| Academy of Management Review
Open vs. Closed Innovation: A Model of Discovery and Divergence
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.
Keywords: Innovation and Invention;
Partners and Partnerships;
Goals and Objectives;
Cost vs Benefits;