Opening and closing open innovation projects: A contractual perspective

In this article we introduce three concepts from transaction cost economics that have so far remained excluded from the open innovation literature, and that enable us to address the demands in the literature for an explanatory mechanism for closing open innovation: unanticipated disturbances, tolerance zone and interpretations of contracts. First, we argue that threats resulting from unanticipated disturbances are absorbed in a tolerance zone and lead to adaptations in knowledge sharing. Second, we argue that these threats and changes in knowledge sharing at the project level impact the interpretation of the open innovation contract at the firm level. Adopting a contractual perspective, the article contributes to the open innovation literature by explaining the tolerance zone of transitioning between closed and open innovation. We illustrate in a case study on a B2B open innovation project how a threat to value creation leads to a continuation of open innovation, whereas a threat to value capture leads to a closing of open innovation.

Automated summary

This article introduces three concepts from transaction cost economics to address the demands in the open innovation literature for an explanatory mechanism for closing open innovation. The concepts of unanticipated disturbances, tolerance zone, and interpretations of contracts are discussed to explain the transitioning between closed and open innovation. A case study on a B2B open innovation project illustrates how threats to value creation and capture impact the continuation or closing of open innovation.