Open innovation and systems integration: how and why firms know more than they make

This paper investigates open innovation for the development of complex products. In this context, systems integrators are firms that integrate component innovations into existing product systems and that design entirely new product architectures. To successfully execute these systems integration tasks, these firms need to monitor and absorb the rapid and diverse technological developments that surround them. Systems integration therefore explains why firms know more than they make. Open innovation, on its part, provides the mechanisms that indicate how firms can expand their knowledge boundary. Open innovation and systems integration are strong complements therefore. More specifically, a contingent and a balanced approach to open innovation is suggested: open as far as abundant component knowledge is concerned, and closed with respect to the generation and exploitation of scarce, internally developed architectural knowledge.