An Overview of Models of

Distributed Innovation

Open Innovation, User

Innovation
and Social Innovation
Garry Gabison and Annarosa Pesole

2014

20xx

Report EUR 27035 EN

European Commission
Joint Research Centre
Institute for Prospective Technological Studies

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JRC93533

EUR 27035 EN

ISBN 978-92-79-44720-4 (PDF)

ISSN 1831-9424 (online)

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Abstract

This report discusses models of distributed innovation and how they differ in their nature, effects, and origins. Starting
from Open Innovation, the paper analyses its methodological evolution, some of its applications, and the opportunities to
apply it in a social context. Open Innovation has gained traction in the last ten years and because of this popularity, Open
Innovation has been endowed with numerous meanings. This paper dives into the large literature associated with Open
Innovation. First, this paper describes Open Innovation. Second, it explains how Open Innovation has evolved from a linear
model of innovation to a model that includes feedback loops. Third, it describes the parallel evolution of Open Innovation
and User Innovation, where users are actively involved. This new perspective on the user involvement further contributes
to the evolution of Open Innovation into Open Innovation 2.0. Finally, the paper considers the role of Open Innovation in
tackling societal challenges and how and if this new innovation process could help Social Innovation to find ways to scale
up and reproduce successful results.
 Acknowledgements
This analysis was produced in the context of the "European Innovation Policies for the
Digital Shift" (EURIPIDIS) project, which is jointly funded by DG CONNECT and JRC-IPTS of
the European Commission.1
We want to thank our colleagues for their valuable input and comments during our
seminars: Marc Bogdanowicz, Daniel Nepelski, Ibrahim Rohman, and Martin Christensen.
We also would like to acknowledge Nadine Roijakkers and Oana Maria Pop for the seminar
they gave us on the topic and their valuable comments on our report. We also would like to
thank and acknowledge the support provided by Federico Biagi and Paul Desruelle.

1
IPTS is one of the seven research institutes of the European Commission’s Joint Research Centre (JRC).
1
 Preface
This report was prepared in the context of the three-year research project on European
Innovation Policies for the Digital Shift (EURIPIDIS), jointly launched in 2013 by JRC-IPTS
and DG CONNECT of the European Commission. Euripidis aims to improve understanding of
innovation in the ICT sector and of ICT-enabled innovation in the rest of the economy.2
The project's objective is to provide evidence-based support to the policies, instruments and
measurement needs of DG CONNECT for enhancing ICT Innovation in Europe, in the context
of the Digital Agenda for Europe and of the ICT priority of Horizon 2020. It focuses on the
improvement of the transfer of best research ideas to the market.
EURIPIDIS aims:
1. to better understand how ICT innovation works, at the level of actors such as firms,
and also of the ICT "innovation system" in the EU;
2. to assess the EU's current ICT innovation performance, by attempting to measure
ICT innovation in Europe and by measuring the impact of existing policies and
instruments (such as FP7 and Horizon 2020); and
3. to explore and suggest how policy makers could make ICT innovation in the EU work
better.
The present report contributes to the first bullet point, and looks at innovation systems.
The project analyses the development of the 'Open Innovation' concept. Current definitions
of this term in the literature show that, since it was first coined, it has evolved in many
directions.
The growing literature on Open Innovation makes the study of this concept unavoidable in
the search for the means to boost innovation. This paper aims to explore the evolution of
Open Innovation, its many offshoots and other concepts that developed around the same
period. Some contemporary concepts resemble or borrow from Open Innovation and
require further description, which can help us understand how each concept may be applied
in different situations.

2
For more information, see the project web site:
http://is.jrc.ec.europa.eu/pages/ISG/EURIPIDIS/EURIPIDIS.index.html
2
 Executive Summary
This report discusses models of distributed innovation and how their nature, effects, and
origins differ. Starting with Open Innovation, the report analyses its methodological
evolution and some of its applications. It also looks at how it differs from User Innovation
and how it can be applied in a social context.
The report starts with Chesbrough's definition of Open Innovation (2003) and analyses how
it impacts on the traditional innovation chain and related business models. Looking at the
different organizational models and taking into account both pecuniary and non-pecuniary
mechanisms, the report contrasts the emerging open business models with the traditional
closed innovation ones.
A key characteristic of open business models is that they include in the innovation process
interactive co-creation outside the boundaries of the firm. This characteristic of Open
innovation is shared with models of User Innovation. This report describes the two
contemporary research streams of Open Innovation and User Innovation, highlighting the
shared precepts as well as the key differences in values and assumptions about the
phenomenon studied.
In both Open Innovation and User Innovation, users may play a role in the definition of the
innovation strategy. However, how users are involved in these two models may differ. The
centrality of users in the innovation process suggests the possible introduction of these
new innovation models in non-profit and public organizations. The report also briefly
introduces Social Innovation and discusses how Open Innovation and User Innovation could
be used in the non-profit and public organization value creation process.
Latest developments on Open Innovation introduce the concept of Open Innovation 2.0 that
encompasses the main precepts of Open Innovation, User Innovation, and Social Innovation.

3
Contents
Acknowledgements ......................................................................................................................................................... 1
Preface .................................................................................................................................................................................. 2
Executive Summary ........................................................................................................................................................ 3
1. Introduction .............................................................................................................................................................. 5
2. Open Innovation in the Business Innovation Literature .................................................................... 6
2.1 Closed versus Open Innovation ................................................................................... 6
2.2 Subsequent Literature Addition: Beyond R&D, Feedback Loops, and Users. ............. 8
2.3 Transfers of Ideas: Different Forms of Openess ...................................................... 11
2.4 Open Innovation in Services and Small and Medium Size Enterprises .................... 12
3. Distributed model of innovation: Contrasting Open Innovation and User Innovation .... 14
3.1 User Innovation ......................................................................................................... 15
3.2 Triple to Quadruple Helix: the Involvement of Users and The Second Generation
Open Innovation. .................................................................................................................. 18
4. Social Innovation ................................................................................................................................................ 19
4.1 Systemic Innovation .................................................................................................. 19
5. Further Development of Open Innovation: Open Innovation 2.0 ............................................... 20
6. Conclusion .............................................................................................................................................................. 22
7. Bibliography .......................................................................................................................................................... 23

Table of Figures
Figure 1 Steps of Technological Innovation Process ........................................................................ 7
Figure 2 Sequential Closed Innovation ................................................................................................. 8
Figure 3 Sequential Open Innovation .................................................................................................... 8
Figure 4 Chesbrough's Latest Definition of Open Innovation (source: Chesbrough and
Bogers (2014) in Chesbrough, Vanhaverbeke, & West (2014)) ............................... 10
Figure 5 Open Innovation with Feedback .......................................................................................... 10
Figure 6 Open Innovation in Services ................................................................................................. 13

Table of Tables
Table 1 Different Forms of Openness .............................................................................................. 11
Table 2 The change and drivers of the innovation paradigm ................................................... 21

Table of Boxes
Box 1 The Linux Community ........................................................................................................................ 17

4
 1. Introduction
The concept of Innovation System highlights the fact that innovation processes no longer
take place within the boundaries of a single organisation. They now involve complex
relationships among several players, both private and public, some of which are
competitive, while others are collaborative. In this context, information and communication
technology (ICT) becomes critical in all aspects of innovation – from product–service
innovation, to business model innovation, through to management innovation. Innovation
processes are moving towards a more widespread adoption of the Open Innovation
paradigm: i.e. they are becoming more open and collaborative. They now involve a diverse
global network of partners, customers, and other stakeholders, making ICT a critical
enabler of distributed innovation and Innovation Systems.
In this report, we consider the two streams of research on the innovation process that
focus on the role of external knowledge: Open Innovation and Open User Innovation.
Chesbrough3 defines Open Innovation as "the use of purposive inflows and outflows of
knowledge to accelerate internal innovation, and expand the markets for external use of
innovation, respectively."4 In other words, the Open Innovation process combines ideas and
knowledge internal and external to the firm in order to capture value from the outside. The
business model based on this process establishes internal mechanisms to garner this
value.5 von Hippel defines Open User Innovation (hereafter User Innovation) as models of
innovation where "economically important innovations are developed by users and other
agents who divide up the tasks and cost of innovation development and then freely reveal
their results."6 Thus, he emphasises the importance of users in the creation of value and its
dissemination as free information.
Open Innovation and User Innovation have both overlapping and diverging characteristics.
We first discuss a taxonomy7 for the two research streams, and then distinguish between
Chesbrough's definition of Open Innovation and von Hippel's definition of User Innovation.
Specifically, we present how these models differ with respect to how they define the
motives for innovation, the innovation process and the commercialisation phase, and the
role played by firms in the innovation process.
The report is organised in six sections. First, Section 2 describes Open Innovation and
compares it to traditional models of innovation. It analyses how companies adopt Open
Innovation (OI) and how OI impacts on the creation of new business models and new
approaches to innovation. It explains how OI has evolved from a linear model of
innovation to include feedback loops.

3
Chesbrough has been attributed with coining the term Open Innovation but has not been attributed with
discovering the method. (Giannopoulou, Ystrom, Ollila, Fredberg, & Elmquist, 2010). However, a study of
the origin of the concept by (Dahlander & Gann, 2010) attributes the concept earlier research of von
Hippel in 1988. See also Hartmann & Trott (2009) highlight that the method is not new as most of the
example predate.
4
(Chesbrough et al., 2006)
5
(Chesbrough, Vanhaverbeke, & West, Forthcoming Fall 2014) In Chapter 3, Chesbrough and Vanhaverbeke
discuss the distinction between the open innovation process and the open business model. They argue
that the open business model lives along a continuum and companies may bring in different level of
information and innovation from the outside to benefit their value creation.
6
(von Hippel, 2005).
7
(Scrohll A., 2014) http://www.open-innovation.net/open-innovation/129-about-the-dispute-between-open-
and-user-innovation and (Duarte V. and Sarkar S., 2011).

5
Section 3 explains User Innovation models where users become central to the innovation
process and how they differ from OI. It also looks at the evolution of innovation
communities (e.g. drupal, linux, etc.). Section 4 analyses the role of OI as a tool to enable
community participation with a social purpose. OI helps scale up and reproduce successful
innovations. Section 5 describes the new concept of Open Innovation 2.0. Section 6 offers
conclusions.

2. Open Innovation in the Business Innovation Literature

In his seminal book (2003), Chesbrough contrasts the Open Innovation model with the
Closed Innovation model. In the Closed Innovation world, all the stages that lead to an
innovation occur within the boundaries of the firm. It is, in fact, a single-company linear
model (pipeline from pure scientific research to commercial application). In contrast, Open
Innovation allows external ideas to enter the firm's stream of innovation at any stage –
external resources (e.g. ideas, patents, etc.) receive the same importance as internal ideas.
Similarly, internal ideas can be sent outside the boundaries of the firm, especially if they
cannot be exploited inside.
In a forthcoming book (Chesbrough, Vanhaverbeke, & West, Forthcoming Fall 2014),
Chesbrough and Bogers underline the importance of using the term Open Innovation
precisely. Chesbrough defines open as flowing and unrestrained exchange of knowledge
from one entity to another. Open can also mean free as in gratuitous, however, Open
Innovation often coexists with market transactions such as licensing fees.
In the OI context, ideas flow freely to and from an entity without hindrance. While the flow
is unhindered, OI always involve multiple actors. One or more actors distribute their
research to one or more different actors, who absorb it. However, the process may occur
without explicit collaboration between these entities: an entity can integrate, on its own,
freely available resources to reach a solution. If the process involves interactions between
two entities going back and forth, they can explicitly collaborate (in a two-way coupled
process).8 In other words, OI does not necessarily imply explicit collaboration, cooperation,
and co-creation – though if one company absorbs knowledge or ideas, another entity must
have produced them.
Sections 2.1 and 2.2 focus on the development of the OI model. Section 2.3 discusses the
different forms of openness. Section 2.4 discusses how OI also affects the service
industry and smaller businesses.
2.1 Closed versus Open Innovation
This section first defines the stages of the innovation process and then introduces how
Chesbrough defines Open Innovation in contrast to the Closed Innovation model.
The sequential stages of innovation can be defined as: basic research and development;
technology research and development; market demonstration; commercialization; market
accumulation; diffusion. Grubb (2004) proposes a sequential six-stage innovation chain,
see Figure 1:

8
(West & Bogers, 2014).

6
 Figure 1: Steps in the Technological Innovation Process

Source: Wiesenthal et al (2009) citing Grubb (2004)

These stages of innovation have numerous variances in the literature. In the OI context,
Hartmann & Trott (2009) use a four-stage innovation model to describe Chesbrough's OI
model: the firm (1) discovers, (2) develops, (3) produces, and (4) ships products. West &
Bogers (2014) also use a four-stage innovation model to describe the OI model developed
by Chesbrough and following models. However, they use different stages: obtaining
innovations from external sources, integrating innovation, commercializing innovations, and
interaction mechanisms.
This report continues along the same path as Chesborough and his followers, and uses a
four-stage model to develop OI: i) research and development (which includes scientific
exploration and technological research); ii) product/services development; iii) marketing;
and vi) distribution. Chesbrough focuses his definition of OI on the initial two stages,
however, following models discuss how openness may affect any of these four stages. 9
Chesbrough defines OI in two steps: first, he defines Closed Innovation; second, he
describes the dichotomy between Closed Innovation and Open Innovation. Closed
Innovation assumes a closed vertical integrated process of innovation. The OI concept
focuses on firms cooperating across boundaries to create and commercialise innovations
and was developed with profit maximization in mind.
Figure 2 illustrates the Closed Innovation model, where all these stages of innovation take
place in-house and under the guidance of the firm. The firm is sealed to ideas and
influences from the outside and keeps all its own ideas inside. The Nuclear and Military
Industries have been used as examples of completely closed industries where "non-
proliferation of technology and protection remain important."10 The closed innovation
model thrived in a number of research-driven industries.11

9
(Lee, Park, Byungun, & Park, 2010) discuss how Open Innovation may come into play at any level: the
R&D, Marketing, Distribution, and inclusion of Component.
10
(Gassman, 2006) p. 224.
11
For instance, Chesbrough cites General Electric as a firm that followed the closed innovation model,
developed their own technologies and products without outside influence. (Chesbrough H. , The Era of
Open Innovation, 2003). Others cite Bell Labs/Lucent, Texas Instrument (George, Works, & Watson-
Hemphill, 2005) pp. 94-95 or Google Wave as a closed project within a usually open innovative firm
(Savoia & Copeland, 2011).

7
 Figure 2: Sequential Closed Innovation

In Open Innovation, ideas and influences from the outside can come in during research and
development stages to influence the process. As shown in Figure 3, ideas can also leave
the firm during these stages and may be taken up by outside entities.

Figure 3: Sequential Open Innovation

In original OI discussion, the sources of ideas and knowledge are universities or research
centres, industry participants (such as competitors, customers, suppliers), government
entities, and users. See Section 3.2 and Section 5 for a deeper discussion of the
involvement of users.

In the third chapter of their book, Chesbrough and Vanhaverbeke (2014) highlight the fact
that open and closed innovation are the two extremes of a spectrum along which most
business models can be found. The spectrum they describe is a function of how the in-
house research and development is involved in product development.

2.2 Subsequent Literature Addition: Beyond R&D, Feedback Loops, and Users.
Following Chesbrough's book, other researchers have furthered the principles of Open
Innovation. This section focuses on how subsequent works on Open Innovation have gone

8
beyond a linear innovation model to introduce different entry points for ideas, feedback
loops, and users.
Giannopoulou, Ystrom, Ollila, Fredberg, & Elmquist (2010) argue in their literature review
that models of innovation evolve over time through four phases (attributed to Rothwell
(1992)):
1. a linear model;
2. interactions between elements and feedback loops;
3. parralel line model (upstream and downstream movement);
4. systems integration and extensive network, and customized responses.
Chesbrough's OI model evolved through these four evolutionary phases. Chesbrough
originally defines "Open Innovation [as] a sequential, linear model"12 looking primarily at
research and development (R&D) processes. In this original model depicted in Figure 3, the
stages of innovation come sequentially, one after the other, and with solely downward
interactions. Later works soon started to integrate loops between the stages of the
innovation process, include movement along the supply chain, and embrace users and
network effects.
Though West & Bogers (2014) agreed that the OI model followed the above four phases;
they suggested however, that this did not necessarily happen in a defined order. West and
Bogers researched 291 published papers for "Open Innovation" in the title, keywords, or
abstract of the papers. They further narrowed their analysis to articles from the Financial
Times top 45 research journals. They highlighted the fact that OI changes in the literature
from a stylized sequential linear model to incorporate feedback and interaction
mechanisms (with influences from external sources at any phase of the innovation process
– and not merely at the R&D phase).
The growing academic interest in Open Innovation has led to additions being made to the
original OI model. Figure 4 represents the most recent way Chesbrough has depicted OI.
The model remains linear from upstream to downstream; however it now has a number of
new elements. It includes four stages of innovation (research, development,
manufacturing, marketing) where openness matters, instead of only two (research and
development). It also includes coupled processes instead of a unilateral process.

12
(West & Bogers, 2014).

9
 Figure 4: Chesbrough's Latest Definition of Open Innovation
(source: Chesbrough and Bogers (2014) in Chesbrough, Vanhaverbeke, & West (2014))

Figure 4shows that though Chesbrough still sees OI as a linear model, this latest version
has included feedback from each stage of the innovation process. Figure 5 shows OI
including feedback and conversations between all four stages of innovation through the
overlap between these stages.

Compe- Users
itors
Product
Development

R&D Marketing

Distribution

Boundaries of
the Firm

Govern-
Univer-
ment
sity

Figure 5: Open Innovation with Feedback13

Figure 3 and Figure 5, side-by-side, show the evolution of OI from a sequential, linear
process to one including feedback loops, introduction of ideas at any stages of innovation,

13
This is a generalization of the model described by Wim Vanhaverbeke, Jingshu Du, Bart Leten, and Ferrie
Aalders in Figure 6.1 of Chapter 6 Exploring Open Innovation at the Level of R&D Projects from New
Frontiers in Open Innovation (2014).

10
and user inclusion. The firm boundaries remain important to ensure that the companies
capture the value of the process.
Ideas come in and affect the innovation process at any of the nodes. The different stages
of the innovation process interact when the companies allow for feedback loops.
Government, universities, competitors, suppliers, and also users come and offer feedback
and ideas as well. In this model with feedback, users may be actively involved in the
creation process (which is the overlapping characteristic with the User Innovation model
discussed in Section 3), although the innovation nucleus remains inside the firm.

2.3 Transfers of Ideas: Different Forms of Openess

Open Innovation allows the "use of sources outside of the entity or group to generate,
develop and implement ideas"14 (outside-in process or inbound innovation). OI also
distributes internal resources outside the entity or group to generate, develop and
implement ideas outside the entity or group (inside-out process or outbound innovation).15
When both processes occur together, these entities co-create through alliance, cooperation,
and joint ventures (coupled-process). The outside-in process, the inside-out process and
the coupled-process represent different forms of openness.
Dahlander & Gann (2010) analysed 150 papers in the Thomson's ISI Web of Knowledge
published before September 2009 and catalogued these papers under the four forms of
openness detailed below:
Inbound Outbound
Innovation Innovation

Pecuniary Acquiring Selling

Non-Pecuniary Sourcing Revealing

Table 1: Different Forms of Openness (Source: Dahlander and Gann (2010)).

Each form of openness has its own advantages and drawbacks. First, revealing (non-
pecuniary outbound innovation) occurs when firms can reveal their internal research to the
external environmental. This revealing helps firms to gain legitimacy in their environment
and it also helps to increase the stream of incremental innovations and cumulative
advancements. However, companies may struggle to capture revenues.
Second, selling (pecuniary outbound innovation) occurs when firms commercialize some
of their research either by selling their internal resources or licensing them. This selling
benefits firms which gain from commercializing their resources. However, firms have found
selling more difficult than expected. They fear disclosing research results will destroy their
value and they struggle to assess the value of research. Purchasers fear being locked-in
and becoming vulnerable to the selling firm. In addition, negotiations may stumble on
transaction costs. Intermediaries such as license-pooling organisations can facilitate
transactions between participants and lower the associated transaction costs.16

14
As defined by Crowdsoucring.org at: http://www.crowdsourcing.org/community/open-innovation/1
15
(Enkel, Gassman, & Chesbrough, 2009).
16
(Giannopoulou, Ystrom, Ollila, Fredberg, & Elmquist, 2010).

11
Third, sourcing (non-pecuniary inbound innovation) occurs when firms can use and access
external resources after they scan and search the repertoire of available external
knowledge. These external resources constitute an important factor of innovation. Yet,
firms struggle to search amongst the various knowledge repertoires because they may fail
to identify the solution to their problem or if they do not find a solution, they may not
recognize when to stop searching. Once they have found relevant external knowledge, they
must also have enough absorptive capacity to assimilate this information.17 Therefore,
sourcing (as well as acquiring) does not completely substitute internal research. Firms
must create synergy between their internal process and available external knowledge.
Fourth, acquiring (pecuniary inbound innovation) occurs when firms can also access
resources through the market place. Firms can obtain licenses or acquire expertise from
outside. Much like sourcing, firms in this situation must be able to assess the value of
solutions offered to them. Thus, they must still have internal expertise. However, they
may struggle to select the appropriate outside resource and at the same time maintain a
working relationship with the source of their resources.
These four forms of openness and their use also indicate how each company positions
itself within the Open-Closed Innovation spectrum. Each form of openness may be used
with different intensity. Breadth of openness describes the number of resources searched
for and used to produce the innovation. Depth of openness describes the extent or intensity
with which each resource is used.18
Researchers have paid more attention to studying the inbound movement of resources
than the outbound.19 The number of studies on outbound flows of ideas remains limited. 20
However, for external research to be absorbed by one entity, it must have moved out from
its original source (other firms, academic and government institutions) at some point,
making these topics intertwined.

2.4 Open Innovation in Services and Small and Medium-sized Enterprises

Open Innovation was originally conceived as a paradigm shift for large manufacturing
companies. These companies were also among the first to adopt Open Innovation as part

17
"Absorptive capacity amplifies the benefits of external innovation sourcing both on innovativeness and
financial performance." (Giannopoulou, Ystrom, Ollila, Fredberg, & Elmquist, 2010).
18
(Bloch, Ebersberger, & Hersta, 2012) empirically investigate these four forms of openness, described in
Table 1: Different Forms of Openness (Source: Dahlander and Gann (2010)).. They find the breadth of
openness (or extent of the network created through OI) has a statistically significant positive impact upon
the probability of creating a new product more than the depth of openness. These results hide that most
of the breadth effect upon the probability of creating an invention comes from intellectual property
protection. In other words, companies that file intellectual property right protections are more likely to
create a new product. Filing an intellectual property right can facilitate licensing or selling of this right –
hence a sign of openness; but it also excludes others from using this research – a sign of closure.
Whether property right encourages open innovation or forecloses future innovation cannot be extracted
from their data and should be further investigated.
19
(West & Bogers, 2014) find that 36 published papers address Outbound whereas 115 do not. See e.g.
(Laursen & Salter, 2006) (empirically investigating, finding a positive impact with diminishing marginal
rate of returns, but enable to identify whether information from different sources affect the effectiveness
of open innovation).
20
(Bianchi, Cavaliere, Chiaroni, Frattini, & Chiesa, 2011) discuss how pharmaceutical companies commonly
use inbound and outbound innovation.

12
of their innovation strategy.21 However, OI has also extended to the service industry22 and
Small and Medium-Sized Enterprises (SME).23
Services differ from manufacturing because they innovate in different ways.24 They involve
more consumer interaction from the start, in a process that is not as linear as the
manufacturing innovation processes. Indeed, unlike manufacturing, services do not deliver
a take-it-or-leave-it product, as service providers tacitly elicit consumers' knowledge and
integrate it into their service value web.25 Figure 6 depicts how OI and external ideas
affect the service development process.

Figure 6: Open Innovation in Services

(Source: Chesbrough (2011) Creating the Customer's Experience: A Service Value Web).

Mina, Bascavusoglu-Moreau, and Hughes (2013) empirically estimated how manufacturers

and services have employed OI in the United Kingdom. Using a sample of 819 business, of
which 67% were manufacturers and 33% were from the service industry, they found that
service companies are statistically significantly more likely to engage in OI. They also
found that company size has a positive statistically significant impact on business
engagement in OI, which is discussed next.
Lack of resources may push SMEs to search for solutions outside the firm earlier than
larger companies. However, their size limits the implementation of OI because
collaboration with outside firms often means new risks and increased transaction costs.
This explains why Mina et al. (2013) found that larger businesses are statistically
significantly more likely to employ Open Innovation measures. Many authors have
addressed the lack of adaptability of the Open Innovation model to Small and Medium-
sized Enterprises (SMEs).26 For instance, Lee, Park, Byungun, & Park, (2010) investigated
the role played by intermediaries in enabling SMEs to achieve the same efficiencies as

21
(Chesbrough, H. W., Vanhaverbeke, W., & West, J., Forthcoming Fall 2014). New Frontiers in Open
Innovation. Oxford University Publishing.
22
"[O]pen innovation has been changing the way many companies think about developing products. But
open innovation can – and should – apply to services, too." (Chesbrough H. , Bringing Open Innovation to
Services, 2011)
23
See e.g. (Spithoven, Vanhaverbeke, & Roijakkers, 2012) using CIS data to investigate and compare the
impact of Open Innovation on SMEs and large multinationals.
24
(Mina, Bascavusoglu-Moreau, & Hughes, 2013)
25
(Chesbrough H. , Bringing Open Innovation to Services, 2011)
26
(Lee, Park, Byungun, & Park, 2010); (Idota, Bunno, & Tsuji, 2012); (Hutter, Hautz, Repke, & Matzler, 2013).

13
large firms in applying Open Innovation and information sharing/gathering. Intermediaries
act as brokers and alleviate some transaction costs associated with selling and acquiring.
They also alleviate some risks because they diminish costly disclosures.27

3. Distributed Model of Innovation: Contrasting Open

Innovation and User Innovation
The previous section shows that often innovation no longer takes place within the
boundaries of a single organisation. Quite the opposite, innovation tends to be distributed
across many stakeholders interacting in a network. As described in Section 2, the
Chesbrough paradigm of Open Innovation challenges the traditional model of vertical
integration and introduces a distributed perspective on the industrial innovation process. In
the same period, von Hippel28 talked about distributed innovation when he contrasted the
"producer model" of innovation to the openly-shared "user innovation model." Both authors
present models of distributed innovation - that is they agree that knowledge relevant for
innovation is widely distributed - and consider the role of users as a source of innovation.
However, these authors differ with respect to how they define the motives for innovation,
the process of innovation, its commercialisation, and the role played by firms in the
innovation process.
Chesbrough's paradigm of Open Innovation is specifically concerned with the economic
implications, focusing on exploiting external sources of innovation and commercialisation
of innovation. This view of OI does not, however, take into account the value created by
bottom-up grassroots communities which focus on the sharing of knowledge for non-profit
purposes. This practice is widespread among internet-based communities - not only but
mostly in the development of free and open source software.
The limitations arising from the revenue-generating focus and the firm-centric perspective
of Open Innovation prompted Chesbrough and those who followed to draw a map of the
areas that require further investigation.29 They proposed nine different perspectives30 and
suggested developing Open Innovation research, including structural R&D processes of
innovation, user and supplier involvement and institutional and cultural issues. In the
analysis presented in their forthcoming book,31 Chesbrough and co-authors further extend
the topics of research to new issues such as Open Innovation in SMEs, high-tech and low-
tech industries, no-profit organisations and Open Innovation in public policy. Furthermore,
they identify the need to analyse Open Innovation at different levels beyond the firm level.

27
They use the example of the Korean Integrated Contract Manufacturing Service and how their services
have helped close this SME-Large-Firm OI gap: these intermediaries help SMEs collaborate; they collect
data about members; they provide consulting services during collaboration; and they open markets for
SMEs.
28
(von Hippel, 2005).
29
(Gassmann, Enkel, & Chesbrough, 2010).
30
The nine perspectives include: 1) spatial perspective; 2) structural perspective; 3) user perspective; 4)
supplier perspective; 5) leveraging perspective; 6) process perspective; 7) tool perspective, 8) institutional
perspective and 9) cultural perspective.
31
(Chesbrough & Bogers, Explicating Open Innovation: Clarifying an Emerging Paradigm for Understanding
Innovation, Forthcoming Fall 2014).

14
In their latest work, 32 Chesbrough and his co-authors further developed the
conceptualization of Open Innovation, which they define as "a distributed innovation
process based on purposively managed knowledge flows across organizational boundaries,
using pecuniary and non-pecuniary mechanisms in line with the organization's business
model". They also clarify how it overlaps with User Innovation and how it differs. Both Open
and User Innovation have an overlapping interest in the role of users in a distributed
process of innovation. The involvement of user knowledge in the innovation process
requires firms to cooperate beyond their own boundaries. However, in the Open Innovation
model, the locus of innovation production remains the firms, while the User Innovation
model advocates a decentralization of innovation that changes the locus of innovation
from firms to users and leads to the "democratisation of innovation".
The following sections introduce the User Innovation paradigm where user communities
(those who get together to create ex-novo or improve a product or service to satisfy a
common need) are taken into account. Section 3.2 describes the User Innovation model
defined originally by von Hippel and the concept of democratisation of innovation,
presenting the practical example of Linux innovation communities. Section 3.1 presents the
evolution from a Triple to a Quadruple Helix model and introduces the concept of Open
Innovation 2.0.

3.1 User Innovation

The User Innovation model differs from Chesbrough's firm-centric approach in that it
explores user motives for innovation. In the User Innovation model, innovation results from
a collaborative and co-creation process, where users share tasks and the cost of
developing innovative products and services, and then users freely reveal their results. In
other words, the motivation for innovation revolves around the concept of user utility gains
rather than pecuniary returns.
According to von Hippel (2013), users are firms or individuals that "expect to benefit from
using a product or a service, in contrast to manufacturers that expect to benefit from
selling a product or a service." Therefore, users who contribute to the development of the
innovative product or service (users-innovators) will adapt the innovation to their specific
needs. The user-innovators, although they freely reveal the innovation, will receive greater
utility from the use of this innovation than free-riders,33 as the innovation may not
completely fulfil the needs of the latter.
The reason for supporting customization of innovations instead of purchasing innovation is
that user needs are heterogeneous and therefore may not be fully satisfied by
manufactured innovations. Hence, users are willing to develop innovations. In addition, in
an efficient innovation system, other users may adopt and further improve the innovation
and make it more valuable. This process generates an incentive to freely diffuse
innovative products.34 von Hippel and von Krogh define this model of innovation as the

32
(Chesbrough & Bogers, Explicating Open Innovation: Clarifying an Emerging Paradigm for Understanding
Innovation, Forthcoming Fall 2014).
33
"A person who chooses to receive the benefits of a public good or a positive externality without
contributing to paying the costs of producing those benefits"
http://www.auburn.edu/~johnspm/gloss/free_rider
34
(von Hippel and von Krogh, 2003).

15
"private-collective" model that contains elements of both private investment and collective
action models.35
The promulgation of the user innovation paradigm has been driven by both the augmented
user-friendly design capabilities of new technologies36 and increased efficiency in the use
of social media. Internet allows the creation of network systems that lead to a
"democratization"37 of innovation, where users can themselves create innovative products
and services thanks to user-friendly technologies. The democratization of innovation does
not only apply to information products, such as software, but also to physical products.38
As shown by the empirical literature, users largely contribute to the development and
modification of commercially attractive products (Franke and von Hippel, 2003). The
benefits of User Innovation span from complementing the traditional innovation chain of
the producing sectors to consideration of social welfare, where the freely available
innovation positively affects society in the same way as free, accessible public goods.
3.1.1 Innovation Communities
The distributive models of innovation presented so far (i.e. OI and UI) show that the
innovation process is not restricted to the exchange or flow of knowledge beyond firm
boundaries for the development of innovative marketable products. It also includes any
non-monetized knowledge spillovers between rivals that play a crucial role in advancing
technological progress and thus in improving societal welfare.39 An additional stream of
research into distributed model of innovation is Cumulative Innovation (CI).40
Cumulative Innovation focuses on the importance of non-monetised knowledge spillovers.
These are essential for both the incremental and radical progress of technological
innovation and hence for the improvement of social wellbeing. The knowledge spillovers
from firms can be involuntary and they can also originate from co-creation processes, like
those that take place in “innovation communities” in which users cooperate to successfully
combine and leverage their efforts. These communities, particularly those which are
developing open source software, are a practical and visible example of this innovative
process. In this perspective, the meaning of open lies more in cooperation and co-creation
than simply in the exchange of knowledge.
Innovation communities represent a good example of the intersecting characteristics of the
model of distributed innovation presented above. As with OI, innovation communities
include the exchange of knowledge flow. For UI, innovation communities highlight the
centrality of the users and non-pecuniary motivation for innovation. Finally, from the

35
Ibidem.
36
For example, the creation of graphic interface that allows an intuitive use of complex operating systems.
37
(von Hippel, 2005).
38
For sporting goods, see Nikolaus Franke and Sonali Shah, “How communities support innovative activities:
an exploration of assistance and sharing among end-users,” RESEARCH POLICY 32 (1), 157-178 (2003)
and Christoph Hienerth, “The commercialization of user innovations: the development of the rodeo kayak
industry,” R&D MANAGEMENT, 36 (3) 273-294 (2006). For computer synthesized musical instruments, see
Lars B. Jeppesen and Lars Frederiksen, “Why Do Users Contribute to Firm-Hosted User Communities? The
Case of Computer-Controlled Music,” ORGANIZATION SCIENCE, 17 (1), 45-63 (2006).
39
(Borges & West, 2010)
40
Cumulative Innovation, together with Open Innovation and User innovation, is a stream of research on
distributed innovation model. The analysis of innovation creation and commercialization as spanning firm
boundaries (or outside them entirely) concentrates in three major streams of research: User innovation (UI)
(von Hippel, 2005), Cumulative Innovation (CI) (Scotchmer, 2004; Murray & O’Mahony, 2007) and Open
Innovation (OI) (Chesbrough, 2003, 2006).

16
perspective of CI, innovation communities develop around the use of non-monetized
knowledge spillovers. Much of the research into online communities suggests that the
nature of these communities, with their permeable boundaries and self‐organization,
makes them a powerful new locus of collective creativity and innovation. (Lee & Cole,
2003).

Box 1 describes the well-known Linux development innovation community.

Box 1: The Linux Community

One of the most well-known examples of new collaborative business models can be
found in the development of the open-source operating system Linux. Linux is a self-
organised open-source community founded in 1991 by Linus Torvalds. In twenty years,
the Linux software-developer community grew considerably, reaching 3,500 participants
in 2008. The division of labour in the Linux community is managed mostly collectively.
The basic model of participation is based on user needs and willingness to cooperate.
The community work on an open platform to collaboratively resolve technical issues
related to Linux development. The development of the software is determined by the
actions of community members and although Torvalds has the final say on it, there is
no explicit project management within the community.

According to the Linux foundation - a non-profit technology consortium chartered to

foster the growth of Linux (http://www.linuxfoundation.org/about) - the value of Linux in
2008 was about $10 billion. This proves how alternative business model based on
different organisation of work (self-selection of tasks, lack of ex-ante guidance and
control, collective strategic decision) can be successful. The latest development shows
that Linux, although not popular in the desktop segment, is the leading operating
system in the area of supercomputing and cloud-computing. Furthermore, not only did
the Linux Foundation bring together under its leadership the biggest competitors on the
market with the common purpose of improving the Linux system, but the foundation
also inspired other open-source projects such as Facebook's Open Compute Project that
brings open-source methodology in data centres:
"The Open Compute Project Foundation is a rapidly growing community of engineers
around the world whose mission is to design and enable the delivery of the most
efficient server, storage and data center hardware designs for scalable computing. We
believe that openly sharing ideas, specifications and other intellectual property is the
key to maximizing innovation and reducing operational complexity in the scalable
computing space. The Open Compute Project Foundation provides a structure in which
individuals and organizations can share their intellectual property with Open Compute
Projects." (From the Open Compute Project website – Mission and principles section-
http://www.opencompute.org/about/mission-and-principles/)

17
 3.2 Triple to Quadruple Helix: the Involvement of Users and The Second
Generation Open Innovation.
The literature on models of innovation ultimately connects to the macro analysis of
Innovation Systems. In this section, we recall the Triple Helix concept introduced by
Etzkowitz in the 1990s and we analyse its connection to OI.
The Triple Helix concept of university-industry-government relationships resulted from "the
shift from a dominating industry-government dyad in the Industrial Society to a growing
triadic relationship between university-industry-government in the Knowledge Society."41
Knowledge societies have "capabilities to identify, produce, process, transform, disseminate
and use information to build and apply knowledge for social development. They require an
empowering social vision that encompasses plurality, inclusion, solidarity and
participation."42 ICT technologies have created the conditions for the emergence of
knowledge societies.
In the Knowledge Society, innovation has expanded from an internal process within and
among firms to an activity that often occurs in other institutional spheres such as
universities and governments. The Triple Helix thesis is that the potential for innovation
and economic development in a Knowledge Society lies in the hybridisation of elements
from universities, industry, and government to generate an Innovation System that
encompasses the function of knowledge production, knowledge transmission, and
knowledge transfer. The Triple Helix concept is proposed for modelling this interaction
process and the evolution of the triad structural adjustments.
The increased interdependence of the business sector and public research institutions
corresponds to critical changes to the innovation process, which are at the basis of the
Open Innovation paradigm. Indeed, Ranga and Etzkowitz use the Triple Helix concept as a
an analitical framework to explain the interaction between knowledge flows and the
development of an Innovation System.
As mentioned before, the original interpretation of OI involved a Triple Helix of players 43 in
which users were not included. On the other hand, users are at the core of the innovation
model proposed by User Innovation. This shortcoming of OI has led to the new concept of
Open Innovation 2.0 that integrates aspects of User Innovation. In Open Innovation 2.0,
Curley & Salmelin (2013) put forward a new model, the Innovation Network Systems
model, which is "based on extensive networking and co-creative collaboration between all
actors in society, spanning organizational boundaries well beyond normal licensing and
collaboration schemes."44 Civil society involvement in Open Innovation 2.0 follows the
evolution of the Triple Helix innovation system into a Quadruple Helix innovation system
(i.e., including the user), where "the innovation trials and scale-up can happen more
successfully due to strong engagement of citizens."45 This concept will be furthered
analysed in Section 5.

41
(Ranga, M. and H. Etzkowitz, 2013).
42
See Communiqué of the Ministerial Round Table “Towards Knowledge Societies”, organized during the
32nd session of the General Conference of UNESCO, Paris, 9–10 October 2003 (document 32 C/INF. 26,
para. 3), http://unesco.org/images/0013/001321/132114f.pdf
43
(Giannopoulou, Ystrom, Ollila, Fredberg, & Elmquist, 2010).
44
(Curley & Salmelin, 2013) p. 5.
45
(Curley & Salmelin, 2013).

18
 4. Social Innovation
Open Innovation and User Innovation are also developed, disseminated, and enforced
through the creation of communities with a specific social connotation, either as regards
their objectives or their means. Social Innovation refers to new ideas, institutions, and
innovation processes that meet societal needs through new forms of civic participation and
collaboration.
The challenge of Social Innovation is to involve society itself in finding alternative and
novel ways to face current societal challenges such as climate change, epidemics,
increasing inequality, and poverty. Social Innovation exploits Internet network effects and
Internet collaborative power to harness the collective intelligence of communities in order
to tackle these social challenges.
The theory is that citizens, enabled by ICT technologies, can "develop awareness, forming a
distributed intelligence constantly enhanced, coordinated in real time, and resulting in the
effective mobilization of skills to tackle societal problems."46
A major challenge for society is to scale up successful Social Innovations once they have
been validated at local level or the pilot stage. Distributed innovation models, by which we
mean both Open Innovation and User Innovation models, can act as scaling factors able to
extend the network of influence far beyond the original innovators' networks.47
Distributed innovation models, and in particular User Innovation models, are characterised
by transparent communications, collective decision-making processes, distributed actions,
and voluntary involvement.48 That is, they offer an alternative strategy to reframe scaling
issues and expand the social impact of innovative solutions to societal challenges. For
example, the adoption of distributed models in social contexts can help empower the
people benefiting from social programs and transform these people into active co-creators
of innovative solutions. This approach, like in the User Innovation model, will allow the
beneficiaries to develop ad-hoc solutions with greater possibility of success. In fact, the
involvement of users on a voluntary basis in the co-creation process reinforces people's
recognition by their communities, increases motivation and commitment, and results in the
development of more solid innovation practices.
Moreover, the open environment, in turn, facilitates the replication and the adoption of
similar experiences throughout different communities, enhancing the final impact of the
social innovations adopted.

4.1 Systemic Innovation

The ultimate goal of Social Innovation models is systemic innovation. 49 Systemic
Innovation typically entails fundamental changes to the social system, affecting many
elements which shape society: e.g. social movements, business models, laws and
regulations, data, infrastructures, and the development of new frameworks and new ways
of thinking and acting.50 For systematic changes to happen, it is also necessary to meet or

46
(Bria, 2014)
47
(Clay and Roshan, 2012)
48
(OECD, 2011) Fostering Innovation to Address Social Challenges
49
(Murray, Caulier-Grice, & Mulgan, 2010)
50
(Davies, Mulgan, Norman, Pulford, Patrick, & Simon, 2012)

19
create new conditions to make the innovations valuable. These conditions include three
essential ingredients: new regulatory frameworks, new institutional forms and the full
access to new technologies.
Systemic innovation is very different from innovation in products or services as it refers to
radical changes to the fundamental social systems on which society depends, such as
healthcare, education, labour market, provision of public services, etc. It can be pushed
forward by the advent of a disruptive technology, such as the Internet, and its results
usually involve changes in infrastructures, behaviours and cultures. Examples of systemic
innovation are the transformation of public services such as the collection and recycling of
household waste and on-demand public transport services. which ultimately aim to reduce
traffic and pollution. Other examples are innovations in the payment system like those
introduced by the bitcoin, or in government such as the Open Ministry in Finland (that uses
crowdsourcing to allow citizens to draft legislation that is later debated by the Parliament).
For these innovations to scale-up and succeed technological innovation (i.e. the services
are regulated by interactive open platforms) is necessary, as well as infrastructural and
cultural changes.
The full exploitation of new technology capabilities and future internet requires an open
distributed infrastructure able to leverage the potential of bottom-up social innovations.
There are several examples of social innovation collaborative initiatives in an open context:
Smart Cities, Open Data, Living Labs, time banks and digital currencies, new models of
urban mobility, new models of collaborative consumption and also collaborative events
such as BarCamps, Open festival, competitions etc.
Distributed innovation and User Innovation, in particular, could play a fundamental role in
facilitating the emergence of creativity and grassroots civic innovations, which in turn
might lead to systemic innovation. User Innovation can be seen as a way to better link
disruptive and cumulative innovation to achieve systemic innovation.

5. Further Development of Open Innovation: Open

Innovation 2.0
Curley and Salmelin have brought together the concepts of Open Innovation, User
Innovation and Social Innovation in new a model they call Open Innovation 2.0 (OI2).51 In
their model, the authors emphasise three main points.
First, they look at collaboration between competitors. This goes beyond joint ventures:
interdependent competitors work together to find solutions and develop new products
(mashed-up products of multiple concepts and ideas).
Second, the authors introduce the user as an integral member of the innovative process.
The user, the fourth element of the quadruple helix, intervenes earlier in the innovation
process to experiment, even before the innovation reaches the pilot stage, and actively
participates in the co-creation of new markets for innovation. According to the authors, the
co-creative process embedded in the quadruple helix approach leads to a win-win situation,

51
(Curley & Salmelin, 2013). Open Innovation 2.0 should not be confused with the previously term Open
Innovation 2.0 that refers to a collaborative model of innovation where innovator share the solution
(Grove, 2008) or open innovation enabled by internet tools and enabling user involvement in the
innovation process (Milleder, 2010).

20
as users get the products and services they need, and the suppliers get scalable products
and services. This allows immediate feedback on which innovation is successful. This
enhances the probability of successes, speeding up the scalability and quickly dismissing
innovation in unsuccessful areas.
Third, the authors highlight the fact that intermediaries must connect value networks to
form value constellations. They point out that interdisciplinary approaches must be taken
that go beyond the traditional boundaries of disciplines such as ICT, chemistry, or
mechanics, which should be mixed together.
That is, OI2 "is a mash-up parallel process where the public policy maker needs to create
the framework for this interaction (mash-up) to happen. OI2 is genuinely intersectional as
innovation often happens in crossroads of technologies and applications and is not linear
extrapolation of past.
To speed up the scalability all stakeholders need to co-create the solutions/find the
innovations together, in real world settings. Only then we have a strong driver to create
new markets and services, and are able to scale up successes fast. There is inherent buy-in
in this kind of innovation environments. On the other hand by involving end users as co-
creators upfront and seamlessly we see very fast the less successful experiments and
prototypes failing; "failing fast, scaling fast" is actually one of the strongest advantages of
Open innovation 2.0."52
The distinctions between these processes are summarized in Table 2:

Closed Innovation Open Innovation Open Innovation 2.0

Dependency Independency Interdependency
Subcontracting Cross-Licensing Cross-Fertilisation
Solo Cluster Ecosystem
Linear Linear, leaking Mash-up
Linear subcontracts Triple Helix Quadruple Helix
Planning Validation, pilots Experimentation
Control Management Orchestration
Win-lose game Win-win game Win more-Win more
Box thinking Out of the Box No Boxes!
Single entity Single discipline Interdisciplinary
Value chain Value network Value constellation
Table 2: The change and drivers of the innovation paradigm (Source: Salmelin 2013 Table 1)53

The authors argue that OI2 and the embedded Quadruple Helix model where the research
community, industry, public sector and citizens are all active actors "create a win-win
situation as it is targeting to create new markets and fast upscaling of the successful
solutions."54

52
(Salmelin, 2013).
53
(Salmelin, 2013).
54
Ibidem.

21
 6. Conclusion
This report described models of distributed innovation, analysing Open Innovation, User
Innovation, and Social Innovation. These models share similarities but differ with respect
to their approaches and main objectives. Open Innovation essentially focuses on profit;
User Innovation on user wellbeing; and Social Innovation on societal improvement.
Despite the growing literature on innovation models in general and Open Innovation in
particular, there is still a need to carry out research on specific issues in order to describe
and guide the changes in the innovation paradigms.
More research is needed to understand how firms should select the correct theoretical
model within a specific innovation ecosystem. For instance, SMEs wishing to carry out
successful Open Innovation may require the intervention of intermediaries. Another
example is that high-tech and low-tech environments may require different Open
Innovation strategies. This and other observations have researchers wondering when these
models can successfully encourage innovation.
In addition, the contemporary Open Innovation and User Innovation research streams need
to be better categorised. As well as, there is a need to further explore the emergence of
new business models characterized by strong user involvement in all stages of innovation
and by less profit-driven reasons to innovate. As for example, in the case of Open Source
models.
Furthermore, though Open Innovation strategies have also been adopted by the public and
non-profit sector, very little research has been done on the social impact of these practices
and only at the most general level. Indeed, an additional level of analysis of Open
Innovation at the individual, firms and society level could help us better understand how to
encourage the adoption and scale-up the success of local innovation in order to set higher
goals and help policy makers to face the current societal challenges.

22
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EUR 27035 EN – Joint Research Centre – Institute for Prospective Technological Studies

Title: An Overview of Models of Distributed Innovation. Open Innovation, User Innovation and Social Innovation

Authors: Garry Gabison and Annarosa Pesole

Luxembourg: Publications Office of the European Union

2014 – 25 pp. – 21.0 x 29.7 cm

EUR – Scientific and Technical Research series – ISSN 1831-9424 (online)

ISBN 978-92-79-44720-4 (PDF)

doi:10.2791/347145
 LF-NA-27035-EN-N
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As the Commission’s
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doi:10.2791/347145
ISBN 978-92-79-44720-4

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