The market of new product development (NPD) has faced a big growth during the resent years, in line with the number of SMEs growing within the NPD market (Ale Ebrahim, Ahmed, & Taha, 2010). This has been identified as an effect of the increased usage of the strategy Open Innovation, which has contributed to SME being more successful (Dahlander & Gann, 2010). The strategy gives SMEs the possibility of creating unique products though gaining valuable information from internal and external relationships, despite their limited resources (Lee, Park, Yoon & Park, 2010). Management of internal and external relations has therefore been considered crucial for companies that conduct open innovation (Von Hippel, Thomke, & Sonnack, 1999), especially during the idea generation phase when the majority of information is gathered (Markham S. K., 2013).

The purpose of the study was therefore chosen to investigate how SMEs firms practicing open innovation are managing internal and external relationships. In order to further make an understanding of, how these methods and relationships is affecting the idea development phase in the beginning of a product development process.

The empirical data in this qualitative study was collected through semi-structured interviews conducted within three individual cases which together made a multiple case study. The cases and interviewees were selected based on that they worked in a company practising open innovation and developing products with in the interior design business. All interviewees had experience of working in a product development process practised in Sweden. The interviews were analysed individually and together in a cross-case analysis, to further find similarities between the cases and connections to existing literature.

The cross-case analysis showed that firms all used internal and external relationships to influence their NPD. The most important relationships where considered with marketing, manufacturers, designers and cooperation with other companies. They used collaborations, briefing meetings, workshops, knowledge exchange, educations and communication to manage these relationships and integrate the information gained in to their idea development. This affected the idea generation phase with knowledge regarding such as demands, trends, design, materials, previous products, financial aspects and manufacturing techniques.