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Why Open Innovation needs to be at the heart of the Welsh Economy

SMEs are encouraged to attend the Co-Innovate conference in October.

During the past 12 months, I have been working with academic colleagues from various UK universities to examine how the concept of open innovation can influence the competitiveness of regions.

Whilst the old model of innovation used to focus predominantly on how firms could generate knowledge internally and then exploit that for their own competitive advantage, the concept of innovation, developed by Professor Henry Chesbrough a decade and a half ago, identified a process of open innovation where firms could and should utilise external ideas as well as internal ideas to advance their technology.

This can range from simple access to knowledge from other organisations to the development of more complex innovation networks that lead to collaborative research and innovation activity.

As a result, access by businesses to market sources such as customers, suppliers, universities, consultants, government laboratories and other organisations can help them to develop and commercialise innovative ideas.

To date, most of the research studies examining open innovation have focused on large firms and how they utilise the open innovation process.

SME research

As a result, very little has been done to support this concept within small to medium-sized enterprises (SMEs).

This is despite the fact that there is increasing evidence that SMEs are playing an important part in knowledge generation and innovation, especially within emerging high technology sectors.

More importantly, many SMEs are naturally agile and entrepreneurial which means that many are already open to new ideas from outside and can exploit those opportunities that may emerge as a result.

However, there are also challenges in fully exploiting the potential of open innovation as many SMEs will often lack resources internally and need these external linkages to access knowledge.

In fact, their very size and limited internal resources means that SMEs may have to rely more on external sources of innovation than many large firms, although such openness has its challenges.

For example, it will certainly cost smaller firms proportionally more than larger firms to identify external knowledge and develop relationships with other actors.

As a result, it has been argued that SMEs may need government support to maintain these relationships with external providers of knowledge and technology in the future.

But is there any evidence to show that open innovation can lead to greater economic competitiveness?

Certainly a number of research studies have found clear advantages for those SMEs involved in open innovation.

For example, open innovation can positively influence the innovative performance of the SMEs, enable them to master new technologies and assist in entering international markets more easily.

There has also been found to be a relationship between open innovation and profitability, which is not surprising given that it is an important dimension in the ability of firms to reconfigure resources to adapt to anticipated changes in the external environment and thus become more competitive.

Fortunately for the Welsh economy, there are already efforts being made to exploit the concept of open innovation for large and small firms.

Co-Innovate

Last year, Wales played host to a major event that provided SMEs with the opportunity to engage with and pitch business to some of the country’s biggest technology anchor firms.

Organised by large technology firms such as IQE PLC, General Dynamics UK, Airbus Group and GE Healthcare, the Co-Innovate conference focused on providing business opportunities across the digital, healthcare and defence and security sectors.

It was a real success and over the two days, investors and the academic, SME and industrial community shared best practices, pitched technologies and explored real business-led challenges presented by world-leading organisations in the digitalisation, defence, security and healthcare sectors.

The second Co-Innovate conference will take place in October and will be focused on a range of different sectors including aerospace, life sciences, medical diagnostics and power, energy and transport.

I would urge any SME in Wales that wants to take full advantage of the opportunities presented by open innovation and to network with like-minded organisations to register now.

But this agenda cannot just be about one event annually no matter how fantastic it is for those participating.

Certainly, if open innovation is to have a positive influence on the competitiveness and productivity of the Welsh economy as the research shows it can, then the next Welsh Government must ensure that it becomes a major element of any business support programme.

If it does, then it could help to maximise the impact of SMEs on high quality employment, wealth-creation and innovation in Wales over the next few years.

By Dylan Jones-Evans @dylanjonesevans