The Information Puzzle; Some observers are perplexed, and others infuriated, by what they think is IBM's contradictory stand on innovation. So let me explain.

Byline: Sam Palmisano (Palmisano is chairman and CEO of IBM.)

In IBM's conversations with decision makers--from CEOs to university presidents to prime ministers and community leaders--we are hearing one question over and over: "How can I stimulate growth and economic development while also cutting costs?" Increasingly, the answer is one word: innovation. I agree entirely. The problem is that the nature of innovation is changing in important ways, driven by an increasingly open, networked and global economy. Knowing how to capture innovation's benefits requires rethinking old assumptions about creation and ownership.

IBM has a unique perspective on this topic. We have earned the most U.S. patents in each of the past 12 years by a very wide margin, yet we're also the leading business investor and innovator in the open movement. Some observers have been perplexed--and some partisans infuriated--by what looks to them like a contradictory position. But it's contradictory only if you miss the underlying patterns shaping innovation. The key for business leaders and policymakers alike is not to adopt a black or white position, but to work toward a balanced approach.

Let me try to simplify the issues with two key distinctions: between open source and open standards, and between intellectual property and intellectual capital. Open source is a method of tapping a community of experts to develop useful things. It began in software, but applies broadly, and is anything but anti-capitalist. It can raise quality at reduced costs, and vastly expands opportunities for profit. In a sense, open source fuels innovation much the way science fuels technology. Science is created by communities of experts, whose fundamental discoveries are typically made available to all, including individuals and companies that are able to capitalize on the new knowledge in novel ways. For IBM, the open-source model is familiar territory, given our long track record in the sciences.

Open standards, in contrast, are not a meth-odology, but an underlying condition for economic or social progress because they make possible the free flow of capital, information and ideas. A currency system is an open standard. A highway system is an open ...