Concept, Structures, and Decision Factors of Open Innovation
5.7 The Difference in Open Innovation According to Regional Innovation Systems or Clusters
In modular architecture, it is possible for companies to provide parts based on optimal technology of the module. Namely, in modular architecture, it is possible for companies to achieve an optimal innovation effect through outside-in open innovation. Accordingly, the open innovation effect appears to be far greater in the modular-based industry than in independent architecture-based industries. As the technology matures, interdependency between parts decreases, and independent architecture is transformed to modular architecture. In the meantime, while the combustion engine-based automobile industry is currently in the mature stage after passing through the emerging and growth stages, the smartphone industry is main- taining a rapid upswing.
5.7 The Difference in Open Innovation According
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firms (Maskell 2001). Firms that belong to any cluster can acquire useful informa- tion and knowledge from similar firms along the horizontal axis and from suppliers and consumers along the vertical axis.
Many of the existing theories related to the innovative activity of clusters focus on the external effect, which is anything that raises the return to a particular firm located in a region as a result of the location of other firms in the same region (Bresnahan et al. 2005, p. 115). In other words, an external effect implies that firms located in a cluster can learn about markets and technical developments from their colleagues in neighboring firms. However, cluster formation is a process that relies on the co-evolution of technology, business models, and local supporting institu- tions and, therefore, appears to be more prevalent in prepared regions (Feldman and Braunerhjelm 2006, p. 11).
When a major technological innovation occurs, new clusters appear and become the locus of the new activity; over time, new industries develop and clusters are formed. As a result of the interactions between agglomeration economies and disec- onomies on the one hand and incremental versus radical innovation on the other, these new industries may eventually lose their advantage (Maggioni 2006, p. 219).
In conclusion, if the external effect of a cluster is positive, the net number of new firms will increase. Conversely, if the external effect of a cluster is negative, the net number of new firms will decrease. Further, if open innovation is implemented along with an increase in the net number of new firms, the cluster will develop in a manner as illustrated in Fig. 5.14. But, if new firms do not join the cluster, the clus- ter will eventually shrink in quantity and quality.
According to Saxenian and Hsu (2005, pp. 235–260), the Silicon Valley–Hsinchu Connection served as the main trigger for the growth of the Hsinchu cluster. A small group of Taiwanese immigrants set up a local branch of the Chinese Institute of Engineers (CIE), which is commonly regarded as the “grandfather” of the Chinese
Table 5.3 Bioregional knowledge asymmetries, domains, capabilities, and innovation systems
Scale Sector Space
Exploration “Big pharma” Biotechnology Boston
Examination Screening Genomics San Francisco
Exploitation Drug HIV/AIDS San Diego
Source: Cooke (2007, p. 26) Table 5.4 Characterization of successful and potentially successful knowledge clustersa
Specialization Diversification Pipeline 1. Embryonic 4. High success Open science 2. Innovative 3. High potential Source: Cooke (2005, p. 93)
aPipeline industries in which knowledge cannot be transferred to outside the company are akin to a closed innovation system; on the other hand, a situ- ation in which knowledge can be transferred either inward or outward is similar to an open innovation system
5 Concept, Structures, and Decision Factors of Open Innovation
professional organizations in the Silicon Valley, and Taiwan’s policy-makers unwit- tingly supported the extension of Silicon Valley’s Chinese network to allow them to work together with their counterparts in Taiwan. In the end, frequent advisory meet- ings and technical interactions supported the creation of personal and professional relationships between engineers, entrepreneurs, executives, and bureaucrats on both sides of the Pacific (Saxenian and Hsu 2005, pp. 243, 245). Many firms in the Hsinchu cluster that had a global open innovation network, particularly with Silicon Valley, developed rapidly from small industrial companies to global companies in high-tech industries such as semiconductors or display units.
Research Question
1. Select any firm and analyze its structure of open innovation by the knowledge funnel introduced in this chapter.
2. Select any firm and analyze the differences in open innovation according to whether the firms are modular or not, product life cycle, and location.
3. Select more than two firms and compare their internal open innovation attitude and its effects.
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