Research on Open Innovation in China: Focus on Intellectual Property Rights and their Operation in Chinese Enterprises

Research on Open Innovation in China: Focus on Intellectual Property Rights and their Operation in Chinese Enterprises

Zhu Naixiao (Jinan University, China) and Huang Chunhua (Jinan University, China)
DOI: 10.4018/jabim.2012010106
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This paper concentrates on how to effectively protect and efficiently use intellectual property under an open innovation model in China. A variety of strategic choices of intellectual property use under an open innovation model are proposed to promote the healthy development of intellectual property operations of enterprises in China.
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1. Open Innovation

Open innovation was defined by Henry Chesbroug, a professor at Harvard Business School, in 2003. He believes that in an open innovation model, companies should use internal and external strength to develop new products and to commercialize them (Chesbrough, 2005). Figure 1 shows the open innovation model.

Figure 1.

A model of open innovation and its practice in China


In the closed innovation model, the steps from new products development to the market are completed within one enterprise. This process involves the use of their own strategic assets, technology and financial assets, the hiring of a large number of the most creative talents to work for the company, the investment in a lot of advanced equipment for production, the conducting of internal independent research, and the use of their own marketing channels to make sales and generate profits. The outflow of innovative resources is products and service, which for the purpose of this paper we call industrial operation of intellectual property.

However, in an open innovation model, companies pay more attention to the flow of internal and external resources in the enterprise, as the boundaries of these become blurred. Chesbrough and Crowther (2006) divide the open innovation into two parts: inbound open innovation and outbound open innovation according to the flow direction of the open innovation. When absorbing external resources, and integrating the external resources to meet the needs of enterprise development, such as through access to technology licensing, purchasing, establishment of strategic alliances with partners or competitors, we operate in an in-bound open innovation environment. When the company exports the resources through selling, licensing or freely releasing their patents and other non-economic means to obtain benefits or increase in the competitiveness of industry as a whole, these are export-oriented open innovation.

In short, whether in-bound or out-bound open innovation, all activities stress the importance of intellectual property operations. Companies should enhance cooperation with the outside world and commercialize their own intellectual property as quickly as possible in order to make the largest and best business profits.


2. The Theoretical Support Of Intellectual Property Right And Its Operation In Open Innovation

Intellectual property operation is not isolated: it is built on the basis of capital operation, and inextricably linked with property theory and competition theory.

  • (1)

    Marx's capital theory provides a theoretical basis for intellectual property operation.

The total capital formula tells us that the process of capital production and circulation is unified. The production process plays a decisive role because only the production process produces surplus value, as the movement of capital cannot leave the circulation process, because the value of products cannot be achieved until they are sold. Intellectual property is the most important intangible asset: its operation cycle of the capital is different from others. IP is a high-tech knowledge-intensive product and intellectual property rights of the goods may be in the form of patent, brand, unique designs or software code. In order to achieve high profits for these high-tech knowledge-intensive products: the third cycle stage (commercialization stage) is particularly important. Thus, value realization of intellectual property is more difficult than that of simple products. It not only requires a smooth flow of capital circulation and turnover but also requires accurately forecasting market demand, and the reliability of legal system for IPR protection.

Therefore, the operation of intellectual property rights is a complicated systematic project, which combines the operation of capital, commercial market operation and legal protection as a whole. Capital operation is the solid foundation of intellectual property operations, commercial market rules providing an operating platform, and the law and regulations functioning like an umbrella, which is essential to intellectual property operation.

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