What we saw during the last century was businesses generating ideas internally which they would then develop, manufacture and sell themselves.
As a result, competitive advantage was based on heavy investment in research and development (R&D) and hiring the brightest people to get to market first.
Once this was done, companies would then protect their new products through aggressively controlling intellectual property to stop anyone else exploiting it.
This would then result in greater profits which could then be reinvested in more R&D and hiring more staff to develop more new products, thus creating a virtuous circle that led to a small number of large firms dominating key technology-based industries.
This looked set to continue for years to come until businesses started to realise that, in addition to ideas generated internally, they could utilise external ideas to develop innovation and new paths to market.
This process, defined in 2003 by the American academic Henry Chesbrough as "open innovation", meant that rather than just using intellectual property to develop its own products and services, an organisation could increase profits dramatically by working with others to exploit its full potential.
So rather than having only one part of an organisation - the R&D department - working on new technologies, products and services, open innovation has opened up access to a whole range of external actors, such as suppliers, customers, universities and even competitors, that has helped to profitably exploit new knowledge.
Certainly, for those Welsh firms looking for every type of competitive advantage in the market-place, working closely with external partners not only helps to exploit their own ideas but, more importantly, enables them stay alert to new external opportunities in their business environment.
But whilst open innovation sounds like a perfect way for organisations to develop new ways of doing things, it can have its drawbacks.
For example, by working with other external partners, there is the danger that the knowledge on which smaller companies rely for their competitive advantage could be lost to, or exploited by, larger and more well resourced partners.
Despite this, it is clear that many businesses cannot afford to rely entirely on their own R&D but need to buy or license ideas or inventions from other knowledge-based organisations if they are to prosper.
Certainly, it would be great to see Welsh universities sharing their intellectual property with local firms for the benefit of the nation, something they have been generally reluctant to do up to now.
Indeed, it is absolutely crucial for an economy that innovation is not stifled and that knowledge is transferred into those organisations that are in a position to maximise its potential.
And there is certainly a role for policymakers to shape the environment in which open innovation can thrive, although this is not always easy as it can cut across a range of areas such as education policy, labour market policy, measures stimulating entrepreneurship and fiscal policy.
The management of open innovation within businesses is not an easy process and as a result, any government intervention would need to be planned carefully. Whilst there are specific initiatives that can be developed in the areas of intellectual property management and R&D, perhaps one of the most important areas where government can intervene is in the area of developing networking amongst organisations, as it allows businesses to understand where the gaps in knowledge are and how to fill them.
More importantly, it can act as the source of new ideas from a range of partners which can drive greater open innovation.
So what can government do to support such an open innovation network?
It can develop policies to support enterprises in assessing and improving their networking skills by fostering knowledge development and competences in these areas. This can be done by providing information or by disseminating best practices in open innovation practices.
It can directly target the interaction between open innovation partners by fostering partnerships and encouraging greater collaboration through funding innovation competitions. It should also support and facilitate innovation intermediaries that can bring various actors together to exchange knowledge, receive feedback and create relationships.
Finally, it can make available various types of financial incentives for R&D through open innovation so as to encourage businesses to adopt this type of approach to greater collaboration.
Therefore, open innovation can offer great opportunities for business both large and small here in Wales and there is a real opportunity for policymakers to work together with universities and industry to develop an environment in which it is not only encouraged but thrives for the benefit of our economy.