Evaluation of Open Innovation with R&D Alliances for Breakthrough Technologies in the Energy Sector

Abstract

In the energy industry, a time of dynamic innovation and uncertainties drives R&D incumbents to extend their technology screening process to the early technology lifecycle. Many early breakthrough technology innovations stem from academia and are developed by academic spin-offs. In these situations an incumbent’s future technology organization (FTO), focused on open innovation, needs to expand its evaluation and development capabilities towards R&D alliances with academic technology spin-offs.

In the light of the open innovation and real option frameworks this study analyzes R&D projects using the real options analysis (ROA) and discusses the critical decision of whether to develop technology internally or externally. It explores R&D alliances between academic spin-offs and a large power industry player and investigates the concept and role of a FTO in the open innovation process. A model will be introduced to operationalize the FTO concept and practically evaluate the risk of open innovation with R&D alliances for breakthrough technologies. Contrary to the common view that risks increase when open innovation is applied along with external development of a breakthrough technology in R&D alliances, the present study shows that the risks and uncertainties can be mitigated and controlled when applying ROA and the FTO model.