According to Henry Chesbrough (2003d), we are witnessing a radical shift in innovation paradigms moving from closed business models to more open and globally-linked models. In his research, the author uses explicitly the expression “paradigm shift” by the historian of science Thomas Kuhn, to emphasize the radical fundamental change in how companies commercialize industrial knowledge. In simple words, closed innovation is nothing but the predominant business model used by most major U.S. corporations to run their labs for most of the twentieth century. It is the strategic model that Xerox used to manage its PARC research facility. Closed innovation is a view that says “successful innovation requires control” (Chesbrough, 2003d: xx). Yet, according to the paradigm firms must be strongly self-reliant and independent, because it is always hard to manage successful business partnerships with other companies without running into troubles.

The idea is that: “If you want something done right, you have got to do it yourself” (Chesbrough, 2003d: xx). The past success of the closed innovation paradigm was mainly due to the centralized knowledge landscape of the twentieth century. Although we were witnessing to numerous scientific revolutions with discoveries made by famous scientists such as Einstein, Bohr, Maxwell, Curie, the norm of science at that time suggested that the scientific community would have not benefited from the practical use of its inventions. “Emulating the norms of ‘pure’ science held in German universities, U.S. scientists regarded the pursuit of practical knowledge as ‘prostituted science” (Chesbrough, 2003d: 22). Thus, although the knowledge generated within universities seemed to hold great promise, the growing enterprises of that time could not rely on this valuable know-how being transferred in the industry. As a consequence of this isolationism, universities lacked the financial resources to conduct significant experiments and come up with revolutionary advancements themselves. Neither government played a great role in the research system by offering assistance and support in the form of financial grants.

As a result of the scarce participation of leading universities and government in the commercial application of science, the industry became the primary source of research funding for practical use of knowledge, and industry R&D laboratories were the primary locus of this industrial research. Historian Alfred Chandler (1990) documented the choices of many industrial enterprises during this period. Among his important findings was the role of companies’ internal R&D functions in creating economies of scale in their business. The institution of the central research lab and internal product development was thus a critical element of the rise of the modern industrial corporation (Chesbrough, 2003d: 24). Outside the fortified central R&D castles, the knowledge landscape was assumed to be rather barren. This was also when the term ‘not invented here’ was first coined. Basically, if a technology was not developed inside a company (i.e. not invented here), the firm could not be sure of the quality, performance and availability of the particular technology. Moreover, because of the closed nature of the system, the intellectual property (IP) generated in the internal R&D departments was closely guarded from fraudulent conversion.

The golden age of R&D was an age of severe vertical integration, born of necessity (since there were few capable external alternatives) and of virtue (since it was easy to capture value from one’s R&D when one controlled the entire value chain of business activities) (Chesbrough, 2003d: 30) […]

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