Dynamics of the Open Innovation Economy System
2.3 Economy Model to Conquer the Growth Limit of Capitalism
2.3.2 Three Interactive Relationships in Open Innovation Economy System
Companies in the open innovation economy are transferred to the closed innovation economy through mergers and acquisitions (M&A), and they gain the opportunity to mass-produce new business models for a short period of time. Large companies in the closed innovation economy can easily and rapidly undertake new combina- tions between the technology and the market through corporate venture capital (CVC) investments. Various virtuous interconnected relationships, including the M&As discussed in Fig. 2.3, are important factors for the activation of the dynamics of an open innovation economic system. For example, Apple bought approximately 20 technical companies related to smartphones through M&As and opened the App Store to realize partnerships with many SMEs around the world in their effort to enter into the smartphone industry in a short time, thus creating millions of employ- ment opportunities. Google also entered into the smartphone industry over a short time through M&As with ten SMEs and start-ups, including the company which created the Android OS, to create more new jobs around the world, especially in the
Fig. 2.2 Dynamics of an open innovation economy system (Source: Yun (2015))
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USA. IBM became a software company from a manufacturing company through positive M&As with promising SMEs and start-ups. It achieved a new combination between the technology and the market which is different from those in the existing computer industry and created new jobs that replaced many in the presently declin- ing industry. SMEs and the large companies of Silicon Valley in the USA that joined the Corporate Business Model Innovation Program of UC Berkeley confirmed the pursuit of mutual interests based on the virtuous interactive relationships described in Fig. 2.3. Large multinational corporations (MNCs) in the closed innovation econ- omy basically apply various open innovation strategies for relationships between SMEs and start-ups (Mortara and Minshall 2014).
The closed innovation economy and the social innovation economy described in Fig. 2.4 form the core of corporate social responsibility (CSR). In particular, in terms of the relationships between a big business and the local society as well as between a big business and government, large companies should consider social and environmental interests and voluntarily cooperate with stakeholders for their sus- tainability and survival (Crowther and Aras 2008). Big businesses in a closed
Fig. 2.3 Concrete relationships between the open innovation economy and the closed innovation economy (Source: Yun (2015))
Fig. 2.4 Concrete relationships between the closed innovation economy and the social innovation economy (Source: Yun (2015))
2.3 Economy Model to Conquer the Growth Limit of Capitalism
innovation economy directly and indirectly support the social innovation economy.
Through this process, a big business directly earns a social reputation, which is essential for its long-term survival, while it also indirectly benefits from the final marketization of the value created in an open innovation economy by social enter- prise. The relationship described in Fig. 2.4 offers the direct benefit of securing potential customers to large companies and contributes to the various and continu- ous production of social value in a social innovation economy. In addition, it con- tinuously allows new combinations between the technology and the market, which are essential for the survival of large companies. Increasing numbers of companies known for their hard-nosed approaches to businesses, such as Google, IBM, Intel, Johnson & Johnson, Nestle, Unilever, and Walmart, have begun to embark on important shared value initiatives (Porter and Kramer 2011). The simple macroeco- nomics of profit-sharing possesses natural immunity to stagnation (Weitzman 1985) (Fig. 2.5).
In a social innovation economy, social enterprises create social values by com- bining technology with the society, which becomes a source of new combinations between the creative technologies and the market. Open social innovation function- ally defines open combinations as those which are between technology and society.
Open social innovation (OSI) is the application of either inbound or outbound open innovation strategies, along with innovations in the associated business model of the organization, to social challenges (Chesbrough and De Minin 2014). Meanwhile, many SMEs and start-ups in an open innovation economy attempt to join the social innovation economy with their experience and know-how and become a major sup- plier of knowledge and manpower for the social innovation economy. In the open innovation economy, the creative source of new or shifting start-ups through the new combination of technology and the market is based on the social innovation economy. In addition, even if the social innovation economy is financially supported by the closed economy, the actual manpower, know-how, and experience are sup- ported by the open innovation economy. The case of the Eighth National Biennial Grassroots Innovation Awards of India, as identified through participant observa- tion, is very similar. All 41 winners, including the three student award winners, were
Open and creative source of New connection and combination between technology and market Example: Uber, Airbnb, Twitter
Social entrepreneurs and institution Creating and distributing social value Open connection and combination between technology and society
A lot of Manpower such as
entrepreneurs Startups from customers, and engineers, and SMEs Open and new
connection, and combination between technology and market A lot of Experiences and
technologies Social Innovation
Economy
Open Innovation Economy
Fig. 2.5 Concrete relationships between a social innovation economy and an open innovation economy (Source: Yun (2015))
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supported with manpower, patent applications, product development, and market sales know-how beyond the social type from the open innovation economy, as exemplified by the Honey Bee Network. Honey Bee Network is a crucible of like- minded individuals, innovators, farmers, scholars, academicians, policy-makers, entrepreneurs, and nongovernmental organizations (NGOs) in India. They were also financially supported by a closed innovation economy, in this case the National Innovation Foundation of India. This action has vitalized the social innovation economy. If both economies configure the innovation community with a flat and open collaboration network, the most active collaboration can be realized. In the case of India, this role is played by the Honey Bee Network (Pisano and Verganti 2008).
2.3.3 Theoretical Validation of the Dynamics of Open