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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
http://innovationexcellence.com
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