Simultaneously managing open and closed innovation in high security contexts lessons from the Australian Defence Industry

This research study set out to answer the central research question: How do companies simultaneously manage open and closed innovation in high-security contexts?

According to the ‘paradox of openness’, innovation needs openness to access external resources and closedness to protect sensitive assets, such as patents, from misappropriation. Companies that attempt to manage the paradox in non-high-security contexts may need Open Innovation (OI) to access external resources, but also Closed Innovation (CI) for sensitive in-house Research and Development (R&D) and security measures to protect sensitive assets from misappropriation or theft. Simultaneous Open & Closed Innovation (SOCI) involves balancing OI and CI, which is challenging. In high-security contexts, such as the defence industry, companies are likely to face the added challenge of navigating hardened security regimes that typically impose additional security constraints. This research was designed to deliver three main objectives. Firstly, to arrive at a deeper understanding of how companies approach SOCI in high-security contexts, by balancing OI and CI. Secondly, to identify the OI, CI and SOCI mechanisms that are used in high-security contexts. Thirdly, to provide managers with an improved understanding of how to achieve SOCI in high-security contexts.

A literature review was carried out across the OI, CI, ‘paradox of openness’ and organisational ambidexterity literature: a review was also conducted across other literature on Australian defence innovation. Analyses of the literature resulted in three conclusions that confirmed the need for further research. Firstly, despite some prior studies limited attention has been paid to the full suite of SOCI mechanisms and the joint operation of SOCI mechanisms. Secondly, the academic literature appears to have mostly overlooked the complexities of simultaneously managing open and closed innovation within the high security context of the defence industry. Thirdly, the literature associated with Australian defence innovation has not addressed OI and CI theory, or the ‘paradox of openness’ theory, or how Australian defence industry companies can simultaneously manage the paradox of OI and CI.

This literature review was used to develop a research lens through which to analyse the data (Eisenhardt, 1989). A multiple case study design was used to investigate SOCI in the high-security Australian defence industry context (Yin, 2014, pp. 11, 57-59). Data consisted of publicly available material, such as journal articles and government publications, in addition to ‘key informant’ interviews. A total of 26 expert ‘key informant’ interviews were executed across 26 Australian defence industry projects, resulting in 192 pages of empirical data. The research lens was used to analyse the raw data, but also to induct and refine first order concepts, second-order themes and aggregate dimensions. The data analysis yielded three overarching results: (1) lessons on the need for openness; (2) lessons on the need for closedness in high-security contexts; (3) lessons for configurations of simultaneous openness and closedness.

This research has produced six contributions for theory: firstly, by discovering that significant similarities appear between the OI mechanisms used in high-security and non high security contexts; secondly, by discovering new or new variants of CI and SOCI mechanisms that appear to be important for high-security contexts; thirdly, by revealing the deliberate avoidance of crowdsourcing in Australian defence industry projects; fourthly, by discovering broader SOCI configurations that are used in high-security contexts; fifthly, by discovering that SOCI works at two different levels, the organisational level and the information level; and sixthly, by discovering higher-order aggregate dimensions that also constitute an instance of structure-mapping theory, and are referred to in this research as the ‘drawbridge analogy’.

This research has developed five managerial contributions: the first contribution is that priority should be given to understanding and dealing with closedness before tackling openness; the second contribution is that managers should understand the risks and remedies associated with intellectual property protection in high-security contexts; the third contribution is the need to carefully plan the split between external and internal resources; the fourth contribution is a process for tailoring SOCI to projects; the fifth contribution is the potential for the drawbridge analogy to promote a deeper understanding of OI, CI and SOCI, but also to assist managers identify areas for future improvement. The implications for future research are also discussed.