Open innovation and the management of intra-firm conflict

Abstract

We analyse the hitherto unexplored relationship between intra-firm conflict between the research and development (R&D) department and central management, conflict alleviation and the choice of ‘open’ versus ‘closed’ innovation, in the context of a simple formal model. We find that in the presence of (intentional or unintentional) divergence of preferred (R&D) output between the R&D department and central management, the decision by central management to adopt an ‘open’ (versus ‘closed’) innovation approach, may help serve the twin purpose of shifting constraints to growth and increasing firm profitability, by alleviating intra-firm conflict.