Global e-Business Association

The e-Business Studies - Vol. 17 , No. 5

[ Article ]
The e-Business Studies - Vol. 17, No. 5, pp.151-165
Abbreviation: The e-Business Studies
ISSN: 1229-9936 (Print) 2466-1716 (Online)
Print publication date Oct 2016
Final publication date 30 Oct 2016
Received 08 Sep 2016 Revised 21 Oct 2016 Accepted 27 Oct 2016
DOI: https://doi.org/10.20462/tebs.2016.10.17.5.151

An Obstacle Factor Analysis and Suggestions for Implementing Open Innovation: Focus on the Startup Alliance Program
Jonghyuk Kim* ; Suk-Chul Kim**
*Ph.D., Dept. of Information, Yonsei University (halfmoonlike@gmail.com)
**Professor, Dept. of Global Economics, Gachon University (skckim@gachon.ac.kr)

개방형 혁신 적용의 저해요인에 대한 해결방안 연구: 다국적 ICT 기업의 벤처발굴육성 프로그램 사례를 중심으로
김종혁* ; 김석철**
*연세대학교 정보대학원 박사 (halfmoonlike@gmail.com)
**가천대학교 글로벌경제학과 교수 (skckim@gachon.ac.kr)

Abstract

Currently, the introduction of open innovation is considered as one of the important topics for the companies' survival strategy, especially, in the ICT industry that has been continuously seeking to innovative ideas more quickly and effectively from the markets. Infact, implementing open innovation requires a high degree of technological openness and compatibility across organizations. But, cases are often reported that many businesses are going down the tubes during implementation of open innovation. This study tried to find the obstacle factors and their solutions based on a variety of preceding studies and case studies about the introduction of open innovation and the usage of collective intelligence, and also through conducting in-depth interview as a qualitative approach with both the organizers and participants of the startup alliance program and the open contest sponsored by the multi-national ICT companies in South Korea which is identified as one of the successful cases of open innovation. From the study, we hope it would offer helpful advice to bring a successful implementation of open innovation for ICT companies.

초록

기술 변화가 빠르게 이루어지고 타 산업과의 연계가 활발한 ICT 기업에게 있어 개방형 혁신의 도입은 매우 중요한 경영 전략의 일환으로 평가된다. 하지만 많은 기업이 미성숙한 방법을 통한 개방형 혁신을 적용하여 다양한 저해요인에 적절히 대응하지 못한 채 개방형 혁신 도입에 실패하는 사례가 드물지 않게 보고되고 있다. 본 연구는 첫째, 국내외 문헌 연구 및 사례 연구를 통해 여러 가지 개방형 혁신 방법과 집단지성의 활용에 대해 소개하고 더불어 이를 저해하는 요인을 도출한 후, 둘째, 개방형 혁신 도입의 성공 사례로 평가되는 국내의 다국적 ICT 대기업인 A사의 개방형 혁신 프로그램 중 벤처발굴육성 프로그램과 공모전에 대한 주최 측 관계자와 실제 참가자의 인터뷰를 실시, 질적연구방법을 통한 개방형 혁신 저해요인에 대한 해결책을 제시하였다. 이를 통해 동종의 ICT 기업이 다양한 개방형 혁신을 보다 효과적으로 도입하는데 있어 도움이 될 수 있기를 기대한다.


Keywords: Open Innovation, Collective Intelligence, Obstacle Factors, Startup Alliance Program, Open Contest.
키워드: 개방형 혁신, 집단지성, 저해요인, 벤처발굴육성 프로그램, 공모전


Contents
ABSTRACT
Ⅰ. Introduction
Ⅱ. Theoretical Background
Ⅲ. Research Methodology: Qualitative Approach
Ⅳ. Findings
Ⅴ. Discussion
References
국문초록


Ⅰ. Introduction

Unlike the past when corporations used to dominate the market with technological innovation via quality talent and economy of scale, companies today are experiencing limitations in growth due to shorter product life-cycle, rise in interdependence between industries, and heavy competition in the market. To overcome this situation, many companies were investing massive sums in R&D, but its effectiveness was gradually reducing (Chesbrough, 2003). In line with this trend, as a new corporate R&D strategy, open innovation has received attention, striving to escape the limits of the existing closed innovation in favor of a more diversified innovation. Particularly, for ICT companies that have fast changing technologies and dynamic integrations with other industries, open innovation can be a very important business strategy. For technology with higher level complexity, there were higher tendencies during the innovation process for depending on combining technologies and capacities from various industries (Hagedorn, 1993). When a company utilizes external knowledge, they can gain additional value on top of their existing technological knowledge (Teece, 1998). Globally, such activities and research are being carried out prolifically, and many companies are gaining the benefit of improvement in R&D efficiency and profit increase through open innovation. However, companies are also experiencing much difficulty in introducing open innovation. There are obstacles to open innovation such as the NIH (Not Invented Here) syndrome, which is emotional resistance from internal members of the company against the company internalizing external ideas, and the NSH (Not Sold Here) syndrome, which is resistance against sharing internal knowledge or know-how with those outside the company. Other than these, there are many difficulties such as institutional factors and cost, leading to many companies failing at open innovation. Therefore, companies must multilaterally consider the factors that reduced open innovation and strategize in order to resolve this matter (Galia and Legros, 2004).

Through the case study of company A, which is a multi-national ICT company with relatively well established open innovation system among ICT companies, this study will examine the characteristics of obstacle factors to open innovation and would like to suggest a direction that could resolve this. Company A is a top Korean company in the area of ICT services, and it is doing business in system integration and ICT infrastructure establishment for gyms, warehouses, and offices. The reason for selecting company A as a target for study is first, because the company is proactively engaging in planning new business ideas due to Korea’s recent SI business regulation, and actually has various open innovation programs. Second, IT industry companies have more knowledge and technology exchange with those outside than companies in the manufacturing industry, and it is also easier for them to introduce open innovation (Chesbrough, 2003). Third, because cooperation with the outside and the intention for joint research and development increase in relation to the company size, Company A, which is a large corporation with total staff of over 15,000, is a fitting company for study (Gemünden and Heydebreck, 1995).

To carry this out, we first examined studies and related cases on related theories such as open innovation and collective intelligence theory. Second, we concretely organized obstacle factors through interview with personnel that participated in Company A’s startup alliance program and the open contest that the company carried out for developing new ventures. Lastly, we suggested measures that can strategically solve this.


Ⅱ. Theoretical Background
1. Open Innovation Theory

Innovation is an activity in which new ideas are applied to a company’s business activities such as products and processes (Rogers, 1998). The existing innovation model was the linear model of innovation, in which innovation occurs unilaterally within the company. However, it has evolved to the interactive innovation system, which combines regional, social, and cultural factors (Nambisan, 2007). This interactive innovation system can be seen as a predecessor to open innovation as it brings in external knowledge. Open innovation is a method of innovation in which the company’s innovation process, from technology R&D to the period of commercialization, is opened to the public, bringing in outside knowledge or technology into the company, or in contrast the internal technology is shared with the market, thereby reducing innovation costs and getting better results from innovation (Amara and Landry, 2005). Examining the root of the open innovation theory, it started from collective intelligence. Beginning from Lévy (West and Gallagher, 2006), the concept of collective intelligence was formulated from the 1990s, and it went through stages of Surowiecki’s The Wisdom of Crowds, Tapscott & Williams’ Wikinomics, and finally arriving at open innovation through Chesbrough, adding concepts of corporate strategy (Surowiecki, 2004; Tapscott and Williams, 2008; Chesbrough, 2003). Thus, open innovation can be seen as a part of corporate strategy that expands into the area of corporate business the concept of collective intelligence, which is when outside intelligence is used to raise existing value as well as create new value.

Types of open innovation include various methods such as licensing, spin-off, technical in-sourcing, as well as consumer participation and venturing. Chesbrough (2003) categorized these into two large groups of inside-out methods, and outside-in methods. Inside-out methods point to a company expanding internal technologies into the outside, developing business models that are different from existing ones, or earning additional revenue by selling to the outside. Outside-in methods point to a company obtaining ideas or technologies from the outside during the R&D process. Later, Van de Vrande, De Jong, Vanhaverbeke, and De Rochemont (2009), and Gassmann and Enke (2004) further divided the types and organized them.

<Table 1> 
Types and Categories of Open Innovation
Type Description
Inside-out
Method
Technology
Sales
Selling technology that a company has, leading to new business opportunities via combination with business models from other companies, as well as strengthening company revenues through royalties
Licensing Offering the company’s technologies as licenses
Open Source Releasing technology or platforms that a company possesses to the public in order to expand participation by consumers or developers
Spin-off Taking a technology or a business model that is difficult to operate within the company and forming a new venture firm
Outside-in
Method
Technology
Purchase
Purchase of outside technology through fund contract
Commissioned
Research
Commissioning research to outside institutions for acquiring certain technologies or testing and evaluation
Joint Research Technology research through partnership with universities and research institutes
Joint Venture Promoting commercialization via establishing a new venture with an outside company that matches with the company’s direction
Venture
Investment
Investing in shares of venture firms with high technological value and potential, thereby making technology acquisition available as well as strengthening profitability
User
Innovation
Improving existing products or developing new products through providing development tools to product/service users as well as receiving feedback from them
Corporate
M&A
Obtaining technology through acquisition of a venture firm that has a desired technology with high technological value
Use of
Collective
Intelligence
Continuously improving on technology and developing new products by eliciting participation from many experts from the public

2. Obstacle Factors to Open Innovation

Obstacle factors mean that the factors impede innovation, manifesting either inside or outside the company when introducing open innovation. Currently, many companies are trying open innovation, but in its process they are facing various obstacle factors to open innovation. Baldwin & Lin (2002) have stated that a company experiences more obstructions when the company is more innovative, and for such factors they selected factors of cost, institution, manpower, organization and information. With this as a background, the OECD’s Oslo Manual the 3rd (2005) reorganized obstructive factors to corporate innovation in the aspects of cost, knowledge, market, and institution. Moving further from this, Arbussa and Coenders (2007) have selected as obstacle factors, lack of manpower, organizational rigidity, innovation cost, lack of consumer response, lack of technology, lack of market data, and regulations. Van de Vrande et al. (2009) argued that obstacle factors to open innovation are bureaucracy, administrative weight, technology, as well as lack of market data, imbalance between operational tasks and innovation, excessive cost and time to innovation, subpar capacity in partners, misunderstanding consumer demands, and lack of organizational flexibility. Tödtling, Prud'homme and Dörhöfer (2011) have said that in terms of technological integration, the causes are difficulty in finding the right partners, risk tolerance, difficulty in acquiring capital, and difficulty in obtaining intellectual property rights.

<Table 2> 
Analysis of Existing Studies on Obstacle Factors of Open Innovation
Researchers Obstacle Factors
Baldwin and
Lin (2002)
Cost Factors Capital, equipment, software development, maintenance, technology acquisition
Institutional Factors R&D tax deductions, cost benefits, regulations and standard
Manpower Factors Lack of technical capacity, difficulty in education, labor contract
Organizational
Factors
Difficulty in introducing changes, managerial attitude, resistance from employee
Information Factors Lack of information, lack of services, lack of manufacturing support
OECD's Oslo
Manual the 3rd
(2005)
Cost Factors Excessive recognition of risk, excessive costs, lack of corporate capital
Knowledge Factors Lack of potential for innovation(R&D, design, etc.), Lack of sufficiently skilled manpower, lack of information on technology, lack of information on the market, lack of outside service capacities, difficulty in finding partnering firms, organizational rigidity of the company.
Market Factors Innovative products, uncertainty of demand for service, domination of potential market by existing corporation
Institutional Factors Lack of infrastructure, lack of property rights, legislations, regulations, standards, taxes
Arbussa and
Coenders
(2007)
Internal Factors Lack of sufficiently skilled manpower, lack of information for technology and the market
Economic Factors Capital risk, and high cost to innovation
Other Factors Regulations, lack of flexibility in standards
Van de Vrande
et al. (2009)
Bureaucracy, Administrative burden, lack of information for technology and the market, imbalance between innovation and everyday operation, excessive cost and time to innovation, subpar capacity from partners, misunderstanding customer demands, lack of organizational flexibility
Tödtling et al.
(2011)
Difficulty in finding the right partner for technology integration, risk tolerance and difficulty in securing capital, difficulty in obtaining intellectual property rights

Through the obstacle factors to open innovation as organized above, this study laid out types of obstacle factors that will be used in the case study as well as the elements for each type as shown in <Table 3>.

<Table 3> 
Obstacle Factors to Open Innovation
Type Description
Internal Cultural Factors NIH (Not Invented Here) syndrome
NSH (Not Sold Here) syndrome
Cost Factors High cost to innovation
Recognition of excessive risk
Lack of capital
Participant Understanding Factors Lack of communication with participants
Estrangement from demands of participants
Institutional Factors Laws, regulations, standards, as well as difficulty in obtaining
intellectual property rights
Lack of infrastructure

3. Case Study
1) SK Telecom

SK Telecom, a Korean telecommunication and manufacturing firm, is proactively carrying out open innovation that involves companies, the country, and the academia. From 2004, it started the CRP (Collaborative R&D Program), an R&D Program for collaborating with small and medium sized enterprises (SMEs), and it has strengthened its mutual cooperation as well as its competitiveness with the government as well as other companies (SK Telecom, 2013). From 2013, it has operated the T open lab, which is an online/offline space for offering infrastructure for implementing and testing technology, helping small and medium sizes collaborators as well as individual developers that lack the environment for autonomous development as well as testing. Through its regular developer forum, the T open lab is operating a program that shares the newest technological trends in the ICT industry with venture firm developers, as well as explores directions for cooperation. Also, from September 2014, it will host a venture startup and corporate support contest along with the Daejeon Center for Creative Economy & Innovation, aiming to discover creative ideas in various industries such as ICT, energy, and semiconductors, as well as promoting cooperative technology development and cooperative business projects (SK Telecom, 2014).

2) NAVER

NAVER started in October 1997 as an internal venture within SAMSUNG SDS, and after its 1999 spin-off that started the Naver search portal service, NAVER is now Korea’s biggest Internet portal service company. Particularly, through the LINE mobile messenger service that launched June 2011, it is strengthening its global operation according to the trend of the mobile market that is growing dramatically (NAVER, 2013a). On the other hand it is also putting multilateral efforts on expanding its mobile content business. In 2013, NAVER started the NAVER Venture Fund, which supports early founders that lack capital, operating a venture startup funding program of $50 million in total (NAVER, 2013b). It is also discovering and growing promising startups through its startup alliance program, and it is systematically supporting their global expansion. Moreover, in order to vitalize professional corporate content in each domain within NAVER, it has restructured certain services that overlap with other small and medium-sized Internet companies under mutually beneficial terms, constantly strengthening its role as a distributor of content provided such companies. Examples include Wingspoon, Wannabe, NAVER Kitchen, Good Morning Alarm App, and NAVER Coupon.

3) Google

Google was founded in 1998 when Larry Page and Sergey Brin, students at Stanford at the time, made a search engine called BackRub with an algorithm that evaluates the importance of a webpage according to the number of links between the websites, offering a more evolved form of existing search engines. Later, they acquired Android in 2005 and expanded into the mobile operating systems market, and in 2006 acquired Youtube, the world’s biggest video sharing site, leading the video content market. Currently, the company is offering services on the web, mobile, media, GPS information, professional search, home & office, and social media. Google’s representative case of open innovation is the Android platform. With the Linux-based Android, by opening and offering the API to the developers around the world, they could quickly acquire diverse array of content and applications, easily maneuvering from the PC to the mobile platform. Particularly, Google led the organization of OHA (Open Handset Alliance), which is a union founded in November 2007 and composed of 34 mobile device manufacturing companies, telecommunications companies, application developers and semiconductor manufacturing companies. Through the OHA, Google achieved value chain cost innovation by sharing open standards for Android OS systems and mobile devices. Also, Google partnered with Phonebloks, an open source smartphone developer community, so that developers, testers and users could easily participate in projects (Google, 2014).

4) GE

Founded in 1878 by the inventor Thomas A. Edison, the US general electric company GE changed its name to General Electric (GE) when in 1892, Edison General Electric and Thomson-Houston Electric Company merged. GE is doing business in the areas of energy infrastructure, aviation, shipping, healthcare, financial services, broadcasting (NBC, Universal), lighting, and electronics. It is operating 6 global R&D centers in locations such as the US, China, Germany, and India. Ecomagination is the most representative program of GE for acquiring outside ideas. It is a portmanteau word of Ecology and Imagination. The program exhibits an assignment in areas such as in 3D printing, and hydroelectricity technology on its homepage, and runs a contest for people to submit ideas, paying awards of $1,000 to $100,000. In July 2010, for the first time, Ecomagination put out a contest with the topic of ‘smart grids’. During the contest period, the applicant pool was 10 times the expected size. 4000 ideas were submitted from 160 countries and 1,600 companies. Through this, 23 new ventures were established and approximately $1.4 million was invested (Yang, 2012). Also, in April 2013, GE partnered with Quirky, a social product development platform company that commercializes ideas, and within only 6 months launched a new product. One of the significant examples is the Egg Minder, and it has the function of connecting wirelessly with smartphones and telling the user when eggs have gone rotten. There are also other devices that were launched and are out in the market such as the Nimbus, Pivot Power Genius, and Spotter.


Ⅲ. Research Methodology: Qualitative Approach
1. Overview of Company A

Company A is one of Korea’s ICT conglomerates. It was founded in the 1980s, and it does business mostly in the B2B areas such as in IT system design and development, IT consulting, data center services, and logistics. In 2014, Company A had a total of 1,095 patents worldwide, and their main business patents were related to intelligent office/home, comprising of 30%. In the components technology area, patents related to mobility/security comprised of 25%. Also, recently they acquired technologies related to intelligent manufacturing/logistics that uses visual analytics and big data analysis. For research and development teams, they have a total of 5 research teams such as the technical strategy team, algorithm research team, architecture research team, existing solutions team, and SW engineer team. In 2014 they had invested approximately $90 million into research and development. Due to recent government regulations, Company A is proactively looking into developing new business, and as a possible method it has introduced open innovation, carrying out programs such as discovering and nurturing ventures, new business idea contests, connecting industries to academia, and partnerships. In this study, we will examine a case of the startup alliance program as well as the open contest. Through in-depth interviews with participants, we drew up a strategy for solving the obstacle factors to open innovation introduced earlier (cultural internal factors, cost factors, participant understanding factors, institutional factors).

2. Startup Alliance Program

Company A’s startup alliance program is a corporate incubation program for commercializing an idea from a person outside the company or from a startup. Participating startups receive office space and equipment, professional mentoring, business investment, and the program helps their independence or co-dependence. For this program, Company A partnered with various venture support organizations and venture capitals such as the Go-Venture-Forum and the Seoul Venture Incubator. The program started in 2012, and its 1st phase comprises of applying through a 3-page business plan related to ICT technologies. The 2nd phase is when the startup team is selected after a presentation interview with Company’s A’s team. The team that comes in is evaluated on their performance every 6 months, and this decides whether their incubation will be extended or not. During the incubation they receive simple business equipment and regular business mentoring. When potential for commercialization is approved within a year and a half, Company A invests capital and shares are distributed. In the case of Quilson, a B2B, B2C smartphone language education service company, it laid its early foundation through Company A’s startup alliance program from December 2012, and received $40,000 in investment from Company A. Subsequently it then received investments of $1.6 million in June 2014, from venture capitals such as Softbank Ventures Korea and DSC Investment which invested $1 million and $300,000 respectively. There are mainly 2 reasons for why Company A initiated its startup alliance program. First, it is to obtain a more proven and tested new business ideas. In the case of average open contest, it mostly stops at collecting ideas that are only at the proposal phase, incurring heavy costs during idea selection and evaluation. However, in the case of startup alliance programs, the proposer of the idea actually develops and tests a new service, validating the idea, reducing risk and costs. Second, it is to have continuity with Company A’s open contest. Company A is carrying out a new business idea open contest not only in Korea, but worldwide. Through this, there are more than 3,000 new business ideas per year that are submitted and the best ideas are selected. However, most of the time it stops at paying out awards. Therefore, by providing conditions for developing and testing such selected new business ideas there can be continuity with the open contest.

After about a year and a half of startup incubation, Company A selects a startup that has validated its service’s superiority. Then through either investment for shares or M&A, it acquires the idea, technology, and capacity of the startup, expanding Company A’s business. This can be seen more as CSV (Creating Share Value), rather than CSR (Corporate Social Responsibility), which is simply supporting startups. With the startup alliance program, Company A evaluated the potential of each startup through quarterly performance reports in order to save costs and raise efficiency. Company A also carried out continuous networking program to examine the startup’s direction. Below is an excerpt from the interview.

The NIH Syndrome and the NSH Syndrome, which are common obstacle factors in open innovation, almost didn’t occur in Company A’s startup alliance program. The reason for that is that Company A does not directly apply the new ideas and technologies from startups toward the Company’s own departments, and that Company A allows startups to be independent, helping them only with strengthening their new business ideas and improving technologies. Therefore, the program’s participating startups had almost no opportunity to meet staff members of Company A other than the personnel from the startup alliance program. Below is an excerpt from an interview with a startup team member.


[Figure 1] 
Interview from Program Organizers


[Figure 2] 
Interview from Program Participants 1


[Figure 3] 
Interview from Program Participants 2

Moreover, to resolve the program of lack of communication with participating startups, and help with service improvement and expansion, Company A carried out a continuously networking program and an education mentoring program. Through this, they reduced the gap in understanding with participating startups. Below is an excerpt from the interview.

Through such interview excerpts as above, it can be seen that in order to neutralize obstacle factors of cost and participant understanding, Company A carried out a quarterly performance reporting system, as well as continuously carried out a networking system as well as an education mentoring system. Also, it can be noticed that forming an environment that allows program participants to come together and share their ideas also helped improving services from participating startups.

3. Open Contest

Started in 2013, Company A’s open contest is an ICT new business idea contest. Anyone from around the world at the age of 14 or higher can submit. This program, unlike the average contest, offers office space and mentoring support of 3 months to a maximum of 10 teams of idea proposers from the first round of selection that came from Internet submissions. For the 2015 standard for the open contest, a total of 2,749 new business ideas were submitted, and contest areas comprised of 3 categories of Life, Work, and Fun. Life is for innovative ideas on living spaces that use ICT technology such as smart homes, healthcare, and smart libraries. Work is for innovative ideas on workspaces that use ICT technology such as building energy management systems, smart office, and shipping systems. Fun is for service ideas that give everyday entertainment such as media, entertainment and SNS. The open contest was advertised through posters, banners, homepages of large universities in the US, as well as news articles. Selection criteria were implementation possibility, creativity, uniqueness, and synergy with Company A. Also, in the final evaluation stage, 70 audience judges were selected, and through a mobile voting system, the audience opinion was reflected as 10% of the final evaluation.

Since the idea selected during the final stage through the open contest is owned not by Company A but by the proposer, the service idea and technology could not be acquired by simply awarding the best idea from final evaluation. Also, for services in the idea stage that did not go through patent registration or service launch had the risk of idea theft. Therefore, in order to solve such problems, Company A carried out an incubating process of 3 months despite this being the open contest, so that participants could independently finish the service and thereby mitigate the problem of idea theft. After that new business capacity and technology was acquired through the method of investing in the shares of the service company that was formed by the participant. Related to this, below is an excerpt from an interview.

As it can be seen from the above interview, Company A did not directly absorb the startup’s new business idea and technology, but rather provided an environment in which the startup could independently improve upon its idea and launch its service. And when the idea matches with Company A’s direction, Company A then invests in the startup, absorbing the new business idea and technology. Also, Company A aimed to gain the benefits of open innovation through its open contest. In fact, Company A’s president has said that “due to the difficulty in responding to rapid changes in technology through internal innovation alone, we are doing open innovation activities”, and that “I expect that the open contest will create new business opportunities.”


Ⅳ. Findings
1. Performance of Company A’s Open Innovation

Through its startup alliance program and the open contest, from 2012, 3,000 or more new business ideas were submitted to Company A every year. In fact, it was beneficial in that they were able to expand their business territory by investing in incubated startups. As of 2015, 3 companies are under Company A and are undergoing incubation. Startups under incubation are constantly improving their service, and a few startups are already providing service. Of course, since it has only been under 3 years since the start of the programs, it is hard to see any explicit success, but it is clear that the programs have benefitted Company A in giving it an image of openness, as well as effects of ICT market trend sensing, and reduction of risk in new business expansion. Thus, Company A decreased its risk of failure by not concentrating investment early on, but rather investing in small amounts into various technologies and services through incubating, and re-examining possibility of success by each phase, either increasing investment or scrapping it.


[Figure 4] 
Interview from the Open Contest

2. Solutions for Obstacle Factors to Open Innovation

Based on our in-depth interview case study, we found a solution that could resolve the obstacle factors to open innovation that we’ve established above. The following are the solutions that Company A carried out in order to resolve internal cultural factors, cost factors, participant understanding factors, and institutional factors.

1) Internal Cultural Factors

Company A operated the startup alliance program, and the open contest independently of the company’s R&D and new business departments, and it did not directly acquire the participating startups but allowed them to act individually. Its support only consisted of office spaces, small amount of office materials, and venture institution mentor connections. Only when the startup had sufficient marketability and technological capacity the company invested in it, indirectly absorbing new business ideas and technologies. As such, it was able to prevent the conditions in which the NIH syndrome and the NSH syndrome could arise (Gassmann, 2006).

2) Cost Factors

In open innovation, there is a lot of cost in bringing knowledge or technology from the outside (Fichter, 2009). However, through the incubating method, Company A invested small amounts into many technologies and services and invested into validated technologies and ideas in stages, giving up those that did not show progress and reducing risk of failure as well as costs. Through such method, the perceived excessive risk was effectively neutralized, and at the same time the company obtained an opportunity to examine various technologies and ideas.

3) Participants' Understanding Factors

Gundlach (1995) have stated that results of open innovation depends on how often participants in a technological partnership interact, and how much risk they are willing to tolerate during the process of the partnership. The startup alliance program and the open contest created a communication channel that works through mentoring systems and quarterly performance reports. Also, the company prepared a place for presenting each one’s idea in a common area, so that there can be an atmosphere where startups can freely share ideas with each other. From the interviews, this was shown to be very beneficial for startups in expanding their network. However, this may only result in the participating startup’s improvement in its own idea and technology, and it is difficult to see that this can actually alleviate the understanding problem between Company A and participating startups. It can be said that this is because as according to the characteristics of Company A’s program, Company A gave indirect support under independent systems. Therefore it created an environment in which measuring close interaction or risk tolerance was difficult.

4) Institutional Factors

The open contest accepts services that are in their idea stage, in which generally it is incomplete, and patent registration or service launch has not been carried out. Technologies and ideas of such services have a large risk for theft (Slowinski, Hummel, Gupta, and Gilmont, 2009). To mitigate such obstacle factors in which obtaining intellectual property rights is difficult, through three months of incubating, the startups were made to complete their services independently, alleviating the problem of technology theft. Then the company obtained new business capacity and technology through the method of investing in the companies made by the participants. Also, in order to evaluate new business ideas and technologies as well as continuously improve them, they connected with various venture capitals, and venture research institutions, remedying the lack of infrastructure within Company A. Through such, Company A’s solutions for obstacle factors to open innovation is organized as shown in <Table 4>.

<Table 4> 
Summary of Company A’s Solution against Obstacle Factors
Type Description
Internal Cultural
Factors
ㆍIndependent management with internal departments
ㆍMitigation of resistance through gradual investment
Cost Factors ㆍCost reduction through incubating methods
ㆍPhases of value examination
Participants’
Understanding Factors
ㆍSecuring communication channels through quarterly performance reports.
ㆍFormation of an environment in which participating startups can freely share ideas.
Institutional Factors ㆍFormation of an environment through incubating in which participating startups can improve their technologies.
ㆍConnection with various venture institutions


Ⅴ. Discussion
1. Implications

Through the case study until now, we’ve examined solutions that can resolve obstacle factors to open innovation in ICT companies. At this point when many companies are initiating open innovation for cooperation with SMEs as well as for strengthening their own capacities, this study can be a guideline for mitigating obstacle factors to open innovation and successful partnerships. Rather than unconditional technology absorption, through gradual incubating and investment, outside technologies could be effectively obtained, and obstacle factors such as the NIH syndrome and anxiety that can arise during open innovation could be mitigated. Also, from the position of a conglomerate that has a deeply rooted existing corporate culture as well as research systems, there is a need to search for a method that can systematize the open innovation process in order for there to be spontaneous connection with new business ideas and technologies from rapidly changing startups, sharing idea discovery and incubation processes with venture capitals and other proven startup CEOs. In the above case of GE’s open innovation also had active participation from venture capitals, raising business accuracy and resulting in successful open innovation. The incubating method that Company A carried out reduced the risk that follows open innovation by conglomerates, and reduced the burden of cost in the long term. For there to be a successful incubating system, it needs to be systematically designed in a way where the potential for success of the new business ideas and technologies is measured in stages, which would either lead to extending investment or abandoning it. It has to be also accompanied by continuous communication and measurements, as well as active technical support. Also, for contests to actually lead to open innovation rather than simply become one-off events, continuous support and communication is required so that the idea that wins the contest can actually become a real service. From that perspective, Company A’s system of office support and mentoring can be a model example for companies when they initiate contests for open innovation.

2. Limitations and Future Research

In this study, we carried out a qualitative research on Korea’s global ICT companies through interviews about open innovation, and it can be said that this is distinct from many existing research that analyzed open innovation through case analysis of manufacturing firms. However, significance may be difficult to claim with simply one company, and because interviews were only done on cases of a startup alliance program and the open contest, cases of many other companies will have to be added for open innovation research from the aspect of corporate R&D to have more universality. Also, a more diverse set of programs should be examined, through which deeper root causes of obstacle factors to open innovation may be found.

As later research topics, since the startup alliance program and the open contest have only started within the last 5 years, there should be more quantitative measurement on open innovation through continuous observation. Furthermore, as research for finding solutions for obstacle factors to open innovation, if studies are carried out in a form that combines qualitative research such as this one with interviews, and quantitative research, the limitations of this study will be remedied.


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