College of William and Mary
"Open innovation", the term popularized recently by Henry Chesbrough (Chesbrough, 2003), is the contemporary label for a much older idea—that the majority of the knowledge in the world exists outside the walls of any given firm, and thus that drawing on resources beyond the firm's own R&D, scientists, engineers, and technicians—or its own marketing or manufacturing experts—is desirable. Contract research, consulting, and design firms, from Arthur D. Little (founded in 1886) and Battelle Institute (founded in the 1930s) to IDEO and Frogdesign have long offered outside assistance to firms seeking to innovate. In the U.S. universities have also been active research partners to U.S. industry since the mid–19th century, responding rapidly to new industry needs with new curriculum designs. Faculty often formed alliances with firms, doing critical research and placing many graduates with their industrial partners, thus fueling the growth of new industries (Mowery and Rosenberg, 1998).
Open innovation has gained additional prominence and momentum in the context of three specific factors: financial pressures for efficiency, burgeoning globalization, and increased technical complexity. First, financial pressures drove firms to eliminate expenditures that did not lead promptly to financial returns. As a result, longer horizon, centralized corporate R&D was eliminated in many ...