Open Innovation (OI) Flashcards

Open innovation (OI) refers to the integration of focused knowledge outflows and inflows to enhance core innovation and to extend its market by generating information from the external environment (Manetti & Bellucci, 2016). Once implemented, it is possible for the firm to expand its precincts and establish a strong symbiotic relationship with external investors (Nicholas, 2015). Contrary to the open innovation, closed innovation is restricted to its internal resources, and only the most outstanding ones are adopted for business development (Zaman, 2019). Social media platforms act as media through which business firms exchange knowledge and ideas with other entrepreneurs and consumers.

In contemporary business, the market is strongly competitive, especially for small and medium businesses (Schuurman, De Marez & Ballon, 2016). Small businesses that cannot effectively utilize the internet via social media channels to market their businesses cannot beat established competitors and therefore, end up making losses (Podmetina et al., 2016). The fact that Small and Medium Enterprises (SMEs) have fewer resources compared to the large firms translates to the need for open innovation through social networking as a compensatory tool for attracting clients (Cheng & Shiu, 2019). Small business partners that are focused on utilizing social media can compose business strategies that accentuate and promote innovation, goal and vision sharing, and increase their income while reducing their start-up costs.

With the advancing technology, it is possible for small and mid-sized enterprises (SMEs) to utilize social media as their top-notch open innovation tool to reach out to target customers and market their products (Theurer et al., 2016). For this reason, like the bigger organizations and corporations, SMEs are now able to source out huge profits from the increased sales thanks to open innovation-social media interactions. Social media platforms such as LinkedIn, Facebook, and Twitter are increasingly becoming the mainstay of digital marketing and advertisement for new products and services (Srinivasan, Bajaj & Bhanot, 2016).

According to Lassen and Laugen (2017), open innovation positively affects increases the speed for development, reduces risks, and increases entrepreneurial knowledge (Barrales et al., 2014). Open innovation is, therefore, an essential requisite for SMEs willing to efficaciously regulate how they interact with consumers, partners, and other major stakeholders. According to Trantopoulos, von Krogh, Wallin, and Woerter (2017), the integration of technologies from external sources is imperative in ensuring that firms do not only innovate but can also generate new ideas. These two premises mean that the introduction of open innovation is essential in ensuring that firms can innovate and in fact develop new ideas (Scuotto et al., 2019).

Trends in the business world are highly dynamic. For businesses to cope up with such changes, it is important for entrepreneurs to embrace creativity and innovation. Innovation and collaboration among business employees help them make decisions that are relevant in the current fast-changing economy. Most of the previous studies majorly focused on the impact of open innovation on individual business organizations (Lee, Park, Yoon, and Park, 2009). This translated to the need to research on the impact of open innovation on a collaborative context. In this case, the study focused on how small SMEs can effectively collaborate with consumers, other businesses, and stakeholders to create a strong market (Cheng & Shiu, 2019). Aggression from large business owners creates strong competition that put SMEs at the risk of failure. However, through by coming together and sharing ideas, it is possible for SMEs to come up with mind-grabbing business ideas that can drive them to the top of the pyramid.

The need to digitize a small or medium business through social media platforms usually defines the degree at which SMEs are willing to borrow ideas from the external environment and use them as stepping stones for going a notch higher in facing the currently-stiff market competition. Entrepreneurial collaboration brings a competitive advantage to small and medium businesses, which enables them to last for a long period of time (Agostini & Nosella, 2017). In a collaborative environment, firm owners and other entrepreneurs can positively challenge each other and come up with lasting solutions that help them sustain market value for their products and service.

The fact that people have different ideas means that small businesses can easily benefit when such ideas are brought together (Scuotto et al., 2019). For instance, open innovation enables entrepreneurs to collectively assess the existing market trends and subsequently create marketing strategies that can help to beat the impending challenges. One of the major reasons for the failure of small businesses is inappropriate handling of business risks (Lassen & Laugen, 2017). This commonly happens when small business owners act independently as business managers fail to share their ideas with other employees. Through open innovation, entrepreneurial collaboration becomes a vital tool that provides a top-notch approach to the existing market risks. It is however, also essential to integrate advanced technology.

Research Gap to Be Addressed by the Study

While multiple businesses are adopting social media for business promotion, there has been increasing interest in how open innovation can be utilized to increase product value and expand the target market (Albats et al., 2019). Nevertheless, despite the immense interest in open innovation as a tool for business growth, there was inadequate information on how this could be implemented to promote SMEs (Lee, Park, Yoon, and Park, 2009). Van de Vrande et al., (2009) noted that the use of the open innovation in SMEs remains understudied hence, the need for additional studies to feel the existing gap in knowledge on how SMEs could integrate the use of open innovation for business success (Del Vecchio et al., 2019).

Imperative to this research was how SMEs could integrate social media as open innovation tools for enhancing interaction between the consumers, partners, and other interested stakeholders (Abuhashesh, 2014). The use of social media has been essential in the expansion of markets for SMEs and creating a space for innovation. This means that the use of social media remains a focal point for businesses to reach their customers (West & Bogers, 2017). In essence, companies continue to leverage their social media presence to improve interaction with the external environment.

Problem Identification

While several studies have been done on the utilization of open innovation, most of them focused on the big organizations (Saunila, 2019). The beneficial impact of open innovation as a social media tool to increase the number of clients and promote small businesses has been left out (Bianchi, 2010). For this reason, there was a need to carry out research to determine how SMEs could integrate social media platforms and open innovation to increase their sales (Cesaroni & Consoli, 2015). Several studies have shown that many performing businesses have incorporated social media as their major marketing tool. They analyze, share, and borrow ideas from external environments to help in promoting their businesses. For this reason, bigger organizations have achieved immense success and have thereby remained at the top of the pyramid. It is therefore only through emulating similar strategies that SMEs will be able to compete with big business firms (Albats et al., 2019). This was a problem that needed to be addressed to enable small and medium businesses to compete favourably with big businesses to increase value for their products.

The goal of this research was to identify ways in which SMEs could incorporate open innovation to promote businesses by increasing their interaction with consumers, other business partners, and major stakeholders. At the end of the study, conclusions were drawn from the results which provided competent solutions that provided small business owners with knowledge on how to increase their sales.

Brief Introduction to the Research Design

In this study, a qualitative methodology was the most appropriate selection design. Justifiably, the study focused on the emerging social media platforms as an open innovation tool to regulate interactions and transactions among stakeholders in a business. With this design, it was possible to draw the necessary conclusions and come up with appropriate recommendations. The study design described how SMEs utilized open innovation to beat the market competition. Data was collected for a maximum of one year; between 2018 and 2019. This provided an easy way to investigate the various encounters that are essential in delivering services to target customers.

Moreover, the researchers were able to determine the participants’ perceptions of SME’s services. For this reason, this provided a better way to assess marketing than a quantitative study design. It would, however, be ideal to employ both types of study designs to assess both the suitability of the services provided and the numbers involved. However, in this context, the study narrowed down to only one study design because of the limited resources: The later requires substantial income to conduct the study to completion.

Reading Guide

This study is easy to read, as it was systematically arranged based on the necessary chapters. The introduction gives the background to the study and the existing research gap. In this chapter, the problem is identified and clearly elaborated. The reader is able to source out the main aim of the study and its correlation to the previous studies. The research question and what motivated the topic is also provided. The second chapter, the methods, explains how the literature was systematically reviewed. In this section, there is a clear description of how scholarly literature has been mapped and an outline of the databases employed. In the third chapter, the identified literature is systematically reviewed and the theoretical stance provided. In the fourth chapter, the research design utilized is discussed and how the data was collected and analyzed elaborated. In the final chapter, the findings from the secondary data used are discussed and a conclusion made.