The Relevance of Open Innovation to Small and Mediumsized Enterprises

It is possible to apply the concept of open innovation in SMEs. However, Chesbrough (2006) revealed that SMEs have different ways to adopt open innovation as compared to large-scale multinational companies.
Considering the growing importance of open innovation among large-scale companies, this study will seek to evaluate and explore the relevance of open innovation on SME’s. To give the readers a better understanding of this subject matter, an overview with regards to open innovation will be provided in this study. As part of going through the main discussion, this study will first discuss how SMEs are able to adopt to open innovation followed by evaluating and examining several existing research studies with regards to the impact of open innovation activities over the business performances of SMEs.
Open innovation requires companies to use internal and external sources to make use of technologies. In line with this, Chesbrough (2003) explained that the use of external pathways can increase the chances wherein companies will be able to innovate new product and technological processes which could improve the overall performance of a company. Instead of heavily relying on internal R&amp.D, the large-scale multinational companies were enticed to incorporate open innovation in their business practices in order to gain competitive advantages over their close business competitors (Chesbrough, 2003).
The process of developing and commercializing the use of technologies within the internal boundaries of a business organization is called the “closed innovation” (Chesbrough, 2003). In the past, large-scale multinational companies are heavily relying on the use of their internal R&amp.D to allow them to develop new product lines that can be easily marketed to the consumers. By doing so, large-scale multinational companies were able to outperform the SMEs (Teece, 1986).