External innovation represents the next step from Closed Innovation in the path to Open Innovation. External innovation is different from Closed Innovation in the understanding that in-house resources could be shared with third parties in return for monetary rewards. For instance, the technology a company has developed itself but is no longer using in its R&D process can be out-licensed to any interested parties. Thus, the “shelfed” product will be able to capture value, benefiting both its author - the licensor and the licensee at the same time. On the other side of the coin, commercial entities become more willing to adopt external solutions, the independent development of which will cost too much effort or resources.
Related Managerial Challenges
- Enterprises face the challenge of exploring the environment of potential partners (competitors, end-users, public institutions, universities etc.) and building appropriate business strategies, including partnerships, which are in line with their corporate agenda;
- Entities need to develop new approaches on how to integrate internal resources and capabilities with external knowledge in a way that will produce maximum benefit for the company;
Resulting Management Techniques
- Companies include in their business strategies a list of potential partners and become more aware of the research, conducted by their competitors;
- Entities start to consider their absorptive capacity and their needs for external resources. Strategies on when and why to participate in clusters, consortia or other collaborative networks are adopted;
- Firms participate in so called “cross-licensing”, in which a license is given in return for another license. This model is commonplace in the electronic industry, characterized with a large number of patents, concentrated in several patent holders.