation of “A” company explicitly suggests the risks that closed innovation brings to industries. The major product of this company is car motor automation facilities, which this company supplied mainly to second vendor industries. This company invested most of the profit obtained through this area of business to relevant internal R&D. Through this R&D, this company has 12 patents including original patents, 8 patents on new devices, 1 program registration, 1 international patent pending, 7 patents pending, and many other original technolo- gies not yet applied for patent.
The CEO of this company majored in electronic engineering in university and further studied fuzzy electrical engineering in graduate school, entered an F-16 fighter-related company, and established his current company after resigning from the previous company. His sources of ideas for new technology development are Hannover Exhibition, Germany and research papers in relevant areas. He explained that he made efforts to develop technologies that could realize his belief that “tech- nology can be called technology only if it can be universally and publicly enjoyed by humankind, with its economic value.” But he never attempted any cooperation with industries in the same line of business, relevant industries, universities, and national research institutes. Consequently, this company is faced with a situation that is unbearable for his company due to time and expenses involved in the process of commercialization of developed technologies.
The CEO of this company developed original patents related to generation by using motors and tires and generation by using vibration, based on his basic knowl- edge related to motor automation facilities and knowledge accumulated in the pro- cess of development and production of many products combined with his personal intellectual curiosity. Among them, there are many prospective patents, but products beyond existing products are not realized in the market, which is a problem. The new technologies of this company have the limitation that the market is not under- stood due to the closed system of the company and that they do not reflect custom- ers’ requirements. Furthermore, the quality of new products is not guaranteed due to the lack of agreement of the researcher group, and this company is in a situation where it cannot ask for demands and agreement from relevant industries.
6.4.3 Closed Innovation of Local Subsidiary Company of Original Technology-Based Industry
The closed innovation case of a Korean subsidiary company of MG is a typical case that shows that even a high-tech industry can face considerable danger when its local subsidiary is insensitive to open innovation. MG Korea is a Korean subsidiary company of MG Crucible established in the UK in 1856, and its main products are thermal ceramics, carbon brushes, engineered carbon, and graphite heat exchangers.
This company has global top technology in thermal ceramics.
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MG Korea had a considerably large-scale domestic market, but it was consider- ably reduced in terms of current total sales amount of about KRW 30 billion, with its total employees about 150 and 5 research staff. MG Korea is involved in coop- eration, in a considerably passive way, with domestic industries and research insti- tutes that requested cooperation, depending only on the high technical capability of its parent company rather than independent and voluntary activities for technical development. MG Korea accumulates its technologies mainly from internal R&D tasks, and it depends on its parent company for most of its technologies. The parent company partly recognizes the necessity of open innovation, but it is sought mainly in its relationship with China. Due to the original technology of MG, tasks of joint research of the ceramic area related to solar cells are being conducted with Samsung Advanced Institute of Technology and Korea Electronics Technology Institute, but also in a very passive way. This company presents a typical case of closed innova- tion of a local subsidiary company directly invested in by technology-based foreign companies. This company can secure additional markets and develop new markets in the solar cell area only through actualization of cooperative research with domes- tic industries. In other words, it could be confirmed in this case that development of local markets and a research foundation is necessary for actualization of open inno- vation of foreign direct investment industries.
As seen in Table 6.3, three closed innovation example firms had high technology and high potential, but these factors nonetheless could not exert a positive effect on the development of these firms. Closed innovation causes a disconnection between technologies and markets in these SMEs. Closed innovation in SMEs causes firms to endure more serious situations than big businesses because they cannot survive in the present circumstances due to the disconnection between the technology and the market.
Table 6.3 Realities of closed innovation of SMEs Company Characteristics
STL Establishing closed-type research system inside the company without any cooperative research with outside
The lack of open-type research of large-scale process industry to lead future industries is closely linked to the market failure of the industry
“A”
company
Through relevant internal R&D, this company obtained 12 patents including original patents, 8 patents on new devices, 1 program registration, 1 international patent pending, 7 patents pending, and many other original technologies not yet applied for patent
Does not understand the market due to the closed system of the company MG Korea Depending only on high technical capability of its parent company rather than
independent and voluntary activities for technical development
Technologies mainly from internal R&D tasks, and the firm depends on its parent company for most of its technologies
Source: Yun and Mohan (2012) revised 6.4 Closed Innovation of SMEs
Research Question
1. Select any firm near you, and examine and find contents and channels of open innovation from it.
2. Find, examine, and analyze any firm that provides an example of closed innovation.
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J.J. Yun, Business Model Design Compass, Management for Professionals, DOI 10.1007/978-981-10-4128-0_7