Abstract – Open Innovation is fast emerging as an important innovation method. This paper explores the use of and preference towards Open Innovation within South African small and medium sized enterprises which also utilize social networking tools. It provides a view of which Open Innovation approaches are preferred together with which innovation partners are preferred based on eighty five survey responses. The survey was conducted under companies that have business networks on LinkedIn and shows that South African SMEs have an interest in open innovation and are currently using these methods, albeit mostly in an informal way. Collaboration is the approach mostly preferred by these SMEs, with customers and suppliers as the preferred innovation partners. Keywords – Open Innovation, SME I. INTRODUCTION Over the last decade Open Innovation has grown in popularity and success to increase innovation effectiveness and speed, especially within larger organizations. A need however exists within the Small and Medium size Enterprise (SME) sector to also improve how organizations innovate and to reduce cost and turnaround times for innovation to be more competitive. Utilizing best practice Open Innovation models, similar benefits should be possible than what is being experienced by larger organizations. Especially in the South African context, this can be vital to provide a competitive advantage and provide access to global input into the innovation process through collaboration and social innovation. Drucker [1] describes innovation as an enabler of organizational competitive advantage, making it essential not just to excel, but even to survive in the market place. “Empirical studies demonstrate that innovative firms tend to have higher rates of profits, greater market value, better credit ratings and stronger chances of surviving in the market” [2]. Enkel and Gassmann [3] argue that “enriching the company’s own knowledge base by integrating suppliers, customers, and external knowledge sources can increase a company’s innovativeness”. Within the domain of innovation, there can be distinguished between closed and open innovation. Closed innovation is internally focused to the organisation whereas open innovation includes externally focused elements within its innovation model. Lindegaard [4] describes open innovation as “a two-way process in which companies have an inbound process in which they bring in ideas, technologies, or other resources needed to develop their own business and an outbound process in which they out-license or sell their own ideas, technologies, and other resources. This should take place during all stages of the innovation process”. Open innovation can be described in the context of various theories. It requires a connected network of participants (network theory) within which knowledge is created and shared (knowledge network theory) to create new value (innovation) [5; 6]. There has been little research conducted on open innovation processes in small and medium sized enterprises with the majority of research being focused on large enterprises instead [7; 8]. “SMEs are the largest number of companies in an economy, but they are under- researched in the open innovation literature” [9]. Rahman and Ramos [10] observe that “to provide innovative services or products to the outer periphery of the customer chain, SMEs play an important role” and that “focusing innovation for SMEs would lead to a newer dimension of innovation research for better business and economic growth”. Open innovation can be an important mechanism for SMEs to gain access to knowledge and technology otherwise not available within their own organizational boundaries, resulting in improved innovation performance. II. METHODOLOGY An exploratory study was performed to evaluate the use of and appetite for open innovation within South African SMEs. This was done to build a view on the adoption and maturity of open innovation within SMEs in South Africa as emerging market. To reduce the cost and time of the study, it was decided to develop a survey making use of the online survey tool SurveyMonkey. This made the distribution and analysis of the survey easier. It was also decided to utilize the online professional networking platform LinkedIn to identify and invite participants for the survey. LinkedIn can be considered as a self-organizing social network [11]. The survey was sent out to 531 people within the following South African groups on LinkedIn with the number of invites in brackets: • Pretoria Business Club (100) • South African Small Medium Enterprises Federation (169) An Exploratory Study on Preferred Open Innovation Types and Partners in South African SMEs W. Krause 1 , C. Schutte 1 , N. Du Preez 1 1 Department of Industrial Engineering, University of Stellenbosch, Stellenbosch, South Africa (wkrause@iqgroup.net) 978-1-4673-2945-3/12/$31.00 ©2012 IEEE 1795