Abstract
Open innovation has so far been studied mainly in high-tech, multinational enterprises. This conceptual paper on innovation ecosystem studies scrutinizing open innovation practices that has been applied by firms focusing on small- and medium-sized enterprises (SMEs). Within the review, we defined the innovation ecosystem, explaining on the innovation issues in SMEs, open innovation as well as close innovation. SMEs pursue open innovation primarily for market-related motives such as meeting customer demands, or keeping up with competitors. Their most important challenges with open innovation are securing the trade secrets. However, SMEs have option either to proceed with open innovation or closed innovation. Open and close innovation has its benefit and weakness; therefore SMEs must identify their main objectives in the business. The future directions of this issue are discussed.
Highlights
It is important to understand what small and medium sized enterprises (SMEs) are in order to tackle the weakest part
Small and medium sized enterprises face the inherent tension of being dependent on external partners to complement their internal innovation activities while having only limited resources to manage innovation processes
Firms that propose product innovation should concentrate on new product development or improvement of technologies while firms introducing new organizational methods as process innovation should focus on knowledge and management culture (Ilker Murat & Birdogan, 2011)
Summary
It is important to understand what small and medium sized enterprises (SMEs) are in order to tackle the weakest part. In Malaysia, SMEs definition is divided into two categories; manufacturing and services firms. SME is defined as companies with less than 200 full time employees and the sales turnover not more than RM50 million. The back line team can provide and create the solution to the demand of the customers. Understanding the process of innovation practices will improve firm’s competitive advantage and increases the chances of SMEs survival since the estimated failure rate for Malaysia SMEs is 60 percent (Ahmad & Seet, 2009). The present literature proposes slight direction for SME managers to apply innovation in their firm (Meyer & Goes, 1988; Van de Ven, Angle, & Poole, 2000). According to Kimberly and Evanisko (1981) innovation influences the introduction of products or services or the process of producing them
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