No. 21




‘Open Innovation’ and Its Meaning for Estonian Entrepreneurship and Innovation Policy *

16 June 2010


RiTo No. 21, 2010

  • Erkki Karo

    Erkki Karo

    Tallinn University of Technology

  • Rainer Kattel

    Director, Institute of Public Administration, Tallinn University of Technology

  • Tarmo Kalvet

    Senior Researcher of the Institute of Public Administration, Tallinn University of Technology

This article discusses the meaning and relevance of ‘open innovation’ for Estonian entrepreneurs and policy-makers.

The paper analyses the topic in a time and context where the Estonian economy is going through a process of technological and institutional catching-up. This process is complicated by two things: (1) techno-economic transformations that have created pressures for modularization and outsourcing and (2) the current economic crisis that has been rewriting existing knowledge and experience relating to global production and innovation networks. The catching-up economies of the Baltic States have been some of the most hard-hit economies by this crisis. The core challenges faced by the structural transformation of the Estonian economy and the relevance of an open innovation paradigm are discussed.

The paper is based on a one-year research project (2009) that was coordinated by the Department of Public Administration, Tallinn University of Technology, and was carried out in cooperation with the Faculty of Economics and Business Administration, University of Tartu. The project was funded by the Estonian Ministry of Economic Affairs and Communications through the IPUP program.

Starting with an overview of the emergence of modern innovation theories, the concept of ‘open innovation’ is placed within this broader context. This is followed by an analysis of the ability of different actors within the innovation system to accommodate the impact of catching-up challenges on their expectations of successful open innovation practices. It is argued that these actors, in general, lack both the capacities and capabilities to manage the risks and develop flexible policies and business strategies required by open innovation practices. Catching-up economies as innovation systems need to start by building both public sector capacities (e.g., policy capacity) and private sector capabilities (e.g., absorptive capacity) that enable institutional learning. Institutional learning and co-evolutionary development of institutional and technological capabilities seem to be a more pressing challenge for catching-up economies than open innovation research has so far presumed. Finally, we review the main challenges that Estonian innovation policy-makers face and we argue that the existing policy-space for pursuing structural transformations of the economy is diminishing increasingly.

Instead of merely seeking ways of inducing open innovation-based business strategies and models, we argue that the Estonian government should tackle fundamental national challenges that create the main barriers for private sector growth and socio-economic catching-up – coordinate policy efforts, develop internal demand and networking capacities, and overcome the high-technology bias of innovation policy.

* Peer-reviewed research paper.

Full article in Estonian