Open Innovation Research, Management And Practice

Joe Tidd

• Publisher: ICP
• Year: 2013
• ISBN:
  9781783262823
• Topic: Biowissenschaften
• Subtopic: Wissenschaft Allgemein

The concept of open innovation has become increasingly popular in the management and policy literature on technology and innovation. However, despite the large volume of empirical work, many of the prescriptions being proposed are fairly general and not specific to particular contexts and contingencies. The proponents of open innovation are universally positive but research suggests that the specific mechanisms and outcomes of open innovation models are very sensitive to context and contingency. This is not surprising because the open or closed nature of innovation is historically contingent and does not entail a simple shift from closed to open as often suggested in the literature. Research has shown that patterns of innovation differ fundamentally by sector, firm and strategy. Therefore, there is a need to examine the mechanisms that help to generate successful open innovation. In this book, the authors contribute to a shift in the debate from potentially misleading general prescriptions, and provide conceptual and empirical insights into the precise mechanisms and potential limitations of open innovation research and management practice.

Contents:

• Introduction: Why We Need a Tighter Theory and More Critical Research on Open Innovation (Joe Tidd)
• Taxonomies and Modes:
  • Different Modes of Open Innovation: A Theoretical Framework and an Empirical Study (Valentina Lazzarotti and Raffaella Manzini)
  • Advancing a Typology of Open Innovation (S C Ellis, Peter T Gianiodis and E Secchi)
  • How to Balance Open and Closed Innovation: Strategy and Culture as Influencing Factors (Ellen Enkel and Karoline Bader)
• Context and Contingencies:
  • The Role of Open Innovation in Dynamic Environments (Fiona Schweitzer, Kurt Gaubinger and Oliver Gassmann)
  • A Conceptual Model of Open Innovation for New Product Development Projects: Towards a Contingency Theory (Hanna Bahemia and Brian Squire)
  • Open Service Innovation: The Influence of Project Novelty (Joe Tidd and Kuo-Nan Hsieh)
  • Exploring the Use of Open Innovation in Processes, Products and Services (Amy Huang and John Rice)
  • Managing Open Innovation in Multinational Enterprises: Combining Open Innovation and R&D Globalization Literature (Wim Vanhaverbeke, Jingshu Du and Maximilian von Zedtwitz)
• Sector and Industry Studies:
  • Measuring the Impact of Inbound Open Innovation Practices on Performance in Services (Anne-Laure Mention and Anna-Leena Asikainen)
  • Generativity and Innovation in Smartphone Ecosystems (Björn Remneland-Wikhamn, Jan Ljungberg, Magnus Bergquist and Jonas Kuschel)
  • Toward a Dynamic Perspective on Open Innovation: A Longitudinal Assessment of the Adoption of Internal and External Innovation Strategies in the Netherlands (Tom Poot, Dries Faems and Wim Vanhaverbeke)
  • Investigating Inter-Industry Differences in the Implementation of Open Innovation (Tommaso Buganza, Davide Chiaroni, Gabriele Colombo and Federico Frattini)
• Limitations and Constraints of Open Innovation:
  • Open Innovation: Old Ideas in a Fancy Tuxedo Remedy a False Dichotomy (Paul Trott and Dap Hartmann)
  • Not for Everybody: Why Some Organisations Benefit More from Open Innovation than Others (Torsten Oliver Salge, Thomas Marc Bohné, Tomas Farchi and Erk Peter Piening)
  • Positive and Negative Dynamics of Open Innovation (Michael M Hopkins, Joe Tidd and Paul Nightingale)

Readership: Graduate students, researchers and practitioners in the field of open innovation and management.

Part I

TAXONOMIES AND MODES

Chapter 1

Different Modes of Open Innovation: A Theoretical Framework and an Empirical Study¹

Valentina Lazzarotti and Raffaella Manzini
Università Carlo Cattaneo — LIUC, Italy

Introduction

Open innovation may be pursued in many different ways, in terms of: (i) organisational form of acquisition or exploitation and consequent time horizon; (ii) number of partners, from dyadic partnerships to networks, and typologies of partners, from traditional supply chain relationship to collaboration with universities, technical service companies, competitors and firms operating in different industries (Chiesa and Manzini, 1998); and (iii) phases of the innovation process that exploit external sources (Gassmann, 2006). The literature has already studied in depth the problem of choosing the specific governance and organisation of open innovation processes, analysing the relative organisational and managerial implications. In other words, the literature has already characterised the different approaches to open innovation in terms of level of integration, organisation and forms of governance (van de Vrande et al., 2006).

This paper attempts to study the implications of other variables — namely, the number and types of partners and the phases of the innovation process which are “opened” to external contributions — to significantly different approaches to open innovation.

In literature many contributions have studied collaborations with each single specific type of partner: universities, customers, suppliers, competitors, public governmental institutions and private research centres (Chiesa et al., 2004; Hoegl and Wagner, 2005). It seems that collaborating with different subjects gives rise to different problems and advantages and requires specific organisational and managerial approaches. Collaborating with a single type of partner, such as customers in new product development (NPD), would presumably be quite easy. Accessing a wide set of external partners (e.g., customers, competitors, universities), coordinating their contributions, organising the innovation process around them and managing all the relationships is significantly different. In other words, it can be argued that the number and type of different partners with which a company collaborates is something that distinguishes a company’s level of innovation process openness: the higher the number and type of partners the company deals with, the more “open” the innovation process is.

A second relevant observation concerns the number and type of innovation process phases for which the company accesses external sources to gain technology and know-how. Many authors have studied the specific advantages companies may achieve by opening their phases of idea generation (Berger etal., 2005), prototyping, engineering, production and commercialisation (Emden Grand et al., 2006; Gassmann and Henkel, 2004). Again, it could be quite simple to open a specific phase of the innovation process, whilst managing the whole innovation funnel as an open funnel would probably be more complex. In any case, it can be argued that the higher the number of phases of the innovation process for which the company accesses external sources, the higher the level of innovation process openness.

Starting from the several conceptual and empirical studies that analyse and give examples of different types of partners operating in different phases of the innovation funnel, the contribution of this paper is that it tries to integrate them by suggesting a framework which reveals four basic ways to collaborate. In fact, by crossing the two variables introduced above, four degrees of openness are firstly identified to become the drivers of the four basic ways to collaborate: a low partner variety and few phases (closed innovators), a high partner variety and many phases (open innovators), a high partner variety and small phase variety (specialised innovators), and a low partner variety and large phase variety (integrated innovators).

Secondly, the framework shows its practical validity by means of an empirical study conducted in Italy with the specific aims of verifying:

•Whether companies can really be mapped in this framework, i.e. whether the four modes of collaboration can be found in real companies (framework applicability);

•Whether different modes correspond to different companies’ features: strategies as well as capabilities, assets, organisational and managerial processes (the explicative power and usefulness of the framework). This point is particularly important in light of the literature that stresses the importance of the “right conditions” (in terms of company strategy, capabilities, organisational factors, etc.) to make any open approach for innovation successful (Pisano and Verganti, 2008). In other words, it is important to pay attention to studying how firms can implement open innovation in practice (Chesbrough et al., 2006). Following this suggestion, we try to enrich the available evidence by identifying the strategic, managerial and organisational contextual factors for some specific modes of collaboration.

The consequent result deriving from the second aim of the empirical study is that the paper also tries to give some preliminary normative indications about how to choose different collaboration modes. Differences in strategies and company capabilities, as well as organisational and managerial features, can in fact lead to different kinds of open modes, although companies are operating in the same industry with analogous size (revenue, number of workers).

The rest of the paper is organised as follows. First, it introduces the theoretical framework about the variables regarding different modes of collaboration. Heeding suggestions from the literature, this section also points out the typical trade-offs of each mode. Second, it illustrates the empirical study and discusses the specific conditions that make it easier to carry out the different kinds of collaboration modes. Finally, it draws closing conclusions by summarising this study’s contribution.

The Theoretical Framework

Since Chesbrough published his book in 2003, the concept of “open innovation” has received a considerable amount of attention from practitioners and researchers. A large number of studies adopt this term to describe the phenomenon where firms rely increasingly on external sources of innovation, which means that ideas, resources and individuals flow in and out of organisations (Chesbrough, 2003). While contributions are still growing, the debate on innovation management is enriched by relevant studies that critically examine the open innovation concept by exposing its weaknesses and limitations (Dahlander and Gann, 2007; Trott and Hartmann, 2009). First of all, authors argue that the concept is not particularly new and that there has been a strong research tradition on the topic for decades, which gives evidence that innovation has always been open to some degree (Freeman, 1974; Pavitt, 1984; von Hippel, 1986; Chandler, 1990; Tidd, 1993). Moreover, the concept of open innovation is criticised in its widespread view that highlights an artificial dichotomy between closed and open approaches (Dahlander and Gann, 2007), whilst the idea of exploring different degrees and types of openness in a continuum seems to provide a more interesting and richer avenue to investigate. In particular, this view allows for a deeper and more real investigation of company behaviour, as well as providing a clearer view of the particular nature and context of any innovation sources (Gassmann, 2006; Dahlander and Gann, 2007). The number of studies adopting this approach is growing: for example, Dahlander and Gann identify three types of openness according to: (i) the different degrees of formal and informal protection; (ii) the number of sources of external innovation; (iii) the degree to which firms are relying on informal and formal relationships with other actors, whilst Lichtenthaler (2008) defines the degree of openness by crossing two dimensions of a firm’s strategic approach to open innovation (i.e. the extent of external technology acquisition and the extent of external technology exploitation). He identifies groups of firms that pursue homogeneous strategies and then practically characterises them in terms of some variables, such as research and development (R&D) intensity, the emphasis on radical innovation, product diversification, etc.

In this paper, we follow the idea that openness needs to be placed on a continuum and we try to explore different degrees of it, basically in terms of number of sources of external innovation. The literature has recently suggested that the degree of openness in a collaboration network for innovation depends on the degree to which membership is open to anyone who wants to join (Laursen and Salter, 2004; Pisano and Verganti, 2008). In totally open collaboration (i.e. crowd-sourcing), everyone (suppliers, customers, universities, students, inventors, public governmental institutions, private research centres and even competitors) can participate. A company makes a problem public and looks for support from an unlimited number of problem solvers. Closed networks, in contrast, are like private clubs and tend to be smaller than open ones (Pisano and Verganti, 2008). Here, the company shares the problem with few parties (usually, suppliers and customers) that it selects because it believes they have the crucial capabilities and assets to provide innovative solutions. Several conceptual and empirical studies hint at the importance of outside subjects’ innovative capabilities as a major determinant for innovation success. Traditionally this would include input from suppliers (Wynstra, 2001; Wagner, 2009), customers (von Hippel, 1986; Berger et al., 2005) and, more recently, an integration of different types of partners in manifold relationships (Chesbrough et al., 2006). For example, some authors (Gassmann and Henkel, 2004) provide considerable empirical evidence about large and well-known companies (e.g. IBM, BASF, BMW, etc.) that shows the existence of these “different degrees” of openness.

Literature has also shed light on the advantages and challenges characterising the open versus the closed approach, as well as on some basic conditions that make each possible to be adopted. The big advantage of an open network (i.e. high partner variety) is its potential to attract an extremely large number of problem solvers and, consequently, a vast number of ideas and creative and knowledge contributions (Coombs and Hull, 1998; Gassmann and Henkel, 2004; Pisano and Verganti, 2008). Moreover, in extremely open approaches, it is not necessary to have previously known the potential contributors. Indeed, interesting innovative solutions can come from people or organisations that a company might never have imagined had something to contribute. However, open modes have their disadvantages: First of all, the costs of screening and testing several solutions could be very high. Rarely is the screening process cheap and fast, such as in the case of assessing a software code. Usually, because expensive and time- consuming experiments are necessary, it is better to consider fewer ideas, which means choosing a closed mode by inviting a contribution from those parties that a company thinks will have the best chance of providing good ideas. Besides, as the number of participants increases, the likelihood that a participant’s solution will be selected decreases. In such a situation, the transaction cost theory (Williamson, 1985) suggests that the best potential partners can be discouraged from participating because they do not want to make transaction-specific investments, which cause resource-wasting if they are not sure that they will be selected. Thus, best parties prefer to participate in small relationships (i.e. closed modes) to be maintained over along period (Pisano and Verganti, 2008). In addition, repetitive cooperation builds familiarity between the partnering firms, which in turn creates trust (Gulati, 1995). From a transaction cost perspective, trust decreases the fear of opportunistic behaviour among the partner firms, allowing for the reduction of spill-over risk. More generally, as the number of selected partners increases, the need for coordination and control (above behaviours and results) increases too, generating organisational costs and risks that can become onerous (Mintzberg, 1983; Dahlander and Gann, 2007). In contrast, the use of fewer partners can be more easily coordinated and controlled, thus favouring a more closed approach. Such types of trade-off suggest that extremely open modes can be effective only under certain conditions: collaboration should concern problems that can be partitioned into small parts that partners can work on autonomously with low coordination needs, i.e. the concept of “high product modularity” (Gassmann and Henkel, 2004). In recent years, this has been made easier by information technology that allows partners to make contributions, share work and observe the solutions of others (Gassmann and von Zedtwitz, 2003; Dogson et al., 2006). Of course, not all problems can be partitioned. Indeed, the research and development related to new product concepts are usually integral tasks which require strong integration and coordination among partners. In such cases, less open modes allow for coordination at a lower cost and should thus be preferable (Pisano and Verganti, 2008).

Apart from partner variety, relevant conceptual and empirical contributions have focused on the so-called “innovation funnel” (see Fig. 1). Openness is the evident feature of this figure: in each phase, companies can potentially access external sources of ideas, technology and know- how, or transfer them to the outside environment (Chesbrough, 2003; van de Vrande et al., 2006) for different reasons: gaining access to new areas of knowledge (also complementary knowledge), managing capacity problems (more flexibility), concentration of core competencies, speed (reducing time to market) and sharing of risks and costs (Hour, 1992). There is empirical evidence about companies that seek support in a specific phase of the innovation funnel or that integrate partners into their entire innovation process in an articulated network of relationships (Gassmann and Henkel, 2004). Thus, it can be argued that the degree of openness for a collaboration network can be further specified depending on the number and type of phases of the innovation process for which the company accesses (or transfers to) third sources. Openness in collaboration increases the involvement of external sources from only a few phases of the innovation funnel to a contribution to the overall innovation process. In other words, in a less open or closed network a company chooses one or a few phases (for example, the idea generat...