Open Innovation versus Techno-Nationalism by Kenneth A. Reinert

Collaboration between multinational enterprises (MNEs), as well as between MNEs and research institutions of various kinds, is an active area of international business research and, more importantly, practice. There is a good deal of evidence that these activities help to spur innovation even among large firms. Indeed, technological development is often cited as one of the reasons for what is known as coopetition among MNEs. This can reflect multiple factors such as the need for standard setting, the large, fixed costs of some technologies, and shortening product lifecycles over which fixed costs must be spread. One way or another, many international firms are embracing what has come to be known as open innovation.

The notion of open innovation came to the fore in the early 2000s. As stated by business researchers Henry Chesbrough and Marcel Bogers, open innovation refers to “‘an innovation model that emphasize purposive inflows and outflows of knowledge flows across the boundary of a firm in order to leverage external sources of knowledge and commercialization paths’.” As described by these researchers, open innovation can involve inbound leveraging of external knowledge, outbound leveraging of internal knowledge for better commercialization, and a combination of the two. 

Of course, most open innovation concerns MNE R&D. This usually involves other firms but can also take place with academic institutes and governments. These arrangements can include formal contractual agreements, non-equity alliances, and strategic supplier agreements. But as stated by Wim Vanhaverbeke, Jingshu Du, Bart Leten, and Ferrie Aalders, informal open innovation is also important, and these can include “‘scouting relationships, conference participations, partnerships in standard-setting organizations, long-term relationships with key technology partners, such a prominent universities and research labs, or key market players,”’ including customers and suppliers.

To take just one prominent example, in 2004, arch-rivals Samsung Electronics and Sony began a collaborative relationship in the form of a joint venture to produce a new generation of LCD panels. In short order, both firms were marketing their own brands of TVs based on the jointly developed LCD panels. This joint venture was responsible for several generations of LCD panels leveraged by both firms and increased both firms’ shares of this market. As stated by Devi Gnyawali and Byung-Jin Park, who studied this partnership, “‘each firm had resources and capabilities that the other one needed, which helped to prompt the firms to engage in coopetition’.”

But things are changing in the global political economy environment as major powers (the United States, China, and the European Union) embrace techno-nationalism as a brand of economic nationalism. In techno-nationalism, perceived national security interests are often leveraged to limit open innovation. This trend has been expertly described by international business researcher Yadong Luo:

New techno-nationalism is a strain of systemic competition thinking that links cross-border technological exchanges directly to a nation’s national security, advocating for strong interventions by the state against opportunistic or hostile states or non-state actors from other countries. Under new techno-nationalism, country leaders seek to attain geopolitical gains, building on the premise that the world has entered a new era of systemic rivalry between competing geopolitical powerhouses that differ remarkably in ideological values, political systems, and economic models.

This new techno-nationalism is emerging, for example, in calls for both the EU and the United States to push back against China in multiple technological realms. These include 5G networks, artificial intelligence (AI), quantum computing, robotics, bioscience, and semiconductors. As part of this, there is a new trend towards regulatory restrictions such as export controls (including foreign direct product rules), blacklists, and sanctions. In some cases, the sanctions have been extra-territorial and, therefore, of questionable validity under international law.

The United States government has reached a bipartisan consensus on techno-nationalism vis-à-vis China, with continued technological restrictions and threat of sanctions extending even to undersea cables, an unprecedented move. The evolution is from protecting legitimate security-related technologies to attempting to undercut China in all “foundational technologies,” including biotechnology. 

Meanwhile, China is pursuing “techno-independence” across a broad array of technologies, establishing self-reliance in science and technology as a fundamental economic goal and dedicating vast resources into making this a reality. To this end, the Chinese government has funded the Made in China 2025 and China Standards 2035 initiatives. 

What these new techno-nationalist policies ignore is the fruitful nature of open innovation that has contributed to the very technologies that national governments are trying to monopolize. This trend risks undermining a central process of economic globalization and international business, ultimately limiting technological development. In the long run, techno-nationalism might turn out to be self-defeating