Open vs Closed Business Model: Exploring Its Role in Innovation in Indian Small and Medium Enterprises (SMEs)

The current business environment demands enterprises to innovate, address needs of customers, and capture value. This requires them to take a relook at their business models. With very less research exploring the business models and their contribution to innovation initiatives of SMEs in an emerging country like India, the current study attempts to fill the gap. Methodology is qualitative consisting of four case studies of Indian SMEs, in the manufacturing and services sector, exploring their business models, through the lens of open vs closed, and the innovation initiatives taken by them. Results show that the SMEs have business models that are primarily closed or partially open. A partially open approach drives the initial stages of innovation, that is, opportunity recognition and solution selection, with the approach being primarily closed during the latter stages of solution development and commercialization. Manufacturing and service SMEs exhibit different shades of openness in the business model elements. These findings can be used by SMEs to take decisions with respect to opening up certain elements of their business model to drive innovation and competitiveness. Theoretically, this research documents the findings of different business model elements of SMEs, presents them through the lens of open vs closed business models, and links them to different stages of innovation. The results of the study based on four case studies, however, cannot be taken as conclusive and need to be interpreted with caution.