The Emergence of Openness: How Firms Learn Selective Revealing in Open Innovation

The Emergence of Openness: How Firms Learn Selective Revealing in Open Innovation

Joachim Henkel TUM School of Management – Technische Universität München (TUM) ; Centre for Economic Policy Research (CEPR)

Simone Schöberl McKinsey & Company Inc.

Oliver Alexy Technische Universität München (TUM), TUM School of Management

March 28, 2013

Open innovation is often facilitated by strong intellectual property rights (IPRs), but it may also function, and even be boosted, when firms deliberately waive some of their IPRs. Yet, extant literature falls short of explaining how firms learn to practice this behavior. To address this question, we conduct an empirical study in a segment of the computer component industry which traditionally has taken a rather proprietary stance. With the advent of the open source operating system Linux, firms increasingly waived their IPRs on software drivers. We trace and analyze this process using both qualitative and quantitative methods. We find that component makers had to go through a learning process to realize that and how selectively waiving IPRs may be beneficial for their business. We uncover customer demand as a trigger, organizational inertia as an obstacle, and positive experiences as subsequent driver of this learning process. We also identify differences between uni-directional and bi-directional openness, and find that firms’ motives relate to how they implement openness. Of particular interest are the important role of an external trigger to rethink an engrained industry practice of strong IP protection, and the development of openness into a new dimension of competition.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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