Published by DIFME on 22-Feb-2021

Microentrepreneurs certainly find changing circumstances and every growing competition particularly daunting due to limited resources and limited opportunity to recruit specialised human resources.  Increased expectations of customers, complexity of products and innovation, shortening of product life cycles and facilitation of knowledge flows by new communication technologies increase competitive pressures across the globe and forces companies to look for ways to provide unique value to customers on a broad scale and in a fast pace, through innovation and internationalisation.

Open innovation can overcome these limitations as it allows accessing additional resources and decreases the risk of not-meeting requirements of international markets.

Companies taking advantage of the open innovation approach, focus on comprehensive development of the market and technological knowledge required for internal expansion They seek to acquire knowledge from external partners that have already developed it, or develop it together with other entities. Open innovation allows microentrepreneurs to access external organisations’ resources of knowledge, networks, customer base, equipment, as well as share the risks of new entry or new project development with other partners.

Internationalisation and Open innovation

Microentrepreneurs certainly find changing circumstances and every growing competition particularly daunting due to limited resources and limited opportunity to recruit specialised human resources.  Increased expectations of customers, complexity of products and innovation, shortening of product life cycles and facilitation of knowledge flows by new communication technologies increase competitive pressures across the globe and forces companies to look for ways to provide unique value to customers on a broad scale and in a fast pace, through innovation and internationalisation.

Open innovation can overcome these limitations as it allows accessing additional resources and decreases the risk of not-meeting requirements of international markets.

Companies taking advantage of the open innovation approach, focus on comprehensive development of the market and technological knowledge required for internal expansion They seek to acquire knowledge from external partners that have already developed it, or develop it together with other entities. Open innovation allows microentrepreneurs to access external organisations’ resources of knowledge, networks, customer base, equipment, as well as share the risks of new entry or new project development with other partners. 

Different ways to engage in open innovation

Microentrepreneurs can take advantage of open innovation to internationalise based on 3 models:

Outside-in. In outside-in open innovation, microentrepreneurs can obtain external knowledge generated by its partners. First-hand knowledge of specific foreign markets, specific legal and technological requirements, data on customer behaviours or preferences or technical knowledge required to optimise the product for specific market can significantly decrease the costs and time required for entry and product adoption and strongly increase success probability.

Engaging a partner with local market and complementary industrial knowledge or resources can also result in inflow of new opportunities for joint product development, especially spotting and responding to gaps existing within the specific market.

While absorbing knowledge from abroad is the most common form accelerating internationalization, microentrepreneurs can also “export” their knowledge to outside within the inside-out open innovation model. It allows creating opportunities to generate additional profit from internal ideas and technologies that were generated within your organisation, but your company does not look to commercialise. Transferring it to firms willing to use it in their business can bring benefits to both sides. Similarly, licencing your products or ideas to markets you do not have capabilities or strategic interest to pursue, can help you to maximise your global return within your products lifecycle.

In many cases, organisations look for mutual knowledge exchange and building a partnership with high value of added knowledge for both/all partners. That leads to creation of strategic alliance contributing to exchange of ideas, resources and mutual support for building strong market position and product development that are usually in the centre of open innovation concept.

Open innovation benefits

Knowledge of technologies, processes and markets is a key factor for your small enterprise competitive positioning. This knowledge is increasingly specialised, dispersed and uncertain when companies try to internationalise. Firms are not able to access all resources and knowledge they need to decrease the increasing uncertainty. Microentrepreneurs should therefore look on internationalisation and innovation as a strategic necessity to ensure sustainability and growth in the long term. Therefore, firms need to build links with other companies and organisations. The greater extend of SME effective links with other companies, organisations, providers, clients in different national contexts, the greater the ability and flexibility to compete in the global market.

Open innovation has a broad number of benefits:

• distributed innovation network allows all to access different capabilities, technologies, market knowledge, provide access to numerous innovation systems and broader human and financial resources base. It allows to generate not only a global level application complex idea with higher global potential, but it also provides international reach for the partners that shorten the time to market, improves partners reputation and probability of first-to-market advantage.
• international open innovation can be a source of access to cutting edge on a global scale technology which are not commonly available locally. Spreading the research efforts provides access to external resources. 
• to compete in the global market, small enterprises need to build a unique competitive advantage. While they commonly struggle with poorer managerial and financial resources, generating unique knowledge in the process of open innovation can be the key asset to achieve competitiveness in foreign countries.
• open innovation can be a way to identify and exploit international opportunities based on your partners knowledge. An international knowledge network can be a source of further information regarding potential knowledge partners abroad
• engagement of proper partners contributes to increased quality and diversification of products and services portfolio that could be offered to customers. That can significantly increase the value for customers. Exposure to new external ideas can be an engine for new product and process technologies.
• partnering with companies with local experience can help decrease the liabilities of newness and foreignness (i.e., the time and risks required with learning the unwritten market and administrative rules in the country), access strategic local resources and build your market position on/or next to locally establish brand. Joint product development, commercialisation and/or internationalisation allow to distribute the costs and risk of those projects across the partnership.
• international open innovation allows you to access and implement knowledge located anywhere in the world and allows you to potentially employ your knowledge in any geographic context. Interacting with overseas partners in the scope of knowledge exchange allows better understanding of cultural and organisational differences.
• using local partners to “export” your knowledge or product can bring financial benefits, as well as increase the visibility and recognition without the costly need to advertise
• internationalisation of research and development activities allows to approach overseas and foreign markets with costs and less risk
• product innovation encourages export activities and engagement in open innovation. It leads more commonly to pursuing intensive international expansion than internal innovation processes.