Open innovation

Traditionally large corporations approach innovation through closed-door policies, where firms rely firmly on in-house resources for innovation. This approach, however, may result in loss of competitiveness when faced with growing R&D costs and tighter profit margins in rapidly changing global markets. The open-door innovation process, in contrast, which means sourcing ideas both from within and outside the organisation, encourages long established firms to form strategic alliances with rivals or to collaborate with startups. For example, Japanese Honda is making greater use of external ideas and technologies realising the efforts of in-house innovation teams alone are not enough. This is not to say in-house teams of big firms are lacking in talent for innovation but rather reflect different levels of risk taking, that is, large corporations tend to have lower risk tolerance than startups.