The “open innovation” model is currently being touted as a superior path for
achieving long-term success. Rather than relying on their own, limited resources for
research and development in the traditional, closed invention system, firms are encouraged
to share knowledge across firm boundaries to enhance their innovative potential. Yet, such
sharing may also have adverse consequences by reducing the rarity of a firm’s inventions.
This paper accordingly attempts to identify and analyze the parameters that determine
whether open or closed types of innovation management are most appropriate for a given
firm. Following a contingency perspective, we examine these determinants as various
internal and external constraints (situational factors). More specifically, applying concepts
related to absorptive capacity, complementary resources, game theory and others, we
derive testable propositions and provide case study evidence regarding the value generating
properties of open innovation