Since the concept of open innovation was put forward by Chesbrough (2003), many researchers focus on open innovation in large enterprises. There is a research gap in how open innovation is implemented in SMEs, specially in Chinese companies. The purpose of this thesis is to identify the motives and challenges of manufacturing SMEs in China to implement onpen innovation.

The study is based on analysis of scientific literature and four case studies of manufacturing SMEs. The empirical data were collected by semi-structure interviews and a survey.

Overall, collsboration with external partners was found to be good for improving innovation performances in the studies companies. And also, four motives were found, which were forming innovation networks, cooperating with external innovation sources, importing advanced technologies, and driving and motivating innvation processes. Meanwhile, four main challenges were found lack of trust in collaboration, disability for transforming external knowledge to internal knowledge, low support from government, and barriers to overcom intellectual property disputes. At last, the authors suggest that manufacturing SMEs in China could collaborate with each other more, and improve the knowledge of intellectual property as well.