When working with external innovators, should companies seek to organize the innovators into communities — or into competitive markets?

"Open innovation" -- in other words, an approach to innovation that incorporates working with innovators who are outside an organization -- is all the rage these days.  But, when working with external innovators, should companies seek to organize them into communities -- think open-source software projects, for example -- or into competitive markets -- more along the lines of InnoCentive?

That's a question that Kevin J. Boudreau and Karim R. Lakhani tackle in their article "How to Manage Outside Innovation" in the Summer 2009 issue of MIT Sloan Management Review. One of the key issues to consider, according to Boudreau and Lakhani, is whether your innovation challenge involves "cumulative knowledge, continually building on past advances"; if so, the authors note, innovation communities have built-in advantages.

On the other hand, if your innovation challenge is best tackled "by broad experimentation across a set of technical approaches or customer groups," Boudreau and Lakhani suggest that organizing external innovators into competitive markets can be advantageous.