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Abstract

OVERVIEW: This article addresses one of the many unexplored challenges associated with closing open innovation—the intellectual property (IP) disassembly problem. This is the problem of disentangling and allocating IP rights at the closing or termination of an open innovation project or when one or more of the vital participants leaves. IP disassembly problems may be mitigated (but not eliminated) through contingent contractual provisions at the IP assembly stage. Moreover, provisions can be made at both the assembly and disassembly stages to prepare for and benefit from subsequent IP reassembly in a sequence of project generations over time. An overriding implication is that IP management that addresses both IP assembly and disassembly problems is necessary (although not sufficient) for effective governance of open innovation.
The Challenge of Closing Open Innovation
The Intellectual Property Disassembly Problem
Ove Granstrand and Marcus Holgersson*
*marhol@chalmers.se
Final manuscript version, 2014. Published in Research-Technology Management, please use
the following reference:
Granstrand, Ove, and Marcus Holgersson. 2014. "The Challenge of Closing Open Innovation:
The Intellectual Property Disassembly Problem.” Research-Technology Management 57 (5):
1925.
Overview: This article addresses one of the many unexplored challenges associated with
closing open innovationthe intellectual property (IP) disassembly problem. This is the
problem of disentangling and allocating IP rights at the closing or termination of an open
innovation project or at the exit of one or more of the vital participants. IP disassembly
problems may be mitigated (but not eliminated) through contingent contractual provisions
at the IP assembly stage. Moreover, provisions can be made at both the assembly and
disassembly stages to prepare for and benefit from subsequent IP reassembly in a sequence
of project generations over time. An overriding implication is that IP management
addressing both IP assembly and disassembly problems is necessary (although not
sufficient) for effective governance of open innovation.
Keywords: Intellectual property; Open innovation; Strategy; IP management; Licensing; IP
reassembly.
Open innovation is an old phenomenon, but the use of it has grown during the last decade.
This growth has given rise to a need for improved competence in managing open innovation,
and numerous research studies and publications have sought to fulfill this need
(Chesbrough 2004; Henkel, Baldwin, and Shih 2013; Kirschbaum 2005). The literature has
stressed the opportunities for increased innovativeness and competitiveness offered by
both inbound modes of open innovationacquiring knowledge and ideas from external
sourcesand outbound modes of open innovationrelying on external paths to markets
for exploitation (Dahlander and Gann 2010; Enkel, Gassmann, and Chesbrough 2009). In
addition, various scholars have recognized coupled or combined modes of open innovation
(Enkel, Gassmann, and Chesbrough 2009; Granstrand 2004), in which knowledge is
acquired, developed, and commercialized with involvement of external partners, for
instance through technology and innovation collaborations, alliances, and networks (e.g.,
Mowery, Oxley, and Silverman 1996).
In both practical and academic discussions of open innovation, much attention has been
given to the opening of closed innovation, and the related opportunities and challenges. On
the other hand, little or no attention has been given to the closing of open innovation, and
the potential problems that may then arise. The closing of open innovation in general refers
to the change process by which organizations decrease their overall openness in innovation,
for example by increasingly relying on internal R&D or in-house commercialization. It may
also refer to the more specific process of leaving, terminating, or cancelling an individual
open innovation project. In either connotation closing open innovation involves a range of
challenges that ripple throughout the organization, including challenges related to human
resource management, production and supply, information technology, and marketing. Such
challenges may be particularly problematic in the context of coupled open innovation, in
which the interdependence and exchange is highly reciprocal.
When closing open innovation projects intellectual propertyrelated challenges, specifically
those related to disassembling jointly generated intellectual property (IP), may be
particularly thorny. Research and technology managers are familiar with the endgame of
terminating in-house R&D projects, but IP problems seldom arise at this late stage for in-
house projects. As a result, managers may not be prepared to deal with the issues associated
with the end stage of open innovation projects that involve both internal and external
players. This article offers an analysis of the IP disassembly problem in this context, and
some managerial approaches to deal with it.
IP Assembly and Disassembly
Flows of ideas and knowledge across firm boundaries are central to open innovation
(Chesbrough 2003, 2006; Chesbrough and Bogers, forthcoming). The knowledge that flows
is commonly associated with and influenced by a set of registered or unregistered IP
ownership and usage rights, which control the commercial use of the shared knowledge,
part of which may be disclosed and disseminated in return for the rights. These rights,
which may include patents, copyrights, trade secret rights, license rights, among others, are
allocated through managerial and legal decisions. A common objective in managing these
rights in an open innovation system is to ensure sufficient freedom to operate for each actor
within specified fields of use, a goal which may invoke conflicts of interest. Each actor must
ensure that all the technologies and the associated intellectual property rights (IPRs)
required to support its business are collected from various owners; the problem of
collecting all the required rights is the IP assembly problem. As innovations become
increasingly dependent on multiple technologies, and hence multiple IPRs, likely with
multiple IPR holders, the IP assembly problem becomes more complex, creating a pressing
need for well-functioning technology markets and careful technology management
(Granstrand 1999).
The process of separating or disentangling a set of related IPRs at the disintegration or
termination of businesses or projectsthe IP disassembly problemis also challenging. The
IP disassembly problem has been defined as the problem of finding an explicit or implicit
contractual arrangement for allocation of IPRs and licenses that allows for separating and
disintegrating a company, business unit, project entity, resource set, or IP unit in order to
enable a transaction, organizational transfer or dissolution of it (Granstrand and
Holgersson 2013, 186).
In the context of open innovation, the IP disassembly problem is the problem of
disentangling and allocating IPRs at the closure of an open innovation project or at the exit
of one or more of the vital participants. During an open innovation project, knowledge flows
across organizational boundaries, and IP is shared or transferred across these boundaries,
whether implicitly or explicitly. When the project is closed or terminated, the involved
actors must deal with an IP disassembly problem. Some of the challenges associated with IP
disassembly derive from the inherently unavoidable incompleteness in contracting where
omissions might be expected, especially as new types of contingencies appear as the surge
of open innovation brings into the field many new entrants with limited experience with
technical collaborations.
An Unsuccessful Closing of an Open Innovation Project
To illustrate the IP challenges in the process of closing an open innovation project, we
present an actual case of a collaboration for joint technology development and
commercialization between a large European multinational corporation and a small US R&D
firm. The case, which is presented anonymously here, involves coupled open innovation,
and therefore a higher degree of resource integration across firm boundaries than pure
inbound or outbound projects are likely to. As a result, it involves more problematic
disassembly issues. The case, which ended up in court, was followed closely by one of the
authors, who was involved as an economic expert. Case data were collected mainly from
confidential company documents and court case material, as well as through the authors
participation in discussions connected with court proceedings, complemented by
interviews with engineers, lawyers, and business managers in the large firm and its law
firm.
These interviews were mainly structured around two elements. Firstly, key events in the
innovation process were assessed together with alternative scenarios without the allegedly
damaging event. Secondly, factors in the claimant’s IP damage calculation model were
assessed (for instance, the expected rate of technological substitution in the industry,
market growth rate, technical and commercial risks, and the expected risk-adjusted cost of
capital as assessed by the interviewees).
Technical, commercial and legal interview data was then checked against open and closed
industry reports plus documentation provided by the claimant and finally integrated into an
economic analysis in order to address the claimed damages on an evidential basis in
rebuttal reports.
Although a single case chosen explicitly for its value in exploring the existence of various
challenges cannot be used to support generalized conclusions about the size or frequency of
IP disassembly problems, it can help identify potential problems and remedies. The single-
case approach is deemed useful for exploring new areas and for providing evidence for the
existence of certain features of a phenomenon (Bryman and Bell 2007). This single-case
study can lead to future research that explores the IP disassembly problem and other
problems related to the closure of different types of open innovation.
The two companies involved were engaged in R&D and commercialization collaboration in
the heavy inorganic chemical industry. This industry is typically characterized by raw
material extraction, standardized bulk products, and cost-cutting process technologies. It is
dominated by globalized, capital-intensive oligopolies and there are significant entry
barriers, retaliation capacity, and imitation risks. The two firms involved in this case were
LF, a large, multinational European technology firm with over 60,000 employees working in
more than 100 countries, and SF, a small US innovation firm with just a few employees
working mainly in R&D. SF was a non-producing entity (NPE), but not a typical patent troll.
In the 1990s, LF needed a new cost-saving purification and separation process technology,
which was provided by SF. At that time, this process technology was at a small pilot-plant
stage, not yet developed to the commercial demonstrator stage, and the collaboration was
intended to develop the technology and scale it up. In pursuit of this goal, the two firms
entered into an exclusive two-year technology collaboration agreement (TCA), which was
both extendable and terminable.
The TCA included a set of terms governing IP assembly at the inbound acquisition phase
and IP disassembly at the outbound exploitation and termination phases of the
collaboration, offered here in summary (without exact legal wording):
Inbound acquisition
SF specified and provided all its know-how (including patents and trade secrets)
and LF provided some (but not all) of its know-how as cleared background
technology.
Each party owned its background technology and was obliged to obtain, maintain,
and defend its background patents at its own cost.
SF granted LF an exclusive, worldwide license on its background technology. In
return, LF paid SF a background-technology user fee based on a specific license-
pricing model.
All foreground technology was owned, managed, and paid for by LF, which
compensated SF for engineering work (with fixed fees, hourly rates, and caps).
Outbound exploitation and termination
If both parties agreed that the joint development work had been successful, the
companies would enter into an agreement for joint commercialization. Otherwise,
LF should grant SF a non-exclusive, irrevocable, royalty-free license to the
foreground technology with unrestricted sublicensing after 5 years, and SF should
grant LF a non-exclusive, irrevocable, and restricted license of such background
technology as was necessary for LF to exploit the foreground technology and then
pay SF the background-technology user fee. These licenses should also include a
non-exclusive right to any written reports relating to background or foreground
technology.
The TCA could be terminated in case of collaboration performance default, financial
default, third-party acquisition, or key persons leaving SF. In this case, mutual
licensing would become noncompulsory.
Both parties should treat as confidential all material received from each other and
reasonably prevent its disclosure for 10 years after the termination of the TCA
unless it had become common knowledge.
Change of control
If SF received an acquisition offer, LF had the right of first refusal to purchase all or
part of the shares in SF or all or parts of the background technology. LF retained the
purchase option for five years after termination of the TCA.
When a few years of collaborative work failed to scale the process technology sufficiently
for a commercial demonstration plant, technological and economic disagreements between
the two companies ensued. LF chose to terminate the TCA and continue with in-house R&D
under the premise that enough knowledge had been developed and gathered, either within
or in parallel with the collaboration, to enable it to continue the project on its own. SF, then
scouting for new partners, asked LF for access to the demonstration plant (run by LF) for a
new customer partner from Asia. LF bluntly denied access, whereupon SF sued for damages
of roughly $150 million for breach of post-contractual loyalty, patent infringement, and
misappropriation of trade secrets in the form of breach of a confidential relationship and
unrightful use of IP.
Key issues in the case were uncertainties and disagreements with regard to rights to
technology relevant to the collaboration project. These uncertainties and disagreements
related not only to the technology developed within the project (foreground knowledge),
but also to technology developed either outside or after the collaboration. A general caution,
especially for small or less experienced firms collaborating with larger or more experienced
firms, is that collaborating partners have an incentive to perform R&D on complementary or
substitute technologies on their own, outside the collaboration. Collaborators can then use
any results from such R&D to increase their bargaining power within the collaboration,
sometimes leading to premature termination of or exit from the collaboration without
meeting the expectations of the partners. An early analysis of this case, noting this
phenomenon, introduced the concepts of sideground and postground knowledge
(Granstrand 2001) as a complement to the standard concepts of background and
foreground knowledge (see Relevant Knowledge Types in Open Innovation,” p. XX).
In dealing with side- and postground technologies, an important issue in the case was the
valuation of and determination of damages for SFs lost profits due to LFs termination of
the collaboration project. In this case, SF invoked the 25 percent rule, which stipulates a
license royalty amounting to 25 percent of a profit-related royalty base, such as the
licensees EBITDA. However, this determination was opposed by LF, which challenged the
fairness of the 25 percent rule on grounds presented in Granstrand (2006), claiming that
the 25 percent rule in IP damage calculations was applicable only in a very special case and
did not reflect the large difference in R&D and commercialization investments between the
two companies in this case.1 Questions such as which royalty determination method to use,
what discount rate to use, and what the expected market life time for the technologies might
be entered into the case; in each instance, the answers chosen made significant differences
in how the project and potential agreements could have financially impacted both firms,
creating barriers for ex post negotiation. The court finally decided that LF had indeed
engaged in breach of post-contractual duty of loyalty and IP infringement. LF appealed, and
the case ended with SF being awarded about $1 million in damages for some minor
misappropriation of its trade secret rights.
This case illustrates the difficulties in reaching agreements on IP disassembly after an open
innovation project ends or fails, even in the context of a fairly simple bilateral collaboration
with contractual measures taken at the IP assembly stage to avoid disassembly problems
down the road.
text box 1
Relevant Knowledge Types in Open Innovation
Managing IP assembly and disassembly problems can be facilitated by understanding what
knowledge assets the partners hold and provide before, during, and after the project.
Contracts and deals can then be structured accordingly. Defining knowledge categories
helps to clarify such understandings. Background and foreground knowledge are here
complemented by sideground and postground knowledge.
Background knowledge is knowledge that is relevant to a collaborative venture or open
innovation project that is supplied by the partners at the start of the project.
Foreground knowledge is all the knowledge produced within the collaborative venture or
open innovation project during the projects tenure.
Sideground knowledge is knowledge that is relevant to a collaborative venture or open
innovation project, but produced outside the project by any of the partners during the
projects tenure.
Postground knowledge is knowledge that is relevant to a collaborative venture or open
innovation project that is produced by any of the partners after the project ends.
Foreground
knowledge
Sideground
knowledge
Postground
knowledge
Postground
knowledge
Background
knowledge Sideground
knowledge
Background
knowledge
Project starts Project ends
Time
Notation:
Note: The figure does not illustrate that parts of one firm’s background, sideground, and postground
knowledge may overlap with another firm’s knowledge.
Old knowledge New knowledge
Time
Collaboration
Firm a
Firm b
Source of knowledge
IP Management in the Closure of Open Innovation
By the very nature of contingencies, contingency contracting before the launch of an open
innovation project is always incomplete (Williamson 1985), potentially leading to ex post
disagreements and disputes. However, such contracting can be made less incomplete by
learning from previous cases.
An important lesson from the case presented here is the need to explicitly consider
sideground and postground knowledge in contracting. This side- and postground
knowledge can either substitute for or complement the foreground knowledge developed
within the project; in either case, it can unbalance the relationship within the collaboration.
In this case, a small firm (SF), which was contributing to the joint technology development,
was completely dependent upon complementary assets held by its collaboration partner for
commercialization of the technology. A first important issue in contracting, then, is for a
collaborating partner to safeguard itself against the risk that its partners undertake R&D in
parallel with the collaboration and (accidentally or intentionally) develop substitute side-
or postground technologies, since these could diminish the commercial value of the
foreground technologies. This could be handled, for example, through exclusivity
agreements or by stipulating a minimum royalty amount.
Similarly, both actors might have interests in acquiring rights to any complementary side-
or postground technologies in order to safeguard the competitiveness of the foreground
technologies. Hence, a second important issue is for collaboration partners to secure usage
rights, at least for certain fields of use, not only to background technologies but also to any
potential side- or postground technologies, to ensure freedom to operate. This need can be
addressed through change-of-technology clauses, such as grant-forward clauses (see
Common Causes in Licensing Contracts,p. XX). There is an information problem related to
such clauses, however, in that side- and postground knowledge is difficult to monitor across
organizational boundaries. Information disclosure clauses could mitigate that risk, although
their effectiveness is limited by enforcement problems.
A third important issue is that the producer of side- and postground technologies might be
entitled to license royalties if a collaboration partner makes use of them in subsequent
businesses. Royalty determination in such cases becomes difficult. Negotiation and
bargaining in these cases can be eased, and disputes related to royalty determination be
mitigated to some extent by establishing principles for valuation and pricing of IP in ex ante
agreements, for example by agreeing on a set of fair, reasonable, and (possibly)
nondiscriminatory (FRAND) licensing terms in advance (see Granstrand and Holgersson
2012).
Foreground knowledge, and the uncertain nature of its relevance to the participating
organizations going forward, presents another significant issue. The foreground knowledge
produced in an open innovation project is typically of relevance to the joint project.
However, the knowledge needed to solve one problem may also unexpectedly contain the
seeds of a solution for other problems. Thus, serendipities emerging from the partners
work in pursuit of the joint project can potentially reposition the partners, restructure the
knowledge flows, and lead to the development of additional indications or applications (for
example, for a new chemical compound or a new material). These discoveries might be of
limited relevance to the joint project but of major importance to one or more of the
collaboration partners, or even to some third party outside the collaboration.
Again a combination of licensing and pricing of technologies is called for to address this
possibility. Foreground knowledge relevant only to third parties could be handled by the
usual open innovation contracts for technology exploitation and acquisition (Granstrand et
al. 1992). A more difficult (disputable) type of situation arises when foreground knowledge
turns out to be relevant both to the joint project and to one partners business outside the
project, and perhaps to third parties as well. Licensing tools exist for resolving this situation
in principle, but technology control and pricing become thorny and shorthand
recommendations are hard to give, other than to point out the need to recognize the
problem beforehand.
Clearly there are many possible complexities and contingencies connected to different types
of cross-boundary knowledge flows in open innovation. Contingency contracting, valuation,
and pricing are key tools for managing IP disassembly in this context (Holgersson 2012).2
License contracts can be tailored to fit many if not most IP disassembly (and assembly)
situations. Limitations such as restrictions in time and commercial space (for instance,
geographic markets, applications, or market segments) can be imposed to preserve
competitive advantage. Grant-back and grant-forward clauses can help collaborators to
avoid losing their technological leads. Sublicense clauses can allow parties to retain control
of new entries and exits. Change-of-control clauses can allow the technology owner to retain
control of licensed technology in case of ownership changes among the partners.
text box 2
Common Clauses in Licensing Contracts
A number of standard clauses may be used in project initiation agreements to anticipate
and mitigate IP disassembly issues. We offer here a brief list of some of the most common
clauses used in license agreements. However, there are no exact or commonly accepted
definitions and clauses may vary a great deal from contract to contract.
- An assign-back clause stipulates that the licensee must transfer ownership of any
improvements it makes to the licensed technology back to the licensor.
- A grant-back clause stipulates that the licensee must license any improvements it makes to
the licensed technology back to the licensor.
- A grant-forward clause stipulates that the licensor must offer the licensee a license on any
improvements of the licensed technology made by the licensor.
Assign-back, grant-back, and grant-forward clauses are examples of change-of-technology
clauses, which stipulate what the parties will do in case a particular technology change
occurs, just as a change-of-control clause does in case a certain change in ownership occurs.
- A change-of-control clause stipulates that the licensor has the right to terminate the license
agreement in case of a change of ownership of the licensee.
- A no-challenge clause stipulates that the licensee is not allowed to challenge the validity of
the licensed patents.
- A termination clause stipulates that the licensor and/or licensee has the right to terminate
the license agreement under certain conditions, for instance if the licensee challenges the
validity of the licensed patents.
The IP Reassembly Process
As illustrated by the case reported here, even an apparently simple process of IP
disassembly can present managerial challenges. However, the IP disassembly problem may
also be turned into an opportunity. The concepts outlined in the discussion form the basis
for what we call the IP reassembly process, a way of managing recurrent IP assembly and
disassembly processes strategically in order to build and expand an organizations IP base
over time.
Fore-, side-, and postground knowledge generated by an open innovation collaboration may
become background knowledge for a subsequent project. Through skillful management of
the IP disassembly process, an organization can capture excess knowledge resources by
securing partial or full ownership or license rights, first, to foreground knowledge relevant
to the first project, second, to side- and postground knowledge, and third, to any foreground
knowledge of limited relevance to the other collaboration partners. In that way, the
organization accumulates knowledge and skills that can be leveraged in subsequent
projects through licensing and collaboration agreements. In this way, the assembly and
disassembly of IP is utilized repetitively in recurrent contracting.
The IP base is thus built by reassembling IP over several generations of projects through
strategic management of IP and knowledge flows from various sources (Figure 1). Such a
process is characteristic of some research institutes, such as Belgiums Imec (see Leten et al.
2013). The leverage of this reassembly business model increases with the number of
collaborating partners and recurring partnerships, especially if the focal entity can position
itself as a hub, maintaining bilateral or multilateral agreements with partners in different
industries or for technologies with complementarities that supersede competitive concerns.
Figure 1 A recurrent IP reassembly process
1
st
collaboration
BK
BK
SK
BK of 1
st
partner
BK
BK of 1
st
partner
FK
PK
BK
1
st
IP
assembly
1
st
IP
disassembly 2
nd
IP
assembly
BK
BK of 2
nd
partner SK
BK of 2
nd
partner
FK
2
nd
collaboration
3
rd
IP
assembly
PK
BK
BK of 3
rd
partner
Time
Notation:
BK = Background knowledge (of research institute if nothing else stated)
FK = Foreground knowledge produced within collaboration
SK = Sideground knowledge produced and controlled by research institute
PK = Postground knowledge produced and controlled by research institute
Old knowledge New knowledge
2
nd
IP
disassembly
Conclusion
The project described in our case was of a simple and common type, but the IP disassembly
process failed due to disputes related to sideground and postground knowledge. The
complexities and risks in the endgame of an open innovation project can lead to a variety of
IP disputes; many of these can be mitigated with foresight and attention to the likely
sources of such disputes.
In order to reduce the risks of failure in open innovation, technology and IP managers must
pay more attention to IP disassembly in general, and to sideground and postground
knowledge more specifically. Contractual provisions for these knowledge types should be
included in license agreements, making the inherently incomplete contingency contracting
less incomplete and thereby mitigating IP disassembly problems.
IP disassembly may also present opportunities. The necessity of IP disassembly may be
remade as a virtue in the form of a business model that leverages assembly and disassembly
to build and capture knowledge resources. In this model, strong management and
contracting skills related to IP assembly and disassembly allow for subsequent IP
reassembly, so that back-, fore-, side-, and postground knowledge can be redeployed and
expanded in multiple project generations.
It is important, then, that management, economic, legal, and technology experts are
involved in drafting contracts and structuring deals for open innovation. A diverse set of
knowledge, experiences, skills, and mindsets is conducive to creative contingency
contracting. Some technology managers despise legalities, which they are neither trained
for nor prepared to deal with. However, the design of a contract platform with contract
modules built on combinations of clauses is not unlike the development of an engineering
system based on various components and subsystems. Contingency contracting also runs
the risk of becoming overengineered, however, just as engineering systems do. Managers
must attempt to take a balanced approach.
Addressing assembly and disassembly problems through contracting is necessary, but not
sufficient, for effective governance of open innovation projects. Noncontractual social
relationships are important complements to contractual relationships, not least when a
project is about to end (Granstrand and Holgersson 2013). It is difficult to contract away
such failure factors in a collaboration as arrogance (Steal with pride), NIH (not-invented-
here) syndrome, and hubris (We dont need them anymore; we can do it ourselves now).
Good contractual relations are valuable. Good social relations may be invaluable.
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Notes
1. The 25 percent rule was later found to be a fundamentally flawed tool for determining a
baseline royalty rate in a hypothetical negotiation by the United States Court of Appeals
for the Federal Circuit (CAFC) in Uniloc USA, Inc. vs. Microsoft Corp. An alternative to
the 25 percent rule is the model provided in Granstrand and Holgersson (2012). This
model generalizes the principle of equalizing the rates of return on investments in the
bilateral case of a buyer and a seller of an exclusive license presented in Granstrand
(2006) to apply to multilateral cases with multiple buyers and sellers of nonexclusive
licenses.
2. On the other hand, joint ownership of IP is generally to be avoided, as the risks and
uncertainties of such an arrangement are significant. One often-cited risk is that in many
jurisdictions any owner can sell licenses to jointly owned IP without the consent of the
other owners (Granstrand and Holgersson 2013).
... These considerations are not static, meaning that appropriate organizational arrangements change over time. However, open innovation literature has been preoccupied with documenting how companies benefit from expanding their boundaries (Teece, 2020), forgetting that boundaries narrow as innovation relationships come to an end (for some rare exceptions, see Appleyard and Chesbrough, 2017;Barbic et al., 2021;Granstrand and Holgersson, 2014). ...
... Closing open innovation may refer to canceling a specific open innovation initiative and reducing a firm's general use of open innovation (cf. Granstrand and Holgersson, 2014). In this article, we focus primarily on the closing of specific initiatives. ...
... This has been observed with Google's development of its various Apps, which all began as open-source projects and were subsequently forked to become proprietary to Google (Appleyard and Chesbrough, 2017). Another reason is that firms engaged in open innovation may be disappointed with their partners or the related technologies over time, meaning that they need to scale back on the initiative and possibly shift to other partners (Clough and Piezunka, 2020;Granstrand and Holgersson, 2014). Moreover, many open innovation initiatives are temporary from the outset, with more or less fixed closing dates, but may open up for recurring business (Reuer and Ariño, 2007). ...
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The literature on open innovation has documented how companies expand their boundaries to become more open, leaving out how boundaries narrow as open innovation relationships end--the closing of open innovation. We explain how open innovation creates new relationships on multiple levels--among firms, individuals, and technologies. Drawing on open innovation and alliance literature, we discuss how the closing of open innovation entails the dissolution of this web of multiplex relationships. We contribute to innovation and strategy literature by explaining how the closing decision is not simply mirroring the initial decision to open up innovation, partly because of evolving interdependencies at multiple levels (firms, individuals, and technologies). Finally, we discuss how closing open innovation relates to new challenges in terms of attention, agency, long-lived interdependencies, and portfolio management that provide new avenues for future research.
... Background IP represents IP that is either relevant (solid border) or complementary (dashed border) to the innovation ecosystem context being visually mapped and was previously developed by first-generation innovators in a temporal phase prior to the one that is visualised in the respective innovation ecosystem map [29], [44]. Background IP sits along the left edge of the ecosystem actor role symbol and is owned by the actor role to which it is attached. ...
... Foreground IP refers to IP that is jointly developed by at least two ecosystem actor roles in collaboration during the temporal phase that is visualised in the respective innovation ecosystem map [44] and, thus, could potentially be also jointly or co-owned by the collaborating ecosystem actor roles, particularly when the collaboration is informal and joint research is on a small scale [51], [52]. Foreground IP is positioned along the right edge of the ecosystem actor role symbol. ...
... In addition to the Spatial and Temporal Identifier, a Ushaped, dark-red arrow (see top section of Table IV) represents the transformation of a specific IP from one classification to another, such as the transformation of Foreground IP to Background IP when transitioning from one phase to a subsequent phase in the innovation ecosystem evolution [44] (also see example in the right of bottom section of Table IV). This IP classification transformation could additionally entail a transfer of ownership of IP from one ecosystem actor role to another depending on the specific scenario being visually mapped in the innovation ecosystem. ...
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Prior management science literature proposes differ- ent visual methods for mapping ecosystems. These methods, how- ever, largely lack an effective approach to visualizing intellectual property (IP) related risks and uncertainties appearing among stakeholders as the innovation ecosystem evolves. Using the design science research methodology, we develop a novel method that visualizes loci of IP risks and uncertainties, as well as dynamics of IP ownership and usage in evolving innovation ecosystems. We demonstrate and evaluate the effectiveness of the new method in uncovering IP related risks and uncertainties by presenting results from applying the method to the innovation ecosystem for crisis-critical products during the COVID-19 pandemic. The currently ongoing pandemic has caused structural changes to that innovation ecosystem with new relationships being formed between incumbent manufacturers and new entrants that have rushed into that innovation ecosystem to support the upscaling of manufactur- ing capacities. This article contributes to the literature on visual methods for innovation ecosystems and provides a new method for researchers, practitioners, and policy makers to identify IP related risks and uncertainties that can arise when innovation ecosystems undergo structural changes. The method allows researchers to formulate and test new theories, as well as practitioners and policy makers to develop strategies to anticipate and mitigate IP risks and uncertainties.
... In particular, it has been argued that the advancement of open innovation research can be found in complementing the static conditions of finding "an appropriate balance" (Enkel, Gassmann, & Chesbrough, 2009) between the benefits of open innovation and the protection of intellectual property rights with the changing conditions of opening and closing open innovation (Hagedoorn & Zobel, 2015). Opening and closing of open innovation refers to the degree of preparedness of organizations to increase or decrease their collaboration with external business partners in innovation processes (Granstrand & Holgersson, 2014), and addresses change rather than statics. ...
... In a few exceptional studies, scholars have also addressed the reverse process: the closing of open innovation (e.g. Granstrand & Holgersson, 2014). The 'opening' of closed innovation and 'closing' of open innovation has been referred to as the purposively managed knowledge flows across organizational boundaries, by which firms increase or decrease their openness to external knowledge flows (Granstrand & Holgersson, 2014;Henkel et al., 2014). ...
... Granstrand & Holgersson, 2014). The 'opening' of closed innovation and 'closing' of open innovation has been referred to as the purposively managed knowledge flows across organizational boundaries, by which firms increase or decrease their openness to external knowledge flows (Granstrand & Holgersson, 2014;Henkel et al., 2014). This may happen by decreasing or increasing the emphasis on internal innovation or, as more relevant for this article, by engaging or withdrawing from open innovation projects (Henkel et al., 2014). ...
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In this article we introduce three concepts from transaction cost economics that have so far remained excluded from the open innovation literature, and that enable us to address the demands in the literature for an explanatory mechanism for closing open innovation: unanticipated disturbances, tolerance zone and interpretations of contracts. First, we argue that threats resulting from unanticipated disturbances are absorbed in a tolerance zone and lead to adaptations in knowledge sharing. Second, we argue that these threats and changes in knowledge sharing at the project level impact the interpretation of the open innovation contract at the firm level. Adopting a contractual perspective, the article contributes to the open innovation literature by explaining the tolerance zone of transitioning between closed and open innovation. We illustrate in a case study on a B2B open innovation project how a threat to value creation leads to a continuation of open innovation, whereas a threat to value capture leads to a closing of open innovation.
... This issue has been partially addressed through the perspective of intellectual property rights (IPR) and contractual mechanisms (e.g. nondisclosure agreements) in interorganizational collaborations (Bogers, 2011;Dyer and Singh, 1998;Granstrand and Holgersson, 2014;Greco et al., 2022). However, very little was said about the use of other means of protection, such as secrecy practices (Bos et al., 2015;Foege et al., 2019;James et al., 2013;Zobel et al., 2017). ...
... For instance, OI scholars suggest evidence-specific IPR practices used by innovative companies to "disassemble" IPR in the conduct of external innovation collaborations as a way to overcome value capture tensions at the end of OI partnerships (Granstrand and Holgersson, 2014). Others highlight how innovators navigate the openness paradox in OI projects involving competitors by combining separation and integration knowledge-sharing mechanisms within the project structure (Rouyre and Fernandez, 2019). ...
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In order to keep up with the pace of innovation, military firms have recently launched a series of open innovation (OI) initiatives to search for and integrate external knowledge into their internal development process. Adopting OI in such a secretive environment unlocks new possibilities to analyze how firms can pursue openness and secrecy. This article builds on a qualitative research conducted inside a large military firm that has implemented an inbound OI strategy. Relying on multiple case studies and interviews with individual players involved in the firm's OI initiatives, we analyzed how these players deploy secrecy practices when participating to OI projects. They actually combine cognitive practices (aiming at modulating the contextual depth of the knowledge revealed through reframing) with relational practices (aiming at controlling the visibility and exposure of this knowledge). We highlight how these combinations evolve during the lifecycle of OI partnerships. By emphasizing different modes by which individual actors practice secrecy in OI, we contribute to previous research addressing how organizations navigate the paradox of openness. Besides, this study proposes new theoretical insights on the role and features of secrecy practices in innovation activities, and thus contributes to the emerging research field of managerial secrecy.
... Olander, Hurmelinna-Laukkanen, & Heilmann, 2015 ). Appropriability-related tensions might further stem from open-closed dynamics (see Granstrand & Holgersson, 2014 ). Here, timing may be crucial ( Bahemia, Sillince, & Vanhaverbeke, 2018 ) and time has similarly proven to have important effects in projects ( Söderlund, 2002 ;. ...
... It seems thus that the degree of openness would require careful calibration. This relates to recent studies that highlight open-closed dynamics ( Appleyard & Chesbrough, 2017 ) as well as the IP disassembly problem ( Granstrand & Holgersson, 2014 ). In Loop 8, as in Loop 3 we find that neither appropriability improvements in the form of milestones, nor compromise work as effective solutions for severe opportunism ( Bhattacharya et al., 2015 ;Hagedoorn & Hesen, 2007 ;Kloyer & Scholderer, 2012 ). ...
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This study aims to elevate the current understanding of value creation and value capture tensions that emerge in open innovation projects and of their potential solutions. In contrast with prior studies that often suggest specific solutions to individual tensions, our study takes an integrative approach by considering complex (bundles of) tensions and potential solutions to these. The study employs qualitative methods and builds on interview data from six case companies and a group of expert informants. We investigate unfolding events from the point when value creation – value capture tensions are identified in open innovation projects, to the search for their solutions. We label such sequences of unfolding events as trajectories. Our findings reveal two types of trajectories: resolution paths, which are trajectories from initial tensions to solutions, and tension loops, where initial tensions persist and/or new tensions emerge after solutions are enforced. We analyze a total of 17 trajectories, of which seven are marked as resolution paths, and ten represent tension loops. For the majority of the tension loops in our data (eight out of ten) the tensions remain unresolved. We further categorize the types of tensions and discuss the implications of our results for researchers and practitioners.
... Firms can and should take advantage of internal and external concepts to promote the open innovation model to keep pace with the development taking place in the external environment (Westergren, 2011). The term "open innovation" refers to organizations' readiness to grow or limit their collaboration with external business partners in innovation processes, respectively, and to address change rather than remain static (Granstrand & Holgersson, 2014). The strategy of innovation is a process for accelerating the pace, productivity, and sustainability of development. ...
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Aim/Purpose This study examines the impact of decision-making, crisis management, and decision-making on sustainability through the mediation of open innovation in the energy sector. Background Public companies study high-performance practices, requiring overcoming basic obstacles such as financial crises that prevent the adoption and development of sustainability programs. Methodology Due to the COVID-19 pandemic, which has led to the closure of businesses in Iraq, a survey was distributed. To facilitate responses, free consultations were offered to help complete the questionnaire quickly. Of the 435 questionnaires answered, 397 were used for further analysis. Contribution The impact of crises that impede the energy sector from adopting sustainable environmental regulations is investigated in this study. Its identification of specific constraints to open innovation leads to the effectiveness of adopting environmentally friendly policies and reaching high levels of sustainable performance. Findings The impacts of risk-taking, crisis management, and decision-making on sustainability have been explored. Results show that open innovation fully mediates the relationship between the factors of risk-taking, crisis management, decision-making, and sustainability. Recommendations for Practitioners The proposed model can be used by practitioners to develop and improve sustainable innovation practices and achieve superior performance. Recommendation for Researchers Researchers are recommended to conduct in-depth studies of the phenomenon based on theoretical and empirical foundations, especially in light of the relationship between crisis management, decision-making, and risk-taking and their impact on sustainability based on linear and non-compensatory relationships. Impact on Society This study provides a reference for organizations with similar cultural backgrounds in adopting sustainable practices to minimize pollution in the Iraqi context. Future Research A more in-depth study can be performed using a larger sample, which not only includes the energy industry but also other industries.
... Firms can and should take advantage of internal and external concepts to promote the open innovation model to keep pace with the development taking place in the external environment (Westergren, 2011). The term "open innovation" refers to organizations' readiness to grow or limit their collaboration with external business partners in innovation processes, respectively, and to address change rather than remain static (Granstrand & Holgersson, 2014). The strategy of innovation is a process for accelerating the pace, productivity, and sustainability of development. ...
Article
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Aim/Purpose: This study examines the impact of decision-making, crisis management, and decision-making on sustainability through the mediation of open innovation in the energy sector. Background: Public companies study high-performance practices, requiring overcoming basic obstacles such as financial crises that prevent the adoption and development of sustainability programs. Methodology: Due to the COVID-19 pandemic, which has led to the closure of businesses in Iraq, a survey was distributed. To facilitate responses, free consultations were offered to help complete the questionnaire quickly. Of the 435 questionnaires answered, 397 were used for further analysis. Contribution: The impact of crises that impede the energy sector from adopting sustainable environmental regulations is investigated in this study. Its identification of specific constraints to open innovation leads to the effectiveness of adopting environmentally friendly policies and reaching high levels of sustainable performance. Findings: The impacts of risk-taking, crisis management, and decision-making on sustainability have been explored. Results show that open innovation fully mediates the relationship between the factors of risk-taking, crisis management, decision-making, and sustainability. Recommendations for Practitioners: The proposed model can be used by practitioners to develop and improve sustainable innovation practices and achieve superior performance. Recommendation for Researchers: Researchers are recommended to conduct in-depth studies of the phenomenon based on theoretical and empirical foundations, especially in light of the relationship between crisis management, decision-making, and risk-taking and their impact on sustainability based on linear and non-compensatory relationships. Impact on Society: This study provides a reference for organizations with similar cultural backgrounds in adopting sustainable practices to minimize pollution in the Iraqi context. Future Research: A more in-depth study can be performed using a larger sample, which not only includes the energy industry but also other industries.
... The ongoing vibrant debate is caused by the fact that, in open innovation, there is a crosscutting disaggregation between the two moments of value creation and value capture. Such disaggregation is determined by the distribution between partners of intellectual property Open innovation and patenting activity in health care rights and existing law enforcements (Simcoe, 2006;Granstrand and Holgersson, 2014). The consequence is a sort of "tension" between intellectual property rights and open innovation (Bican et al., 2017). ...
Article
Purpose The study aims to explore the interplay between open innovation and intellectual property. Differently from previous studies, we argue that open innovation fosters firm's patenting activity. Design/methodology/approach We use linear regression analysis to test model's hypotheses. Data are drawn from the Eurostat statistics and refer to a large sample of European firms (NACE Rev.2). Findings The findings confirm that open innovation fosters patenting activity in health care, also thanks to huge governments' expenditures in this market. Research limitations/implications The study focuses solely on European firms and it adopts a traditional linear approach. So, we cannot exclude that different dynamics may occur across European borders. Future research should address this concern by focusing on multi-country comparative studies. Practical implications Open innovation is the most suitable model for health industry, because it improves both innovation performance and intellectual capital of firms. Originality/value The study tackles an existing gap of the literature by considering how the presence of large customers impacts the strength of intellectual property protection.
Thesis
Since Dr. Henry Chesbrough first coined the open innovation concept back in 2003 (Chesbrough, 2003a), a lot of research was performed to identify the key open innovation activities across different sectors and industries (Huston and Sakkab, 2006; Ili et al., 2010; Spithoven et al., 2013; Van de Vrande et al., 2009; Bommert, 2010; Brown and Osborne, 2012). Although several researchers investigated the open innovation perspective applied to the defence industries of different countries (Fernandes et al., 2020; Simões et al., 2020; Cronin, 2020), high-qualitative research of this open innovation concept applied to Belgian Defence in particular is lacking. Moreover, a publicly available overview of the actual research and development (R&D) practices of Belgian Defence is also not available for the moment. To address this literature gap, this Master’s Dissertation focuses on giving an overview of the R&D practices of Belgian Defence and, as a result of the latter, how well these practices are aligned with the modern view of open innovation. Despite the several limitations present in this dissertation, it still provides interesting findings useful for both ‘non-defence’ and ‘defence’ related readers respectively. Hence, this dissertation shows that Belgian Defence is currently on the way to implement an effective Triple Helix strategy that connects Belgian Defence with the most proficient industrial partners. However, it shows that the legal framework which surrounds, for example, the procurement policy of Belgian Defence is putting several limitations on these open innovation practices. As such, several guidelines to both Belgian Defence and the government infrastructure surrounding Belgian Defence are given.
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The Covid-19 pandemic exposed firms, organisations and their respective supply chains which are directly involved in the manufacturing of products that are critical to alleviating the effects of the health crisis, collectively referred to as the Crisis-Critical Sector,to unprecedented challenges. Firms from other sectors, such as automotive, luxury and home appliances, have rushed into the Crisis-Critical Sector in order to support the effort to upscale incumbent manufacturing capacities, thereby introducing Intellectual Property (IP)related dynamics and challenges. We apply an innovation ecosystem perspective on the Crisis-Critical Sector and adopt a novel visual mapping approach to identify IP associated challenges and IP specific dynamic developments during and potentially beyond the crisis.In this paper, we add methodologically by devising and testing a visual approach to capturing IP related dynamics in evolving innovation ecosystems and contribute to literature on IP management in the open innovation context by proposing paraground IP as a novel IP type.Finally, we also deduce managerial implications for IP management practitioners at both incumbent firms and new entrants for navigating innovation ecosystems subject to crisis-induced dynamic shifts.
Thesis
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Innovations and technological developments have been recognized for their central importance for economic success and growth at least since the 1930s. Intellectual property (IP) and intellectual property rights (IPRs), such as patents, trade secret rights, and copyrights, have during more recent decades caught increasing attention, and, mainly due to various developments at macro level, IP has become an important source of competitive advantage at micro level in many industries. This has led to an increased importance of strategic IP management, and the related research field has been growing since the late 1990s. This thesis aims to contribute to this growing field, and the first purpose of this thesis is to explore and explain strategic and innovation related IP management practices, and the managerial and economic consequences of such practices. Apart from the growing importance of IP management in general, an increased focus on open and collaborative approaches for creating innovations has led to a need for new and adapted IP management skills. The second purpose of this thesis is therefore to develop managerial and economic frameworks, models, and tools to be used in the intersection between IP management and open innovation practices. These purposes are addressed in a cover paper and six appended research papers of theoretical/conceptual as well as of empirical nature, being based on interviews, questionnaires, patent statistics, and document studies. In connection to the first purpose the results show that, while many small firms have problems with properly benefitting from the patent system, large firms have increasingly developed their IP strategies, especially their patent strategies. The purpose is then not only to appropriate monopolistic returns from innovations but also to govern various forms of open innovation. Large firms were found to in a first step increase their patenting (in terms of quantity), and in a second step focus more on selective, quality-oriented, and internationalized patenting. Additional results show that the internationalization leads to a convergence in managerial choices of output markets for patenting worldwide, in parallel with market and technology diversification. Further, a case from mobile telecommunications illustrates the role of IP management in the governance of open innovation systems. Finally, two cases from the automotive industry illustrate the IP-related problems that arise in connection to divestments and other types of disintegrations (‘IP disassembly problems’), and how IP management can mitigate them. This leads to the second purpose, related to the development of models, tools, and frameworks for IP management in relation to open innovation. First, the thesis provides a conceptual framework of innovation openness, especially pinpointing the role of IPRs. This framework emphasizes three key dimensions of innovation openness: resource distribution, technology governance, and technology accessibility. Second, a framework for managing the IP disassembly problem is presented, enabling increased exit opportunities and decreased transaction costs. Third, a method for determining fair, reasonable, and non-discriminatory royalties in licensing collaborations is developed, applicable to multilateral licensing deals. It stands clear that contemporary IP management is not (and has never been) only about maximizing excludability. Strategic IP management must therefore be developed and integrated with technology and corporate management in order to foster success at the micro level of firms, and thereby also at macro level. Developments in IP management skills (e.g., sourcing, control, commercialization, licensing, valuation, pricing) and IP contracts will then most likely lead to increased efficiency of interorganizational technological relationships and quasi-integrated organizational forms, and thereby also to increased innovativeness and economic development.
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