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KTH, Industrial Engineering and Management Master of Science Thesis TRITA-ITM-EX

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KTH, Industrial Engineering and Management Master of Science Thesis TRITA-ITM-EX

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The importance of open innovation in Small and

Medium-sized enterprise in Stockholm Sweden,

A case study of Single Technologies

by SEFERA ALI SHIGUTE

JUDE BAHANAG NUNGA

Master of Science Thesis TRITA-ITM-EX 2017:073

KTH Industrial Engineering and Management

Industrial Management

SE-100 44 STOCKHOLM

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Betydelsen av öppen innovation i små och

medelstora företag i Stockholm Sverige

En fallstudie om Single Technologies

SEFERA ALI SHIGUTE

JUDE BAHANAG NUNGA

Examensarbete TRITA-ITM-EX 2017:073

KTH Industriell teknik och management

Industriell ekonomi och organisation

SE-100 44 STOCKHOLM

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Master of Science Thesis TRITA-ITM-EX 2017:073

The importance of open innovation in

small and medium-sized enterprise in

Sweden: A case study of Single Technologies

Sefera Ali Shigute

Nunga Jude Bahanag

Approved

2017- May 29

Examiner

Gregg Vanourek

Supervisor

Dr Terrence Brown

Thesis Number

2017 - 073

Commissioner

Contact person

Sefera Ali Shigute

Jude Bahanag Nunga

ABSTRACT

The entrepreneurs behind newly formed companies in Sweden as well as small medium-sized

enterprises and start-ups are increasingly getting involved in open innovation or exploring its

practices. They do this in order to develop innovative products and services. SMEs and start-ups

are collaborating with external stakeholders, such as enterprise service providers, industrial

suppliers, research institutions or universities, to either bring their innovative products and

solutions to the market faster or to stay ahead of the game of competitions. By engaging in open

innovation practices, the different stakeholders involved are able to combine human capital, in

addition with a collection of available resources. By reading further into this thesis research, a

typical exploration of resources can be noticed spanning from hardware to software and from

soft skills to hard skills, thus resulting to innovative outcomes (product and services).

This thesis research will investigate the benefits Swedish start-ups and small-medium-sized

enterprises can gain from open innovation. There are several studies on large companies that use

open innovation to generate additional values. Accordingly, external learning is very important

in small and medium-size enterprises for growth. However, there are fewer studies on startups

and SMEs, in terms of open innovation; therefore, this research study aims to address this gap.

SMEs and open innovation are becoming very important in the local Swedish and global

knowledge-based economy. In the past Sweden’s economy, SME played an important role and in

the future SMEs are estimated to be more important, due to the rapid technology development

and fast-growing services sector. An important contributing fact to the local economy is that 9

out 10 new jobs during the last twenty years were created within the SME sector in Sweden.

Accordingly, this study has highlighted the importance of external learning and its contribution

towards improving the innovative performance of small and medium-size enterprises. The

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findings from all interviews and case study revealed different impact about the importance of

open innovation. All companies had their respective motivating reasons to explore external

resources, while some could attest the resources helped to verify their assumption. Other SME

and companies were collaborating with research institutes, academia in order to complement

their innovation process, which ended up being a benefit to all parties involved in open

innovation.

Key words: Innovation, open innovation, external learning, business model, SMEs in

Sweden

Examensarbete TRITA-ITM-EX 2017: 073

Betydelsen av öppen innovation i små och

medelstora företag i Stockholm Sverige: En

fallstudie om Single Technologies

Sefera Ali Shigute

Jude Bahanag Nunga

Godkänt

2017-May 29

Examinator

Gregg Vanourek

Handledare

Dr Terrence Brown

Uppdragsgivare

Kontaktperson

Sefera Ali Shigute

Jude Bahanag Nunga

Sammanfattning

Entreprenörerna bakom nybildade företag i Sverige samt små medelstora företag och

nystartade företag blir alltmer involverade i öppen innovation eller utforskande av sina metoder.

De gör det för att utveckla innovativa produkter och tjänster. Små och medelstora företag och

nystartade företag samarbetar med externa intressenter, såsom företagstjänstleverantörer,

industrileverantörer, forskningsinstitutioner eller universitet, för att antingen föra sina innovativa

produkter och lösningar på marknaden snabbare eller för att ligga före tävlingsspelet. Genom att

engagera sig i öppen innovationspraxis kan de olika berörda parterna kombinera humankapitalet,

dessutom med en samling tillgängliga resurser. Genom att läsa vidare i denna avhandling kan en

typisk prospektering av resurser märkas från maskinvara till programvara och från mjuka

färdigheter till svåra färdigheter, vilket resulterar i innovativa resultat (produkt och tjänster).

Denna avhandling kommer att undersöka fördelarna svenska nybörjare och små och medelstora

företag kan dra nytta av öppen innovation. Det finns flera studier på stora företag som använder

öppen innovation för att skapa ytterligare värden. Externt lärande är därför mycket viktigt i små

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och medelstora företag för tillväxt. Det finns dock färre studier om nystart och små och

medelstora företag, när det gäller öppen innovation. Därför syftar denna forskningsstudie till att

hantera denna klyfta.

Nyckelord: Innovation, öppen innovation, externt lärande, affärsmodell, små och medelstora

företag i Sverige

ACRONYMS

AB – Aktiebolag

API – Application Programming Interface

CTMH – Center for Technology in Medicine and Health

FZD - Frizzled

GPS – Global Positioning System

IBM - International Business Machines Corporation

ICT – Information communication and technology

IoT - Internet of Things

IP – Intellectual property

IQ - Intelligence Quotient

KI – Karolinska Institute

KTH – Royal Institute of Technology

MEDTECH – Medical Technology

MNE – Multi-National Enterprise

OECD - Organization for Economic Co-operation and Development

OI – Open Innovation

OL – open lab

SME – Small and medium-sized enterprise

R&D – Research and development

RQ – Research Question

P&G - Procter & Gamble

STING – Stockholm Innovation and Growth

SU – Stockholm University

WEQ – We Quotient

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WIPO - World intellectual property organization

3 D - Three-dimensional

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Contents

FOREWORD 10

1 CHAPTER ONE 13

1.1 Background 13

1.2 Purpose 13

1.3 Objective 12

1.4 Structure and audience 12

1.5 Ethics and sustainability 12

2 CHAPTER TWO 15

2 THEORETICAL FRAMEWORK 15

2.1 Innovation strategy in Sweden 15 2.1.1 The roles of innovation and SMEs in Sweden economy 15 2.1.2 Knowledge management and innovation 16

2.2 Innovation methodologies 17 2.2.1 Open innovation 18

2.2.2 Open innovation paradigm, from closed to open model 19 2.2.3 Concept of open innovation in SME 20

2.2.4 Business models through open innovation in SMEs 21 2.3.2 Managing innovation partners and networking 19

2.3 The role of IT enabling open innovation: Transferability 23

2.3.1 Role of IT –enable external learning 23 2.3.2 Role of IT –enable internal learning 23

2.4 Summary of theoretical framework 24

3 CHAPTER THREE 22

3 Methodology 22

3.1 Methods 22 3.1.1 Interviews 22 3.1.2 Interview questions 23

3.1.3 Interview process 23

3.1.4 Case study 23

3.2 Limitation 23

3.3 Delimitation 24

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4 CHAPTER FOUR 25

4. Summary of the case studies 25

4.1 4.1 Overview 25

4.2 THINGS - The Innovation Growth house Stockholm AB 25

4.3 Case Study 26 4.3.1 Case Study Single Technologies Stockholm, Sweden 26

5 FINDINGS 29

5.1 Size of SME 29

5.2 Creating and capturing value in open innovation 30

5.3 SME and start – up benefits from OI 30

5.4 Open Innovation Drivers 30

5.5 Knowledge Exploration, Assessment and Adoption 31

5.5.1 Exploration 31 5.5.2 Assessment 31 5.5.3 Adoption 32

5.6 Open innovation importance 32

5.7 collaborations 32

6. ANALYSES 33

6.1 Case study analysis 33

6.2 RQ, How can SMEs and start-ups benefit from open innovation in Sweden? 33

6.3 Benefits 33

6.4 Open Innovation Networking 34

6.5 innovation and sustainable development in Sweden 34

6.6 Barriers affecting OI 34

7. DISCUSSIONS 35

8. CONCLUSION 35

9. RECOMMENDATIONS 35

10. FUTURE STUDIES 35

REFERENCES 40

APPENDIX 42

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List of figures

Figure 2.1 the evolution of innovation

Figure2. 2 the creativity levels in the open business mode

Figure 2.3 Open innovation model for SMEs

Figure 4.1 Model Theta 3 D Video Microscopy

Figure 4.2 Cutting Edge Single Molecule Imaging

Figure 4.3 Single molecule imaging

Figure 5.1 Motives that drive SMEs to open innovation

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List of tables

Table 2.1 SME definition by European commission 2005

Table 2.2 breaking down open innovation prejudices

Table 2.3 the principle of closed and open innovation

Table 4.1 sample enterprise in THINGS – Stockholm innovation and growth

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Foreword

In this thesis research, literature review, 8 interviews and a case study have been conducted.

The research has been reviewed from March 2017 to May 2017 and it is performed in

collaboration with several Swedish companies recognized for having either a unique business

model or simply operating in a different business sector. The authors focus has been on hardware

companies with growth potential in Stockholm and the research is part of the KTH

Entrepreneurship and Innovation management master program, Stockholm, Sweden.

We would like to thank our supervisor Dr Terrence Brown, director of M.Sc. Entrepreneurship

and Innovation Management at KTH Royal Institute of Technology for all the academic support,

guidance and comprehension throughout our academic study semesters and during our thesis

research period and process. We wish to use this opportunity to thank all the interviewees for

their time, shared industry knowledge, insights and practices on open innovation; this study

could never have been complete without their assistance. We also acknowledge all valued

feedback and research insights given to us by Mr. Serdar Temiz, Mr. Gregg Vanourek, and Mr.

Geert Van Den Boogaard. Special thanks to our case study interviewee Dr. Johan Strömqvist,

Ph.D. | CEO and Mr Hassan Al Hamwi for their kind advice;

Stockholm, Sweden 2018 May

SEFERA ALI SHIGUTE

JUDE BAHANAG NUNGA

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Chapter One

Introduction

The purpose of this study is to disseminate the benefits Swedish small medium-sized enterprises

can gain from open innovation. In order to achieve the goal of this thesis research, the

researchers would be answering the following question:

How can SMEs and start-ups benefit from open innovation in Sweden?

The following section comprises the introduction for this thesis research. It starts with a

“background” which explains the importance of open innovation in SMEs and also includes the

“purpose” of the study and its “objectives” which are the base for decision making regarding

“methodology” of the study. Furthermore, there is a “limitation” part which explains the

obstacles, size and scope of the research.

1.1 Background

Open innovation is among the rapidly growing innovation practices currently undergoing wide

spread during this 21st century. With open innovation, corporations or the engaged stakeholders

collaborate by combining their internal ideas with external ideas, supported by the use of

common and related technologies with the ultimate goal to innovate. As for the open innovation

model, the usual mission is to fast track product development, innovation efficiency. According

to Chesbrough H. (2003) open innovation has a wide potential opportunity for improving the

innovative performance of small and medium-size enterprises. Open innovation is defined as

follows, “Open Innovation is a paradigm that assumes that firms can and should use external

ideas as well as internal ideas, and internal and external paths to market, as the firms look to

advance their technology.”(Chesbrough H. 2003). By reviewing some of the successful

entrepreneurs who happen to be referred as open innovation practitioners, it has become

evidence SMEs are collaborating with external partners, whether suppliers, customers or

universities, to keep ahead of the game and get new products or services to market before their

competitors. Accordingly, external learning is very important in small and medium-size

enterprises for rapid growth.

1.2 Purpose

The purpose of this research is to highlight the importance of external learning and disseminate

the outcome and innovation approach taken by small and medium-size enterprises and start-ups.

The thesis research explores and involves the benefits of open innovation in SMEs in Sweden

and to further integrate empirical findings with the literature review. Additionally, the research

aims to further develop the open innovation research field.

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1.3 Objective

By carrying out this thesis research, the following Research question will be answered

- How can SMEs and start-ups benefit from open innovation in Sweden?

1.4 Structure and audience

This study starts with an introduction describing the key theories such as open innovation and

their relationships with SMEs, it also explains the theoretical framework used. Afterward,

empirical findings from eight interviews and a case study will be taken into account which forms

part for the results section. Having both the academic and industrial perspective will make it

possible to identify the gaps and present a conclusion and suggestions for improvements.

This thesis research is suitable for use within different academic research fields and within

innovation practices in other key industrial sectors; ranging from Engineering to Big Data,

Software, Artificial Intelligence, Medical device, Information Security and Internet Security,

Information Technology and Communication. Entrepreneurs and newly recruits within the above

listed industries facing challenges or in need of insights may use this.

Academically, this thesis research may best suit students, lecturers and researchers directly or

indirectly connected to the field of innovation management, and who are interested in new

studies regarding open innovation. Aspiring entrepreneurs and individuals from the general

public who may consider his or herself novice to the term Open innovation can find this research

resourceful.

1.5 Ethics and sustainability

Ethics and sustainability were among our top priorities during the process of case study,

literature review and most especially start-up interviews. Interviews were conducted to each

start-up referred in this thesis research. The respective interviews, questions and sessions were

carefully planned and conducted in a private physical location that suited both the interviewer

and the interviewee. Typical interviewees were either one of the start-up founding entrepreneur

or a representative from the company´s management or development team working within the

capacity of open innovation and able to share certain details about their business and innovation

approach. The interviewees were informed about the intention of the information gathered, and

to be analysed and what category of information shall become accessible to the public after the

research findings.

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.

Chapter Two

THEORETICAL FRAMEWORKS

This theoretical section introduces the concept of innovation and open innovation, the role of

SMEs in Sweden’s economy and the benefits of open innovation in SMEs. It starts with

explaining the fundamental theories of open innovation, and then draws attention to the main

problem area, which is further investigated, thus evaluating the impact and need for

improvement. Information cited in this section is the result of the literature reviewed.

2.1 Innovation strategy in Sweden

Currently the world faces fundamental challenges and changes. Most of the countries within

the European Union and the OECD, as well as countries such as China, Russia, India and Brazil

have an increased interest in developing the innovation ecosystem and practices in their

countries. According to, Annie L. (2012), Sweden needs to be more innovative in order to

meetup with the global social challenges, to increase the competitiveness and to renew the future

welfare and public services.

An innovation strategy for Sweden is needed in order to:

☞ Meet global societal challenges

☞Increase competitiveness and create more jobs in a global knowledge economy

☞Deliver public services with increased quality and efficiency

All these facilitate good innovation climate, and “a good innovation climate lays the

foundations for more jobs, a more sustainable society with better quality of life for all inhabitants

and growth throughout the country”. The following is the national innovation strategy vision for

the innovation climate in Sweden 2020: “Sweden is a creative country characterised by

pioneering ideas and new ways of thinking and doing in order to shape our future in a global

community. People in all parts of Sweden can and want to contribute to creating value for

people, the economy and the environment through new or improved solutions” ( Sweden minister

for enterprise, report, 2012).

2.1.1 The roles of innovation and SMEs in Sweden economy

In knowledge-based economies, SMEs are increasingly viewed as a key source and driver of

innovation and new technologies. OECD, (2005), tends to differentiate innovation by degree of

novelty: ´it may be new for an organisation, new for a market (or area of application) or new for

the world´. And, National encyclopaedia defines innovation as follows: Innovation is “Events

through which new ideas, behaviours and procedures are introduced into a society and then

spread”. It is difficult to define the boundaries between small, mid-sized and large companies.

SMEs is a category of micro, small and medium-size enterprise, which employ fewer than 250

persons and which have an annual turnover less than 50 million euro and an annual balance sheet

total less than 43 million euro (European commission report, 2005). For more details see table

3.1 below or Appendix G

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Table 2.1 SME definition by European commission 2005

In the past of Sweden’s economy, SME played an important role and in the future SMEs are

estimated to be more important, due to the rapid technology development and fast-growing

services sector. Currently Sweden has around 800 000 private companies among which around

99% are classified as SMEs. The SMEs main importance is that 9 out 10 new jobs during the last

twenty years were created within the SME sector in Sweden (Företagarna, 2012).

2.1.2 Knowledge management and innovation

A). Knowledge

Knowledge is one of the organizational assets and a remarkable substance. Organizational

innovation is defined as the adoption of an idea or behaviour that is new to the organization,

where the innovation can be a new product or a new service, a new technology or a new

administrative practice. According to Nonaka et al., (2000), innovation is the combination of a

firm’s existing knowledge assets to create new knowledge. The primary task of the innovating

firm is therefore to reconfigure existing knowledge assets and resources and to explore new

knowledge. In the literature related to innovation, knowledge is discussed as the element of a

recombination process to generate innovation. Knowledge is more widely distributed today,

when compared to, the 1970s, and this greater diffusion of knowledge changes the viability and

desirability of a closed innovation approach to accessing and taking new ideas to market

(Chesbrough, H. 2003).

B). Knowledge Management

Literally there is no commonly accepted definition of Knowledge management. According to

Drucker (2005), knowledge management is the coordination and exploitation of organizational

knowledge resources; in order to create benefit and competitive advantage. Knowledge

management is the process of capturing, developing, sharing, and effectively using

organizational knowledge and it can be thought of as the deliberate design of processes, tools,

structures, etc. with the intent to increase, renew, share, or improve the use of knowledge

represented in any of the three elements [Structural, Human and Social] of intellectual capital.

Knowledge management is concerned with identifying, translating, sharing and exploiting the

knowledge within an organization. One of the key issues is the relationship between individual

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and organizational learning, and how translated into new processes, products and businesses

(Tidd.J and J. bessant, 2013).

C). Innovation

“Schumpeter divided technological change into three phases: 1) invention (the creation of new

ideas); 2) innovation (the implementation of these ideas or the commercial introduction of these

ideas); and diffusion (the spreading of these ideas)” (Arthur W. B. 2007). In this study, the

researchers focus only on innovation; several literatures indicate that, there is no common or

universal definition of innovation, because of the different concepts when referring to

innovation. However there exist some elements in which almost everyone agrees in the area of

newness and pioneering-ness. OECD (2000) defines innovation as follows: “By innovation we

mean knowledge that is turned into new value in the form of products, services or new

organisations in both the private and public sector. That means everything from industrial

robots, payment systems and energy efficiency to leadership business models and healthcare.”

Drucker C. (2005) wrote that “the business enterprise has two-and only two, basic function of

marketing and innovation”.

Focus of innovation: Innovation can happen in products, services, processes, administration and

technology and business models. Evolution of innovation see figure 3.2 below

Figure 2.1 the evolution of innovation

(Source: Salmelin (http://www.slideshare.net/globalforum11/2-brorsalmelin) after Chesbrough,

Forrester and Von Hippel).

2.2 Innovation methodologies

An article on the innovation excellence website described 4 evolving innovation methodologies:

☞ “Closed innovation–R&D department’s work in strict isolation to develop new products and

new processes with the objective of developing a competitive advantage

☞Collaborative innovation–companies co-develop with selected partner suppliers, new products

and manufacturing solutions.

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☞ Open innovation–technologies, patents and licenses flow in and out of a company, through

partnership with universities, research centres, competitors and so on; the flow is both inbound

and outbound.

☞ Co-innovation–core to this approach is collective intelligence which is now possible to

formally organize in three pillars: converges of ideas, collaborative arrangement, and co-creation

of experiences”. In this study the researchers focus is on open innovation.

2.2.1 Open innovation

According to Chesbrough, H. (2003), “Open Innovation means that valuable ideas can come

from inside or outside the company and can go to market from inside or outside the company as

well”. This approach places external ideas and external paths to market on the same level of

importance as that reserved for internal ideas and paths to market. The same author argues that

the internal ideas can be taken to market through external channels, outside the business of the

enterprise to add value. In a nutshell, the principles of open innovation are summarized as

follows:

☞ “Not all smart people work for you

☞ External ideas can help add (create value), but it takes internal R&D to claim a portion of

that value

☞ Firstly, it is better to build a better business model than to get to market

☞ Will win, if you make the best use of internal and external ideas

☞ Not only should you profit from other´s use of your intellectual property, you should also buy

others´ IP if it advances your business model

☞ should expand R&D´s role to include not only knowledge generation, but knowledge

brokering as well” (Chesbrough, 2003).

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Table 2.2 breaking down open innovation prejudices

2.2.2 Open innovation paradigm, from closed to open model

Chesbrough, H´s (2006) reflection on closed innovation paradigm suggest firms should be in

control of their product, initial idea, marketing and distribution, financing, servicing and support

due to the fact that government institutions and the academic era of the 20th

century did not

engage in the commercialization of applied science. As to closed innovation, this process

involved is `closed` due to the fact that ideas at the beginning are able to enter in one direction

and as well exit in another direction usually introduced to the market as product. A typical

example of such model is the AT&T´s bell laboratories (Chesbrough, 2006). Figure 2.1 on

Appendix C explains the process of the closed innovation and Figure 2.2 explains on open

innovation model. Here ideas can enter from internal or external technology sources and new

technology can enter into the process at various stages. Furthermore, ideas can go to market in

many ways. See appendix Figure 2.2 for details and the principles of closed and open innovation

shown in table 2.3 below;

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Table 2.3 the principle of closed and open innovation

Source: H. Chesbrough, (2006)

There are four factors that paved the way for open innovation paradigms:

☞The increasing availability and mobility of skilled workers

☞ The growth of the venture capital markets

☞ External options for ideas sitting on the shelf

☞The increasing capability of external suppliers

These four factors have resulted in a new market of knowledge. It resides in employees,

suppliers, customers, competitors and universities (Chesbrough, 2011 p.85).

2.2.3 Concept of open innovation in SME

The concept of Open Innovation related to user innovation, cumulative innovation, know-how

trading, mass innovation, or crowd innovation and distributed innovation. Open innovation is

emerging paradigm based on the following assumption:

“Valuable ideas can come from inside or out of the company and can go to market from inside or

outside the company as well. This approach places external ideas and external paths to market on

the same level of importance as that reserved for internal ideas and paths to market during the

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Closed Innovation era” (Chesbrough,2003). As numerous literatures indicate, the possibilities for

OI in SMEs also lie with external sources.

2.2.3a Types of Open Innovation

Liao et al, (2014) classified open innovation into three groups, outside-in inside-out; (inbound

and outbound) and coupled, in this study the researchers focus are only outside-in (inbound)

open innovation. For more detail see Figure 2.3

Figure2. 2 the creativity levels in the open business mode

Source: Liao et al, (2014)

2.2.4 Business models through open innovation in SMEs

It is based on multi-agent relationship, where the internal R&D is complemented by connect

and develop function to establish and maintain relationship with the external world. In the open

innovation model, technologies, patents and licenses flow in and out of firm, through partnership

with universities, research centres, competitors and so on. This entails, trying to acquire external

knowledge or assets – the flow is both inbound and outbound. Furthermore, alongside with the

development of Open Innovation business models, Open Innovation brokerage firms have

appeared in the market place e.g. Nine Sigma’s, co-founded by P&G for their connect and

develop Open Innovation Ecosystem (Lee et al., 2010).

Figure 2.3 Open innovation model for SMEs

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Source: Lee et.al. 2010

2.3.1 Benefits of open innovation in SMEs.

In knowledge-based economies, SMEs are increasingly viewed as a key source and driver of

innovation and new technologies. SMEs, particularly new and fledging small firms, lack the

necessary internal absorptive capacity and accesses to external technology, knowledge and

finance needed to develop and diversify their product portfolio, invest in R&D and pursue

opportunities for commercialisation and internationalisation. Open innovation is not an effective

option for the early-stage ventures which may not have enough capabilities regarding R&D

investment and capital. Obviously, open innovation has high potential for SME (Lee et.al. 2010).

Numerous literatures argue that open innovation has a big potential opportunity for improving

the innovativeness of SMEs and open innovation proposes many benefits to SMEs operating on

a global program of collaboration:

☞ Reduced cost of conducting research and development

☞ Potential for improvement in development productivity

☞ Participation of customers early in the development process

☞Increase in accuracy for market research and customer targeting

☞Potential for viral marketing

Additionally, open innovation practices, also can offer technological and internal financial and

human resources and it could enable greater access to information, technologies and laboratory

facilities that can takes many years to acquire in-house. If SMEs apply Open Innovation through

collaboration with external partners, they can compensate for the lack of internal resources and

competences and access a wider market of opportunities. Open Innovation allows “many people

from different fields or disciples to solve the same problem and when many minds are working

on the same problem, it takes less time to solve and the solutions are better” (Chesbrough H,

2011). The same author argues that SMEs should open their own innovation processes for the

following reasons:

☞ To implement internal ideas otherwise unexplored and to ensure access to external ideas,

☞To enable better usage of their partially hidden innovation potential

☞To share the wealth and efficiency in resource allocation

☞To extend their potential for growth via alliances

☞ To be offered vast opportunities by larger companies to access resource or knowledge

“Creating linkages”, as open innovation can be called, enables multiple organizations to learn,

grow and gain from collaboration! (Chesbrough, 2011 p.85)

2.3.2 Managing innovation partners and networking

Managing relationships, with partners and develop the overall network of innovation groups is

very important for company’s success. According to Wim V. (2012), there are ten rules to

manage Open Innovation networks successfully:

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1). Selecting the right partners

2). Central firm should organize and manage the innovation network

3). Innovation networks need to be developing continuously

4). Partners that can´t work according to the rule can´t remain in the network

5). Partners have to trust each other in the network, “open innovation is not only about sharing

cost and risk, but also about sharing profits equitably” the same author

6). Partners must manage balance between internal management of firm and external

management of the network

7). Collaborative innovation is easier with partners of similar size and ambitions

8). Keeping cost under control

9). Central firm in Open Innovation network must be careful documenting and registering every

innovation activity

10). and manage tensions and problems in network actively

“Tackling problems early in an open conversation help innovation partners keep the joint

innovation projects on track” The same author.

2.3 The role of IT enabling open innovation: Transferability

In this study, the researchers focus is on inbound open innovation; the role of IT in the

innovation process has been widely studied in the literature and it has been found that IT has

important contributing role in innovation process (Kleis et.al. 2012). However, there is limited

literature on the influence of IT on open innovation concretely, how IT can support this approach

and result in more innovation outputs (Whelan et.al. 2013).

2.3.1 Role of IT –enable external learning

Information technology is a critical enabler of collaboration capability in organizations

“Infrastructure technologies such as computers, networks, and communication applications (e.g.

e-mail, Skype, paltalk and Facebook) are instrumental to these collaborative efforts … by

proving the necessary linkages for information exchange with external partners” (Kleis et Al.

2012, p. 46). This capability becomes more important when the organizations innovate more and

more openly.

2.3.2 Role of IT –enable internal learning

Furthermore, collaborating with internal members of the company have been believed to be

important for innovation, particularly it is essential for social integration mechanisms. These

mechanisms help a company to build social structures that “promote connectedness, interaction,

coordination and communication among members of company by creating seamless networks of

people, devise and knowledge” (Joshi et al., 2010, p. 475). Using these mechanisms, employees

collaborate with each other to share the relevant knowledge acquired through the company in

different places.

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Summary of theoretical framework

This research will be based on exploration and discovery of Open Innovation practices. The

literature review section and expected findings should empower our view about known theories

and methods of open innovation processes. Just as innovation is linked to newness, our main

objective is to explore the benefit within open innovation processes as a result of contribution

within the industrial management domain. According to Westland `two things set apart

organizations with a good record of Innovation` (J.C Westland, 2008, P 8). Firstly, they do not

hope for innovation to occur by accident and secondly, they believe it does initiate employees to

act from a different perspective usually backed by personal and motivating reasons.

Chapter Three

Methodologies

Research activities include defining business opportunities and problems, generating and

evaluating alternative course of action. According to Zikmund et al., (2010), this process

includes “ideas and theory development, problem definition, searching for and collecting

information, analyzing data and communicating the findings and their implications”.

Several related literature was found and reviewed. The processes of finding and revising

literature have been described in detail in the following section.

3.1 Methods

The theoretical framework is the basis for constitution of results, since it determined the scope

and limitations of results, including the proper technique regarding how to perform the result

section. In other words, literature review provided the authors with the possibility of navigating

in the data collection task.

Simultaneously, the conducted interviews facilitated the collection of accurate and up to date

data. Gathered data is analyzed, evaluated and categorized. Having appropriate order of

empirical data available, made it possible to make a comparison between theory and practice.

Based on the knowledge and insights acquired as a result of this research study, including

discussions with industry experts, while taking into account the exploration of academic articles,

all these contribute to recommendations to bridge the gap of the research study. There exist

recommended sections for further improvement and future research. The sources for the

literature study includes scientific journal articles, published text books, guidance, and reports.

They were mostly engaged with subjects within open innovation and SMEs. Definitions, details

of implementations, advantages and disadvantages of aforesaid subjects are investigated. Key

factors, concepts, theories and areas of improvement are recognized and used for expanding the

literature review and theoretical framework.

3.1.1 Interviews

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Eight direct interviews were conducted, of which seven were targeted towards SMEs, while the

additional interview was conducted with a representative at the Stockholm Open lab

Organization. Interviews were among the primary sources of data collection for this research

study, second to the related literature reviewed. The purpose was to see what is already known

and the common knowledge in the field, including what kinds of researches have been done. The

respondents were primary selected based on their leadership roles at the different companies,

while taking into consideration their prior combined experience working within development and

operation sectors connected to the open innovation process and business start-up environment.

Most of the interviewees were very educated, bearing educational backgrounds such as Master of

Science Degree and PhD respectively. The interviews helped us in finding quality data. In total

seven respondents were selected from SMEs and one from an organization operating on the basis

of Open Innovation. The modes of data collection were semi-structured interviews.

Interview questions were formulated and decided for collecting data. Secondary information is

rarely used in this research study; this is due to the fact that it was not possible to access any

specific original source.

3.1.2 Interview questions

The interview´s main topics were originated from theoretical frame work. Interview questions

are intended to complement data needed to answer the research question, research purpose and

its objectives. The answers received from open innovation practitioners (such as the

representative from Open Lab Stockholm) based on the interview questions, in addition to the

answers from each startup company representative, irrespective of the industry gave the authors

empirical knowledge regarding the operation and value of open innovation. Valued insights such

as their perception on Open Innovation, it´s function, it´s connection to their business or startup

activities and how open innovation can serve SMEs. When, where and how it should be used?

What are the challenges and what are the requirements? (For more details see Appendix A)

3.1.3 Interview process

As a whole, eight interviews were arranged, and a suitable location and time were agreed upon

participants’ mutual availability. The researchers preferred to conduct a physical interview so as

to ensure the proper gathering of data and in some cases have a view of the startup and

organization environment and technological product offerings. For more detail see appendix B.

However, this thesis research focused is based on startups and organizations founded and based

in Stockholm Sweden, though they all have common national and global ambitions towards their

respective businesses, products, services, partners and clients.

3.1.4 Case study

The researchers use the case study method to build up theory and to explore and facilitate an

understanding of SMEs life-cycle, and add strength to what is done through interview and

literature review, consider it as an included in case study (Yin R. 2013). According to Yin R.

(2013) a case study is descriptive and exploratory. Therefore, the authors provide a description

of open innovation practices within SME, while data triangulation method has been used. Case

study may involve both qualitative and quantitative research method, however it should be noted

that this thesis research used qualitative exploratory research method

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3.2 Limitation

The scope of this thesis was restricted to small and medium-sized enterprises and start-ups in

Sweden. A wide variety of literature content were reviewed (as referenced at the end of the

report), while several limitations were encountered. Among the limitations encountered, the most

significant challenge was finding suitable interviewees; including the possibility to find

diversified type of businesses with unique business models who were all exploring open

innovation. In addition to these, the limitation to find additional companies operating in other

industries not listed here so as to include in our research study, with the aim of offering our

prospective readers with wider research findings and even broader view of industry practices and

exploration of open innovation. Our focus was in Sweden and we limited our interviews to

Stockholm-based startups and companies. All the companies interviewed were still in their early

stage of product innovation (not more than 6 years of operation) and could not confirm if further

engagement of external learning were necessary to confirm their exploration of Open Innovation.

All these findings, both from our end and as well during the exploration phase with the

stakeholders limited the type of information being shared or exploited. However, the small

medium sized enterprises acknowledged their needs and interest for exploring open innovation.

Experts in high positions are busy with their daily tasks and have no time to be interviewed and

while junior employees do not possess a satisfactory knowledge regarding the subject areas of

Open Innovation. With some companies, there were also problems regarding intellectual

property restrictions and the respective business models for each company. Considering the

focus is with startups and SMEs, it must be noted during such early interaction with each

company, the respective companies with existing defined products and services may still be

persuaded to explore other business models or engaged in co-creation with other stakeholders.

3.3 Delimitation

The scope of this thesis was restricted to small and medium-sized enterprises in Stockholm

Sweden, with emphasis on Hardware Companies. Researchers used literature from the year

2003; one of the motivating reasons has been to look further back at previous findings within the

area of open Innovation and compare with recent company interviews and case study, after

articles of Chesbrough H. (2003). Liao et al, (2014) classified open innovation into three

groups, outside-in inside-out; (inbound and outbound) and coupled, in this study the researchers

focus is only outside-in (inbound) open innovation

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CHAPTER FOUR

4. Summary of the case studies

4.1 Overview

The empirical base of this thesis is formed by a case study and a total of eight Swedish

companies operating or developing diversified business services and technological solutions

aiming both the local and global market. Below, an introduction to the individual participating

company interviews, case study and the main results are presented.

4.2 THINGS - The Innovation Growth house Stockholm AB

THINGS are the leading hardware and solution-oriented innovation hub located in Stockholm,

Sweden. THINGS innovation hub incubates numerous ICT startups working within hardware-

oriented solutions. Even though its member companies are serving the local market, their

solutions are export oriented. THINGS does operate a facility with numerous product prototype

and testing tools, including a maker space, all available to its approved members for

experimentation and exploration during their respective business and project development life

cycle.

THINGS are a subsidiary of STING innovation hub Stockholm. The THINGS business

environment is powered by the 21st century maker´s trend, in combination of operating a

business environment closely connected to its networking, technology and service partners.

At THINGS, aspiring entrepreneurs and startups get access to their startup resources, thus

facilitates members to turn their ideas into scalable and export-oriented products and solutions.

THINGS does facilitate its network of members and companies to explore and innovate around

the rising trends of Internet of Things, wearable’s, life science, 3D scanning and printings

(http://www.thingstockholm.com/about/). For more detail see table 4.1 below,

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4.3 Case Study

In this section we present empirical data with reference to a case study that focuses on how a

successful start-up company uses open innovation to develop their business in Stockholm,

Sweden.

4.3.1 A Case Study of Single Technologies Stockholm, Sweden

THINGS: Member Company Single Technologies – Sweden

Single Technologies is a private Swedish Stockholm-based company founded in 2012, one of

the leading regions in Europe and known around the world for life science Innovation and

Research and Development. The company develops software and hardware for the purpose of

sequencing and immune assays. Single is strategically located in Stockholm and within close

distance to Karolinska Institute and other major Technological University such as KTH Royal

Institute of Technology. The Stockholm innovation landscape strengthens Single´s long term

vision, aiming to become the market leader within diagnostic and pharmacology, likewise

specializing as single molecule imaging technologies provider. Single targeted clients are

Hospitals, Pharmaceutical companies and Research Institutes. In general, the company's area of

activities falls between Biotech and Pharmaceuticals; specializing in Drug development, Medical

Device, Diagnostics and Research tools. The Single Technologies organization is comprised of a

very good and strong leadership team, sub-divided into board of directors and advisors. The

company has an employee size between 11 to 25 people and the current stage of the company is

categorized as operating in the start-up phase (taking into account the year in which it where

founded). Single Technologies is incubated in Things Stockholm and at the same time the

company is presented on Things’ members page as the world’s `fastest 3 D video microscope`.

The company has secured an Intellectual Property for their imaging product system and has since

then been executing collaboration opportunities. One of Single´s growth strategy is by external

partnership and innovation engagements with researchers, thus expanding their services. Single

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Technologies operates a combined set of applications, Services and Technologies which

contributes to providing solution in Molecular mechanisms, pathways in live cells and quantify

biomarkers

PRODUCT

Single’s product is built with guided principles and marketed as smarter, faster and saver. The

current innovative product is the Model Theta 3D Video Microscopy

Figure 4.1 Model Theta 3 D Video Microscopy

The innovativeness of the product can be defined by its unique specification which is made of

different components; Scanning System, Scanning Speed, Illumination, Detection System,

Software, Plates and Samples. Single’s innovative product is using open innovation to transform

screening and imaging to an advance process. To match the innovative profile, the company

facilitates the possibility to take live cell and high-resolution molecules in video format. Its

Model Theta is able to produce thousands of 3D single images of cells in less than a minute. The

company’s current product in the market serves as screening services for hospitals and research

institutes. Single’s technology such as High Throughput Screening, Large Scale Imaging and

DNA Sequencing are marketed towards its identified customers. Single uses ultra- sensitive

detection system to measure samples. It also uses a smart approach to track cells by means of its

unique dynamic imaging mode. Single Technologies have different applications, Services and

Technologies which contributes to providing solution in Molecular mechanisms, pathways in

live cells and quantify biomarkers

Quantification Services

Its lab testing services is a quantification services for the measurements of concentration of

protein tested in cells, tissue and solution. Single have a patent pending ultrasensitive test for the

quantification of biomarkers in live cells, solution and in dead cells

Advanced protein-protein interaction Service

It provides a real-time monitoring possibility during the testing for concentration of species of

either bound or unbound. Single have a well-defined strategic offer of its services from a start

point to a final report. Between the processes, a strategy is outlined as a result of client’s

requirements and selected proteins which are then recommended to suitable test. As a core part

of the test, Single is in-charge of the measurements and analytics of the result

TECHNOLOGIES

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Single technologies is made up of several small innovative components; namely Single's Photon

counting camera, Single's 3 D optics, Single's sample plates and Single's friction free scanning

stage

Figure 4.2 Cutting Edge Single Molecule Imaging

Single technologies apply the use open innovation detector system in the area of detector-array

and high-power laser. With the aid of open Innovation, Single technologies has been able to

develop the Single Molecule Sensor, 3 D Optical Laser System and Friction Free Scanning Table

Strategy

The principal strategy of Single Technologies is to accelerate the collaboration and partnering

between researchers and partner companies, irrespective of their geo-location. Thus, single´s

ultimate goal is to strengthen its position in important markets by way of expanding its products

and service offerings while aiming to deliver high quality

Products

Single Technologies Model Theta is the world’s fastest single molecule sensitive 3D video

microscope. It allows you to make high resolution videos of molecules, live cells and tissue.

Model Theta is capable of producing 10,000 3D images of single cells in just 1 second.

Challenge: To overcome the challenges inherent in observing Nano meter-sized molecules in a

massively parallel fashion, they have developed three key innovations:

The Single Molecule Sensor

The 3D Optical Laser System

The Friction Free Scanning Table, See Figure below

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Figure 4.3 Single molecule imaging

Source: http://www.singletechnologies.com/technologies-1/

Learn more

https://www.b2match.eu/ssbbs2016/participants/591

http://www.singletechnologies.com/products/

https://www.b2match.eu/ssbbs2015/participants/489

http://www.singletechnologies.com/services/

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5 Findings

This section is a summary of the eight interviews and case study which has been done during

this thesis work. The sample of interview questions is placed in the appendix A, and also the

transcription of the interviews is attached in appendix B for further inquiries. As it is written in

the above paragraph this section is a reflection of interview transcriptions and case study. What

is done here is collecting same information under one heading.

Single Technologies, Stockholm Sweden, History

Single technologies were founded in Stockholm, Sweden in 2012 and for this 21st century the

company's aspiration is to become the market leader within imaging technology for diagnostic

and pharmacology. The company is strategically located close to key world class-universities

such as Stockholm University, Karolinska Institute and KTH Royal Institute of Technology. All

these universities happen to be part of Singles collaborative partners, each with international

reach potential.

Single technology operates within the life science field and has a specialty technology in

diagnostic and drug discovery. Furthermore, its Imaging Intellectual property and international

partnership facilitate its competitive aspiration for high quality delivery and at the same time

raising barrier to compete. As part of Single's strategy to sustain product and service innovation,

they apply the open innovation approach by way of external collaboration with wide range of

external players such as academia and other industry stakeholders

Open Innovation focus and resources

A physical interview with the company´s CEO and a desktop case study research of Single

Technologies were conducted to find out about the importance and role of open innovation,

including other interviews involving 8 Swedish innovative Startups. The sizes and business

operation domain of the interviewed startups varied. Tannak AB, a Stockholm-based startup

developing Internet of Things (IOT) solutions depend on their new technology solutions to track

animals, while single Technologies startup operating in the area of med tech, find Open

Innovation very important and a win-win benefit for both the participating external collaborators

and their own company (shared knowledge and resources).

Neue Labs AB, another Stockholm-based startup operating within Fashion Tech did not depend

on Open Innovation, however they acknowledged the new external ideas helped to validate their

own ideas for their product and service innovation. Whereas for Magnea Company operating a

combination of Internet of Things, Wearable Technologies, Machine Learning and Med Tech,

found Open Innovation to be important based on their search for knowledge and validation of

ideas, including transfer of previous knowledge from other projects. Finally, but not the least,

Banana Charge AB serving hardware-as-a-service (power bank) focus and use of open

Innovation involves external knowledge from industry experts in addition to physical testing to

validate the feasibility of their proposed product and the advancement of their innovation.

5.1 Size of SME

SMEs is a category of micro (less than 10 employees), small (less than 50 employees), and

medium-size enterprise, which employ fewer than 250 persons and which have an annual

turnover less than 50 million euro and an annual balance sheet total less than 43 million euro

(European commission 2005). Accordingly, within the scope of this research study, all

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interviewed startup companies and the case study company have been categorized under small

medium-sized enterprise.

5.2 Creating and capturing value in open innovation

Both the interviewed start-ups and the case study company are jointly creating value with their

partners and risen to become known as knowledge – intensive firms. Knowledge - intensive firm

is defined as organizations that offer to the market the use of fairly knowledge – based products.

Knowledge – intensive firms employ highly skilled individuals and they create market value

through application of knowledge to novel, complex client demands. The key resource of

knowledge – intensive firm is intellectual capital – knowledge, information and experience

(Hage, 1999). The cost is lower, since they don’t have to build up a new competence centre.

Knowledge is creating more value when it is used more and at the same time increases more

experience. “Useful knowledge has become widespread, and ideas must be used with alacrity. If

not, they will be lost” (H.W. Chesbrough, 2003, Gassmann et al., 2010). For example,

Stockholm-based Openlab organization does create value by means of organizing Design

Thinking workshops (training), and as well through the transfer of knowledge by their

experienced staffs and expert guest presenters among the different stakeholders engaged. They

also assemble multidisciplinary stakeholders with complementary skills sets who share

diversified knowledge and experiences to address the carefully selected societal challenges in-

house and via their managed online portal.

5.3 SME benefits from Open Innovation

By operating an early stage startup company, it is possible to be engaged in open innovation and

at the same time cooperate with large organizations. Such interactions may involve engagement

with multinational corporations and academia. A typical collaboration example in this scenario

may relate to shared resources, for example open source software development (IMB enterprise

and startup solution), where startups may be exposed to the possibility of capturing greater value,

while on the other side of the cooperation, the large corporations usually benefit from new ideas

and a great pool of talent, all for the mutual benefit of all stakeholder involved.

5.4 Open Innovation Drivers

When looking into the seven out of eight Swedish SMEs interviewed, they all differ in terms of

size, and business operation domain. Tannak AB, developing Internet of Things (IoT) solutions,

thus depend on their new technological solutions to track animals, while single Technologies AB

operating in the area of med tech find Open Innovation very important and a win-win benefit for

the participating external collaborators and their own company (shared knowledge and

resources)

Neue Labs AB, operating within Fashion Tech did not depend on Open Innovation, however

they acknowledged the new external ideas helped to validate their own ideas for their product

and service innovation. Whereas for Magnea AB operating a combination of Internet of Things,

Wearable Technologies, Machine Learning, and Med tech, found Open Innovation to be

important based on their search for knowledge and validation of ideas, including its internal team

transfer of previous knowledge from other projects. Finally, but not the least, Banana Charge AB

serving hardware-as-a-service (power bank) focus and use of open Innovation involves several

approaches, such as external knowledge from industrial experts in addition to physical testing to

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validate the feasibility of their proposed product and the advancement of their innovation. For

more detail see Figure 5.1 below

Figure 5.1 Motives that drive SMEs to open innovation

Source: Van de Vrande, et al., (2009).

Based on the studied literature, case study and interviews Figure 5.1 show the main motives

which should drive SMEs towards open innovation.

5.5 Knowledge Exploration, Assessment and Adoption

5.5.1 Exploration

During this research, there were key findings in areas such as motivation for knowledge

exploration within Open Innovation. Tannak AB did attest one of the most motivating reasons

for exploring open Innovation was to find problem solution. Whereas the innovative Single

Technologies AB's key reason for exploring Open Innovation was to create alliances that could

count towards their organizational solution credibility, besides mutually obtaining key opinions

from market experts, while the experts in returns get exposed to fresh and innovative ideas and

opinions. Neue Labs AB reason for exploring open Innovation was merely to seek Mathematical

formula. Magnea AB explored open innovation for Data processes. Banana Charge AB has a

diverse view on Open Innovation and they explored Open Innovation in order to seek

confirmation on feasible next step on what to do with their innovation processes. Another reason

was to find out if someone has done something similar, besides reviewing available resources

(companies and open resources to combine knowledge and opinions)

5.5.2 Assessment

There is evident every enterprise strategically has different reasons for exploring open

innovation. This leads to diversified handling of data obtained through open innovation

processes and how they are finally assessed. Tannak AB went on to assess knowledge and the

insights from open innovation internally via organized workshops between its internal team

members and employees. Single Technologies AB assessed the validity of knowledge by market

knowledge, including its product development with partners and from constructive prototype

feedback. Neue Labs AB´s own method of assessing knowledge and information from open

innovation was by practical use through courses at higher institutions where they lectured and

also from customer use. Magnea AB method of assessments was by evaluation and testing

including comparing available research papers with other papers for consistency. Banana Charge

AB assessed knowledge and information as a means of open innovation exploration and

processes by ordering prototypes and testing to see if they work. They also periodically watched

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digital sampled hardware tutorial videos which demonstrated different processes and approaches

involving `do` and `do not` as guidelines.

5.5.3 Adoption

Within this phase of the execution of knowledge and information gotten out as a result of open

innovation, the expectation and application of the new knowledge and insights processed by each

start-up proved to be different. Tannak AB adoption was business driven (based on cost and

technology feasibility), in addition to its shareholders feedback and advices. Single Technologies

AB simply applied knowledge on product development. Neue Labs AB adoption was based on

feedback from customers and students. Magnea AB simply acted by modification and

integration. Banana Charge AB´s own adaptation of knowledge and information from Open

Innovation thus differs from the above-mentioned companies. Regarding hardware, they acted by

ordering components, in addition to being engaged in desktop research (Google top 20 links

preview), likewise they are involved in further activities such as reviewing the datasheet from

company’s websites and tested for consistencies.

5.6 Open innovation importance

Some importance of Open Innovation includes; the need to reduce cost, to save time and

develop ideas. The use of both internal and external ideas would help SMEs have a better

business model than if they focused only on internal ideas. Furthermore, the authors believe that

Open Innovation helps SMEs by means of expanding their ideas and opportunities, while

enabling them to avoid or minimize risk. It is also considered to complement SMEs with

competences they are lacking in addition to increasing the firm's capabilities.

5.7 Collaborations

For SMEs, business collaborations are particularly important for strengthening innovative

capability. Form empirical finding we see that the source of innovation in Sweden commonly

occurs in collaborations between universities and SMEs. Well-designed universities and high-

achieving graduates have kept Sweden in the top three innovative countries in the world for the

last five years. Furthermore, Sweden is ranked the second most innovative country in the world.

For more detail see Appendix D and E.

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6. ANALYSES

The analysis is structured and divided into four sections of which the first two sections

corresponds to the Research Question and case study analysis. Additionally, the potential

benefits, networking and impacts have been pointed out.

6.1 Case study analysis

In this case study, the participating Stockholm-based company Single Technologies, operates

within the Swedish hardware industry on the basis of open Innovation. The case study shows that

the ability to innovate forms the key for SME competitiveness in knowledge –based economies.

This is the case for companies operating in both high-tech sectors as well as low-tech sectors.

According to Yin (2003), a case study research strategy should be followed when researcher

wants to describe, explain, illustrate and explore conditions related with research topic.

Single Technologies a spin-off from KTH, is developing systems to image single fluorescent

molecules over huge volumes faster than any other competitor or existing solution in the market.

Why? Because sensitive imaging over large volumes is the bottleneck for DNA sequencing

speed, cost and accuracy; which is important for people to find out if they’ve got a certain

disease at an early stage.

Research question (RQ)

6.2 RQ, how can SMEs and start-ups benefit from open innovation

in Sweden?

The main research question of this thesis is to state the benefit of Open Innovation for SMEs

and start-ups in Sweden. During the study, focus was on how SMEs and start-ups benefit from

Open Innovation. The goal of this study is to understand and demonstrate the potential benefits

the Open Innovation could provide to SMEs and start-ups. The literature and empirical findings

show that, SMEs and start-ups benefit less from Open Innovation at an early stage. They can

benefit from Open Innovation only at commercialization stage, and those benefits are cost

reduction, risk sharing, knowledge gain and available resources.

6.3 Benefits

The “open innovation model” suggests that firms should combine internal and external ideas and

technologies in order to speed up the innovation and new product development process as a more

effective pathway to market. In knowledge –based economies, SMEs are a key source and driver

of innovation and new technologies. However, empirical finding and literature demonstrated that

at fewer SMEs are responsible for the majority of innovation, new product development, and

R&D, export and wealth creation. Open Innovation has wide potential opportunities for

improving the innovative performance. Several literature reviews demonstrate that, SMEs can

access inter-firm resources at a lower cost, addressing obstacles such as technological and

internal financial and human resources that hinder new product development and the ability to

enter new markets. Additionally, open innovation could enable greater access to information,

technologies and laboratory facilities that could take years and require significant R&D

investment to acquire in-house. To avoid the problem of shortage of R&D expertise, SMEs can

attempt to explore a wide part of external information sources (Lee et al., 2010)

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6.4 Open Innovation Networking

Open Innovation is being used in connected networks such as the internet of things to achieve

different business needs and solutions, including solving environmental hardships. Data

collection and sharing is involved within these distributed networks. As the world of ICT

(information communication technologies) is expanding, this speed-up the communication

processes among organizations from a local area network to wide area networks. For open

innovation to be effective which usually involves the sharing of both internal and external ideas,

combined with technologies, such practices and communication are facilitated by means of

computer and technological network capabilities. In the context of Open Innovation, firms need

to have higher level of collaboration with different stages of R&D. To support several

collaborative partnerships, firms need to possess specific capabilities. This ability can be defined

as networking capability (Fowles and Clark, (2005). According to Walter et al (2006), there are 5

underlining quantity of networking capability: 1) the ability to coordinate between collaborating

firms, 2) knowledge of their partners, 3) relationship skills with other firms, 4) internal

communication skills, and 5) building new relationships. According to Lee et al., (2010),

networking is an effective way to facilitate OI among SMEs.

6.5 innovation and sustainable development in Sweden

Several literature reviews associate today´s social and economic developments with the results

of successful implementation of new ideas (innovation), technical discoveries and developments

in fields such as ICT, health sciences and energy. In 2011, 69% of all employees worked in the

private sector, see Appendix F. The proportion of public sector employees has decreased over

the past 20 years, from 34 per cent in 1993 to 28 per cent in 2011. In 2012, 40 per cent of the

employees in the private sector worked in small and medium sized enterprises (10 – 249

employees). These evidence points an increasing, excessive and continuous shift in employment

growth being created by the SMEs, which is why the capacity of these companies to engage in

systematic innovation activities is an important dimension in this strategy. Accordingly, the

future sustainable developments of Sweden are more dependent on innovation and private sector

(SMEs).

6.6 Barriers affecting Open Innovation

1). Organizational culture

☞ many barriers for Open Innovation in SME are related to corporate organization and culture,

when two or more firms are working together, such cooperation are clearly the most important

barriers that firms face. These inter-organizational relationships lead to problems concerning –

the division of tasks and responsibility.

☞ The balance between innovation and day-to-day management task, and communication

problems within and between firms.

2). The availability of time and resources

3). When partners cannot meet the expectations or cannot deliver the required quality of a

product or service

4). User involvement goes together with problems related to property right

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7. DISCUSSIONS

This study has highlighted the importance of external learning for improving the innovative

performance of small and medium-size enterprises, in addition to exploring the benefits of open

innovation in SMEs. By reviewing the case study and the data which were gathered as a result

from the innovative company interviews, we found that open innovation could enable greater

access to information, technologies and laboratory facilities that would normally take years and

require significant R&D investment to acquire in-house by SMEs and startups.

We want to point out that, the authors discovered it is possible for SMEs to participate in Open

Innovation through “inbound open innovation” (outside in), where the process entails the

acquisition and transfer of external technologies, ideas and knowledge into the firm through, for

example, R&D contract and university collaboration. 2nd

as the externally acquired technology

and knowledge is tested already, it can increase both speed and quality of innovative activity,

and If SMEs apply open innovation through collaboration with external partners, they can

compensate for the lack of internal resources and competences and so access a wider range of

market opportunities (Gassmann et al,. 2010). By analyzing the available research on Open

innovation which contributes to the innovativeness of participating organizations, usually the

knowledge shared and learned is massive. From an internal perspective of an organization the

innovative performance is increased, and similar changes occur which leads to the development

of personal skills of the stakeholders involved.

8. CONCLUSION

The purpose of this study was to highlight the importance of external learning for improving the

innovative performance of small and medium-size enterprises, in addition to exploring the

benefits of open innovation in SMEs in Sweden. The practice of Open Innovation thus presents

huge benefits to companies. Common evidence can be referred to the general goals and

commercialized end products or services which are usually achieved. The rising need and

promotion of renewable energy and sustainable development by government agencies worldwide

both in mature and emerging economies, all these shows the increase of the awareness about the

importance of open innovation in the society and for businesses to consider such alternative

solutions. By taking into account this thesis research from the literature review, interview

encounters and the case study about Single Technologies Company, the positive impact of open

innovation benefits is huge both from a business perspective and from a sustainability

perspective. It thus reduces cost, increases the ability to innovate (add knowledge and resources)

and risk sharing. In summary, open innovation is critical for the knowledge-based economy and

for the next generation to come. Before, studies on Open Innovation had mainly focused on

MNEs (van de et al. 2009); many large companies like IBM, Philips, and P&G are successfully

using Open Innovation (H. Chesbrough 2003). Some researches on Open Innovation in the

context of SMEs are conducted before. However, these researches are basically based on 2nd

data, conceptual or managerial. Totally, Small- and medium sized enterprises lack both

managerial and technical skills for their effectiveness (Rahman H. and Ramos I. 2010)

Finally, the literature and empirical findings suggest integrating different management

disciplines to understand Open Innovation in Small- and medium sized enterprises. The need to

combine Academia, Open Innovation Policies, Innovation Management and Entrepreneurships

practices into a connected ecosystem. Such move shall eventually contribute to a blended

approach to understanding open innovation’s benefits and the value it can create for both startups

and small medium-sized enterprises.

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9. RECOMMENDATIONS

There is evidence on small enterprises missing out several benefits by not exploring Open

innovation. One major challenge is the lack of existing channels of direct linkage between small

medium-sized enterprises and research centers such as business incubator networks and science

parks for the advancement of knowledge transfer and innovation resource access and usage. This

leads to recommended approaches such as encouraging small medium-sized businesses within

the business communities to adopt the practice of open innovation which is commonly exploited

by mostly large corporations

10. FUTURE STUDIES

The concept of open innovation is not yet widely known by most stakeholders across diverse

industries and professional disciplines, even though it is on the rise. Therefore, there are vast and

available research areas about open innovation in which further research studies can be done;

such as Open Innovation Policy, open innovation within academia and start-ups, innovation

management and entrepreneurship. Currently, these disciplines have been developing

independently. However, to understand the complexity of Open Innovation in Small- and

medium sized enterprises, we must create bridges between these disciplines. Attention towards

future studies should also support small medium-sized enterprises for Open Innovation, while

researchers are invited to address these knowledge gaps and further develop this research field.

There is evidence small enterprises seem to be missing out to benefit from the vast resources

connected to open innovation practices. One major challenge is the lack of existing channels of

direct linkage to research centres such as business incubator networks and science parks for the

advancement of knowledge transfer and innovation resource exploits and usage. As such, all

these leads to an opportunity for further studies within the open innovation field in order to

include small medium-sized businesses within the increasing practice of open innovation. Before

this, the benefit within this field has been mainly exploited by large corporations.

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http://www.thingstockholm.com/about/

https://www.b2match.eu/ssbbs2016/participants/591

http://www.singletechnologies.com/products/

https://www.b2match.eu/ssbbs2015/participants/489 http://www.singletechnologies.com/services

http://openlabsthlm.se

http://openlabsthlm.se/course-challenges

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http://www.designorate.com/open-innovation-to-drive-creativity

http://www.slideshare.net/globalforum11/2-brorsalmelin) after Chesbrough, Forrester and Von

Hippel) Salmelin

www.developyourcity.com

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Appendix

Appendix a Sample interview questions

A). FOR INNOVATING COMPANIES

1. How would you understand Open Innovation?

2. Can you name 3 expressions that characterize open Innovation?

3. How does Open Innovation impact your organization?

4. How your company, create, Capture value from open innovation?

5. What are the benefits of innovating together with others for small companies?

6. Does Open Innovation offers any unique opportunities for small businesses?

7. How small companies can manage open innovation despite the liability due to their

smallness?

8. What are the positive effects of Open Innovation?

9. What are the negative effects of open innovation?

10. From several literatures we see that many small enterprises and start-ups in Sweden are

failed (closed) after 2-3 years. What is the main challenge for these?

B). FOR ENTREPRENEURS

11. How does your start-up make use of open innovation from an internal and external

perspective?

12. What are the learning processes of open innovation to your start-up?

13. Was open innovation the driving factor of the commercialization of your start-up products?

14. Do you think Open Innovation is essential in this 21st century for companies to be innovative

within the industry specialty of your start-up?

15. What went wrong during the entire life cycle exploration of open Innovation for your start-

up?

Friday September 30th, 2016

Single Technologies Startup Questions and answers

Interviewee: Johan Strömqvist PhD, Co-founder and CEO

Startup Introduction

1. When was your startup founded? February 2012

In what area does your startup specialize: IOT, Wearables, 3D, Medtech

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Startup Team Size: 4 Founders (12 Employees)

Type of Company: Single Technologies AB

Funded?

Yes. Business Angels\private equity

750,000 SEK Vinnova Grant

Patent: Applications (2)

2. Do you use Open Innovation in your startup towards your product innovativeness?

- Yes,

- Through collaboration with SciLife Lab to use their application (DNA sequence, methodology,

re-agent and know-how) in exchange of Single Technology platform technology

3. Do you share risks and rewards with external partners?

Shared risks: They put their effort into the project (testing), which results to their time

Shared rewards: The chemical and revenue from the market

4. What do you seek from Open Innovation when you explore available resources?

- Key opinion leaders (on particular application which is not available in-house)

- Help product to become more user friendly

- Alliance leads to credibility

- Help to market product

5. Was Open Innovation the major contribution to your startup products and services?

No, not really

Recruited two co-founders with expertise in 2 different industries

6. How do you analyze the knowledge from Open Innovation to be worth to use in your startup?

Weekly discussion with partners

Get feedback on prototype

Market Knowledge

Product development guided by partner feedback

7. How do you apply the knowledge from Open Innovation to your startup?

Take the knowledge and apply on product development

8. How important is Open Innovation to your startup or to the domain in which your startup

operates?

- On a scale of 10, the answer is 8\10

- Win-win (mutual opportunities);

i. University uses Single Technology tech platform

ii. Single Technology benefit by using research findings towards its innovation and at the same

time gets insight to the future within industrial innovation

- For example, by direct contact with key local universities, designated professors with high

credibility provide guidance

- By collaborating or have experts from academic field take part, this gives credibility

- Academia: Endorsement, collaboration, innovation and research

- Scilife Lab: Verification, collaboration, endorsement and expert feedback

- Use students for software programming and mechanical construction

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Appendix B Interviews

1 Case company Single Technologies, Stockholm Sweden

Interview date: 2016-05-12 and September 30th

Company’s function: Med tech service provider

Interviewed person position: CEO, PhD

Purpose of interview: introductory to the use of open innovation in SMEs in practice.

Company background:

Single Technologies AB is a Stockholm based startup developing technologies within the

domain of drug discoveries and diagnosis. The company´s vision is to become the leader in the

21st century single molecule imaging. Single desire to achieve these visions specifically by

means of its identified and applied affiliated Intellectual property and unique know-how within

pharmacology and diagnostics. The company is strategically located in Stockholm, Sweden close

to some of the world's leading universities such as KTH Royal Institute of Technology,

Stockholm University and Karolinska Institutes. All this nearness to valued resources add to

Single´s motivational drive for technology excellence, contribution towards accelerating national

and global innovation in addition to producing high quality products. Single is founded by

diversified experts with complementary skills sets. Single enjoys a competitive advantage of

having a set of board of directors, partners and advisers.

Interviewee background: Johan Strömqvist PhD, Co-founder and CEO

Interviewee’s knowledge of, Open Innovation: He has very good understanding of open

innovation and the first person agree for interview.

Appendix B. 2 company Openlab Stockholm

Interview date: 2016-09-24

Company function: coordinate collaboration between different organization

Purpose of interview: was to know more about the role of collaboration for open innovation

Background Introduction

OL is a Stockholm-based collaborative center with a digital web portal which facilitates societal

innovation. OL ´s mission and vision are guided by collective an effort which spearhead

diversified mobility and brings together the thinkers and doers to create positive societal impact.

In order to better address societal innovation, Open OL lab facilitates the gathering of dynamic

teams that create solutions addressing challenges faced by local citizens, organizations and

companies. To achieve its goals and mission, OL often engage interdisciplinary teams with

innovative and creative minds to work on the challenges being presented by different local

stakeholders. OL ´s founding partners are coming from, the Royal Institute of Technology (KTH,

(KI), (SU), City of Stockholm, Stockholm county administrative board, Stockholm county

council and Södertörn University.

Appendix B .3 company Smart Business Academy-Sweden

Interview date: 2016-05- 18

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Company function: is to promote, encourage and support the development of investment and

startup new businesses in Sweden.

Purpose of interview: to know the main reason, why many small enterprises and start-ups in

Sweden are failed (closed) after 2-3 years?

Interviewed person position: Hassan Al Hamwi -Head of Advisory Board, Stockholm - Sweden

Interviewee’s Background: He had B.Sc. degree and he has more than 25 years of work

experience.

Open innovation knowledge

Interviewee: Interviewee claiming about having knowledge of innovation and some theories and

concepts about open innovation.

.

Appendix B .4 Magnea Startup, Stockholm Sweden

Interview date: 2016-09- 04

Company function: Combination of Internet of Things, Wearable Technologies, Machine

Learning, and Med Tech

Purpose of interview: was to get the IT industry practitioners experience of open innovation

Interviewed person position: Henrik Gradin, PhD, Serial entrepreneur and Co-founder at Magnea

AB

Company background:

Magnea AB is a medical technology spin-off company based out of Stockholm, Sweden

specialized in the treatment within healthcare and eldercare. Magnea's wearable technology

sensor provides real time information to both caregiver and users. Magnea is able to provide

innovative technology with the aid of its integrated internet of things (IOT) platform, machine

learning, and application programming interface (API). Magnea's leadership is made up of

talented co-founders and skillful employees. The company enjoys a partnership with world class

institutions and organizations such as KI, Stockholm Innovation and Growth (STING),

Flemingsberg Science and the Center for Technology in Medicine and Health (CTMH).

Interviewee background: He has experience about 15 years in Open Innovation

Interviewee’s knowledge: Interviewee claiming about having enough understanding and

knowledge about opens innovation and has many years’ experience in this area.

Appendix B. 5 company Tannak AB, Sweden

Interview date: 2016-09-09

Company function: hardware solutions

Purpose of interview: was to get the hardware industry practitioners understanding of open

innovation

Interviewed person position: manager, the co-founders of Tannak AB

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Company background:

Tannak AB is a Swedish technology company with a suite of hardware solutions designed and

developed with the capability to manage large herd of animals within and around the semi

population area of Sweden. The company was founded in the municipality of Jokkmokk, with

the aim to provide solutions to existing challenges involving time and labor constraints in

reindeer herding. The company’s key technology products are base stations, online management

system and a global positioning system (GPS) collar. These unique technological product

solutions were developed to provide automated services to complement existing monitoring of

animals by snow bills and other traditional methods. The company is run by employees and

board of directors who add value to the company’s offerings through their diversified and

complementary skills and expertise. Susanne Spik and Karin Kuoljok are both the co-founders of

Tannak AB and they also sit on the board of the company.

Interviewee background: The interviewee is a company manager who is involved with also sit

on the board.

Open innovation

Interviewee knowledge: The interviewee claims about being up to date regarding open

innovation.

.

Appendix B .6 company Banana Charge AB, Stockholm Sweden

Interview date: 2016-09-17

Company function: Hardware as a service (power banks)

Purpose of interview: was to get the hardware industry practitioners experience of open

innovation.

Interviewed person position: Harun Poljo, Co-founder and Product Developer of Banana Charge

Background information

Banana charge developed a power bank solution serving consumers of mobile phones, tablets

and other portable headset devices. Their solution enables commuters and workers to have the

flexibility to charge their portable devices at any time. It is possible to either purchase or rent

their power banks from designated automated stations in and around Stockholm. Banana Charge

products are environmental friendly, recyclable and the management team is made up of three

co-founders and two team members

Interviewee background: KTH MS Candidate 2015 - 2017, (Product Innovation Management)

Open innovation

Interview’s knowledge: interviewee claim about having professional understanding about open

innovation.

Apendix B .7 Company: MindfulHU, Stockholm Sweden

Interview date: April 21st, 2017

Company´s area of specialization: Wearables

Interviewed person position: Bin (Tina) Zhu, Founder, CEO, and PhD Candidate (Interaction

design), at KTH, Stockholm, Sweden

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Purpose of the interview: The exploration of Open Innovation

Company Background:

Mindful HU is a Stockholm based start-up specialized in wearable technologies. As of the

interview date, the start-up is part of the early stage incubated start-ups participating at the KTH

Innovation business incubator. The company´s area of work is within med tech, focusing on

commercialized medical technologies towards the reduction of stress. Even though the start-up is

at its early stage, they have a prototype in the market, while undergoing pilot testing in 4

different countries.

Apendix B .8 Company: Cryptcert, Stockholm Sweden

Interview date: April 11th

, 2017

Company´s area of specialization: Information Security

Interviewed person position: Nazri Abdullah, Co-founder and PhD Candidate (Cyber Security) at

KTH, Stockholm Sweden

Purpose of the interview: The impact and association of open Innovation towards product and

services

Company Background:

Cryptcert AB is a Stockholm based start-up, incubated and is part of the KTH Innovation

business incubator start-up program. The company area of business operation is within

information security. The company´s vision is to provide security and privacy solutions to its

targeted clients. The services and product is technology based, where it requires verification and

validation of innovative works from normal profile or standards in information security.

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Appendix C Closed and open innovation

Figure 3.1 Closed innovation model (Ideas flow in the closed innovation model)

Source: Elmansy, R. (2015)

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Figure 3.1 open innovation model

Source: Henry Chesbrough (2004)

``Under the open innovation model, there are many ways for ideas to flow into the process and

many ways for it to flow out into the market. Projects can be launched from either internal or

external technology sources, and new technology can enter into the process at various stages``

Appendix D – Innovation performance

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Appendix E –

Role of Science Park for future innovation ecosystem

Source: UNDERSTANDING INNOVATIVE SWEDEN

Appendix F Figure 3.1 Number of employees by enterprise size, out of those with at least one employee

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