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Issue: Volume 35, Number 1 January 2010
Title: Open vs. Closed Innovation: A Model of Discovery and Divergence*
Authors: Esteve Almirall, Ramon Casadesus-Masanell
Abstract: When is open innovation superior to closed innovation? Through a formal simulation model, we show that an open approach to innovation allows the firm to discover combinations of product features that would be hard to envision under integration. However, when partners have divergent goals, open innovation restricts the firm’s ability to establish the product’s technological trajectory. The resolution of the trade-off between the benefits of discovery and the costs of divergence determines the best approach to innovation.

 

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