An Open Innovation Project Typology of Exploration and Exploitation: Managerial Implications and Empirical Applications

Abstract

Despite an increased use of open innovation (OI) in firms, it is still a question of how firms can work successfully with OI in a way that enables them to exploit their current capabilities and simultaneously explore fundamentally new competencies. Firms need to be able to practice different forms of OI activities—inbound, outbound, or coupled—while simultaneously reaping the value these forms create. How firms reap value from different OI activities however remains under-investigated and consequently, we know very little about how these activities co-exist in firms. Before engaging in how firms can embrace different forms of OI activities simultaneously, we argue that there is a need to reassess how OI research approaches the idea of exploiting current capabilities and simultaneously exploring fundamentally new competencies. Based on the original framework of exploitation and exploration, a typology is proposed, which takes its departure at the project level in firms. The project level is promising as OI research has shown that OI at the firm level typically is a consequence of various OI initiatives at the project level. The value of the proposed typology and its applicability for firms is demonstrated through the case of Lego. The conceptual study results in a project typology of four generic OI approaches: inbound-exploration project; inbound-exploitation project; outbound-exploration project; and outbound-exploitation project. When these approaches are integrated, the coupled processes appear. Practical implications are derived with an overview of how managers can cope with different forms of OI strategically.