Only the Brave: Product Innovation,Service Business Model Innovation,and Their Impact on Performance

Recent empirical findings concerning the performance effects of service business model innovation (servitization) and its interplay with product innovation are mixed. Using the lenses of the demand‐based view on value creation and complementarity, the performance impact of two key service business models is examined: the product‐oriented model and the customer‐oriented model, implemented jointly with product innovation. Results indicate that the interplay between service business model innovation and product innovation results in long‐term performance benefits coupled with a degree of short‐term performance sacrifice. Service business model innovation in isolation from product innovation results in short‐term profit gains but long‐term knowledge loss and, thus, market performance decline. Our study suggests that firms need to look beyond the evidence on short‐term effects in order to achieve superior performance in the long run.     

Synergies among Producer Firms,Lead Users,and User Communities: The Case of the LEGO Producer–User Ecosystem

While many firms today proactively involve users in their new product development efforts using a wide variety of methods such as the lead user method, firm‐hosted user communities, or mass customization toolkits, some pioneering firms are experimenting with the creation of sustainable producer–user ecosystems designed for the continuous exploration and exploitation of business opportunities. In this paper, the functioning of such ecosystems is studied with particular emphasis on the synergies they can yield. Based on an explorative and longitudinal multiple case study design, the producer–user ecosystem of the firm LEGO is analyzed, and three main actors in the ecosystem are identified: entrepreneurial lead users who aim to start their own businesses, a vibrant user community, and the LEGO company as the focal producer firm and facilitator for multiple user‐to‐user and user‐to‐producer interactions. Our study reveals three kinds of synergies: (1) reduced risk for entrepreneurial lead users and the focal producer firm, (2) the extension of the design space of the focal producer firm's products, and (3) the creation of buzz within the user community. Finally, the theoretical and managerial implications of our findings for innovation researchers and practitioners are discussed.     

Managerial Ties and Firm Innovation: Is Knowledge Creation a Missing Link?

Managerial ties, the personal networks of senior managers, have been found to be facilitators of firm performance because of their network benefits. However, social network theory suggests that managerial ties only play a “conduit” role by providing possibilities and opportunities to approach external resources. How can firms turn these possibilities and opportunities into internal knowledge assets and further transform them into firm innovation? Extant research constructs a direct mechanism for the managerial ties–firm innovation link. The research reported here, however, provides and investigates an indirect ties‐innovation argument where organizational knowledge creation processes, including knowledge exchange and knowledge combination, are mediators. And managerial ties are examined through two traditional dimensions, business ties and political ties. This study employs empirical data from 270 firms in China and uses structural equation modeling techniques to reveal interesting findings. First, the results support the key argument that the influence of managerial ties on firm innovation is indirect. Second, knowledge exchange and knowledge combination are different constructs and the former positively influences the latter. More interestingly, business ties can exert a significant direct impact on both knowledge exchange and knowledge combination, while political ties can only influence knowledge exchange directly. Although both knowledge exchange and knowledge combination impact product innovation directly, only knowledge combination can directly influence process innovation. These findings indicate that the role of political ties is declining, but business ties still have substantial influence on firm innovation in transitional China. Different processes of organizational knowledge creation, such as knowledge exchange and knowledge combination, make distinct contributions to firm innovation. Product innovation, as opposed to process innovation, is more externally oriented and needs more organizational level knowledge creation activities. This article extends the understanding of the ties–innovation link, organizational knowledge creation theory, and firm innovation in a transitional economy by providing a more complete understanding of how firms can access and internalize external resources and then transform them into product innovation and process innovation.     

The strategic dilemmas of innovative enterprises: proposals for high‐technology sectors

High levels of research and development (R&D) expenditure, pressure for innovation and the creation of new knowledge are features that distinguish high‐technology (high‐tech) enterprises from other, less technologically advanced, firms. Confronted with multiple contemporary approaches to strategy and turbulence in their environment, these enterprises make strategic choices continuously and dynamically. This paper proposes a model and matrix for the classification of high‐tech enterprises’ development strategies (with regard to their specific features), which are then verified. Qualitative research was conducted in 61 medium and large high‐tech companies based in Poland that operate either in Poland or in the global marketplace. The results show that high‐tech firms have the fundamental goal of developing R&D activity as a resource (and its redundancy) rather than product/market goals. The studied firms strive above all for leadership in innovation, creating new technologies based on their own R&D resources, while also using outside sources and mostly applying the personalisation approach in knowledge management. However, they choose different paths for product and market development, depending on the opportunities presented by the environment, and the firm's ability to identify and take advantage of these.     

Innovation management techniques and tools: a review from theory and practice

Knowledge is considered to be an economic driver in today's economy. It has become a commodity, a resource that can be packed and transferred. The objective of this paper is to provide a comprehensive review of the scope, trends and major actors (firms, organizations, government, consultants, academia, etc.) in the development and use of methods to manage innovation in a knowledge-driven economy. The paper identifies the main innovation management techniques (IMTs) aiming at the improvement of firm competitiveness by means of knowledge management. It will specifically focus on those IMTs for which knowledge is a relevant part of the innovation process. The research study, based on a survey at the European level, concludes that a knowledge-driven economy affects the innovation process and approach. The traditional idea that innovation is based on research (technology-push theory) and interaction between firms and other actors has been replaced by the current social network theory of innovation, where knowledge plays a crucial role in fostering innovation. Simultaneously, organizations in both public and private sectors have launched initiatives to develop methodologies and tools to support business innovation management. Higher education establishments, business schools and consulting companies are developing innovative and adequate methodologies and tools, while public authorities are designing and setting up education and training schemes aimed at disseminating best practices among all kinds of businesses.     

Application and performance impact of stage–gate systems – the role services in the firm’s business focus

Although service innovation is important, knowledge of new product and service development, including the positive effect of stage‐and‐gate‐type systems, has been derived almost exclusively from studies in the manufacturing sector. In the present paper, we address two important questions: How do differences in the firm’s business focus, which describes whether a firm puts more emphasis on products or services in its business activities, influence the usage of such formal innovation processes? Is stage‐and‐gate‐type systems’ impact on innovation program performance contingent on the firm’s business focus? Unlike previous studies, we not only differentiate service and manufacturing by industry classification codes but also apply a continuous measure to take into account the blurring of boundaries between the manufacturing and service businesses. Based on a comprehensive discussion of service‐specific characteristics and their implications for innovation management and using a cross‐industry, multi‐informant sample of innovation programs from 272 firms with 1,985 informants, we find empirical support for firms with a stronger focus on the service business being less likely to use stage‐and‐gate‐type systems. Furthermore, the use of stage‐and‐gate‐type systems fosters innovation program performance, and this effect becomes stronger as the business focus shifts toward services. This result implies that service‐based firms can benefit from stage‐and‐gate‐type systems to a greater extent than product‐based firms. Our research also demonstrates the gap between the desired level of innovation process formalization and its current usage in practice, especially for firms with a dominating service business.     

Performance of Global New Product Development Programs: A Resource-Based View

Gaining a competitive edge in today's turbulent business environment calls for a commitment by firms to two highly interrelated strategies: globalization and new product development (NPD). Although much research has focused on how companies achieve NPD success, little of this deals with NPD in the global setting. The authors use resource‐based theory (RBT)—a model emphasizing the resources and capabilities of the firm as primary determinants of competitive advantage—to explain how companies involved in international NPD realize superior performance. The capabilities RBT model is used to test how firms achieve superior performance by deploying organizational capabilities to take advantage of key organizational resources relevant for developing new products for global markets. Specifically, the study evaluates (1) organizational NPD resources (i.e., the firm's global innovation culture, attitude to resource commitment, top‐management involvement, and NPD process formality); (2) NPD process capabilities or routines for identifying and exploiting new product opportunities (i.e., global knowledge integration, NPD homework activities, and launch preparation); and (3) global NPD program performance. Based on data from 387 global NPD programs (North America and Europe, business‐to‐business), a structural model testing for the hypothesized mediation effects of NPD process capabilities on organizational NPD resources was largely supported. The findings indicate that all four resources considered relevant for effective deployment of global NPD process capabilities play a significant role. Specifically, a positive attitude toward resource commitment as well as NPD process formality is essential for the effective deployment of the three NPD process routines linked to achieving superior global NPD program performance; a strong global innovation culture is needed for ensuring effective global knowledge integration; and top‐management involvement plays a key role in deploying both knowledge integration and launch preparation. Of the three NPD process capabilities, global knowledge integration is the most important, whereas homework and launch preparation also play a significant role in bringing about global NPD program success. Tests for partial mediation suggest that too much process formality may be negative and that top‐management involvement requires careful focus.     

Managing Knowledge for Innovation: The Case of Business‐to‐Business Services*

The present study builds a typology of organizational knowledge in business services and empirically examines the effects of knowledge on innovation performance. It is suggested that firms differ with respect to their knowledge creation approaches and that these approaches have implications for firms' innovation activities. A conceptual framework of knowledge assets with degrees of tacitness and collectiveness as the principal axes is used to ground the empirical analysis. The organizational knowledge framework is empirically operationalized using survey data from 167 business service firms and supplementary case study evidence from 16 other firms. It is found that business service improvements and new service introductions are significantly associated with collectively held knowledge, such as codified service solutions or team‐based competences and procedures. In contrast, relying solely on tacit knowledge held by individuals may hamper innovation. The results also suggest that tacit collective knowledge is more closely associated with new service introductions, whereas explicit collective knowledge is associated with service improvements. Tacit collective knowledge is thus conducive. A managerial implication is that new service introductions necessitate team competences and routines, whereas incremental service improvements are more likely if procedures are in place to codify services into explicit solutions or technologies. Thus, the knowledge management approach should depend on the strategic orientation of the service firm toward continuous improvement of existing services or development of completely new services.     

Developing Sustainable New Products in the Textile and Upholstered Furniture Industries: Role of External Integrative Capabilities

Environmental sustainability has become one of the key issues for strategy, marketing, and innovation. In particular, significant attention is being paid by companies, customers, media, and regulators to development and consumption of green products. It is argued that through the efficient use of resources, low carbon impacts, and risks to the environment, green products can be essential to help society toward the environmental sustainability targets. The number of green product introductions is rapidly increasing, as demonstrated by the growing number of companies obtaining eco‐labels or third party certifications for their environmentally friendly products. Hundreds of companies representing most of the industries, such as Intel, SC Johnson, Clorox, Wal‐Mart, and Hewlett–Packard, have recently introduced new green products, underlining the need to develop products that create both economic and environmental values for the firm and customers. A review of the literature shows that academic research on green product development has grown in interest. However, to date, only a few empirical studies have addressed the challenge of integrating environmental issues into new product development (NPD). Previous empirical works have mainly focused on a set of activities for the green product development process at the project level. After years of paying no or marginal attention to environmental sustainability issues, most of the companies now generally realize that it would require knowledge and competencies to develop green products on a regular basis. These knowledge and competencies can be varied, such as R&D, environmental know‐how, clean technology/manufacturing process, building knowledge on measuring environmental performance of products, etc., that may be developed internally or can be integrated through external networks. Adopting a resource‐based view of the firm, this article aims at (1) investigating the role of capabilities useful for companies to integrate knowledge and competencies from outside of the firm on green product development in terms of both manufacturing process and product design and (2) understanding whether green product development opens new product, market, and technology opportunities, as well as leads to better financial performance of NPD programs. To this end, a survey was conducted in two Italian manufacturing industries in which environmental issues are becoming increasingly important, namely textiles and upholstered furniture. A questionnaire was sent to 700 firms, and 102 useable questionnaires were returned. Results show that (1) companies engage in developing external integrative capabilities through the creation of collaborative networks with actors along the supply chain, the acquisition of technical know‐how, and the creation of external knowledge links with actors outside the supply chain; (2) external knowledge links play a key role in the integration of environmental sustainability issues into the manufacturing process, whereas capabilities such as the acquisition of technical know‐how and the creation of collaborative networks prove to be more important for integrating environmental issues into product design; and (3) the integration of environmental sustainability issues into NPD programs in terms of product design leads to the creation of new opportunities for firms, such as opening new markets, technologies, and product arenas, though not necessarily leading to improved financial performance of the NPD programs.     

Leveraging micro‐ and macro‐structures of embeddedness in alliance networks for exploratory innovation in biotechnology

Researchers agree that alliance networks can be an important instrument in a firm's innovation process, but there is limited empirical evidence on actually how they facilitate the creation of new knowledge for exploratory innovation. The research question is what alliance network configuration is optimal for exploratory innovation. The present study investigated the interaction between a firm's alliance portfolio structure (the micro‐level) and the industry alliance network structure (the macro‐level), and it empirically tested how their interaction may be affecting the exploratory innovation outcome of network participating firms in the biotechnology industry. The paper uses data from exploratory patents filed by 455 dedicated biotechnology firms in 1986–1999 and an overall network comprising 2,933 technological alliances over the same period. The results indicate that, in the case of biotechnology, firms with high exploratory innovation output have short path indirect access to many other firms (micro‐level), and operate in dense industry alliance networks centralized around a few key firms (macro‐level), and that these effects are curvilinear.     

Measuring business model innovation: conceptualization,scale development,and proof of performance

Business model innovation is a topic that has received much attention from academia as well as from business practice. After extensive research on the definition and conceptualization of the concept and publication of many case-based results, recently scholars have been calling for more generalizable results, large-scale investigations and greater empirical sophistication. Despite the great importance of measuring business model innovation for various purposes, a validated measurement scale is still not available. I fill this gap by systematically developing a new scale for business model innovation. I follow a rigorous scale development approach to ensure validity and reliability. Specifically, I collected two large-scale samples of 126 and 232 firms to specify and assess the scale. As a result, I provide a hierarchical three-level scale for measuring business model innovation. At the first level, 41 reflective items are provided to measure ten subconstructs of business model innovation. These can be used as formative measures of three dimensions of business model innovation at the second level, namely value creation innovation, value proposition innovation and value capture innovation. At the third level, these three dimensions form the metaconstruct of business model innovation.     

The sum of its parts: Examining the institutional effects on entrepreneurial nodes in extensive innovation ecosystems

Innovation ecosystems are intricate networks that provide opportunities to access resources, capabilities, and cooperating firms for value-creating knowledge transfer. While the literature has noted the complex nature of diverse innovation ecosystem actors, fewer studies have refined how macro-institutional pressures impact behavioral interactions among diverse entities. The innovation ecosystem research has yet to theoretically refine how micro-level complex components (entities) navigate environments, coalescence, and overcome barriers within varying institutional conditions. Ultimately, each entity behaves and is governed by diverse motivational drivers. Yet, the divergent impacts this has on key behaviors have not been covered by broader-scale empirical studies. Therefore, this study focused on the institutional mechanisms that influence the crucial role of entrepreneurial networking activities in ecosystems. Using a global sample, the study employed a multi-level logistic regression model and data developed from the Global Entrepreneurship Monitor, World Development Indicators, Index of Economic Freedom, and the World Governance Indicators to reveal certain forms of institutional settings that influence collaborative behavior in the ecosystem and entrepreneurial networks' emergence. It emphasizes the need for managers and policymakers to recognize these effects and enact strategies that promote value-creating entrepreneurial network behavior on the individual level to benefit the holistic ecosystem performance.     

Business model innovation in strategic alliances: a multi‐layer perspective

Business model innovation (BMI) has recently become a topic of interest for research as well as corporate practice. However, we lack specific insights into actors, drivers, and different forms of BMI as the concept is by now mainly addressed in a very general way. In this paper, we analyze how BMI takes place in strategic alliances with the focus of enhancing the recent knowledge about BMI by developing a concept that links firm‐level BMI with alliance‐driven innovation of business models. Against the background of an in‐depth explorative qualitative study, we shed light on the basic nature business model innovation alliances (BMIA) and their effects on both, alliance level and firm level. We develop a process model of BMIA that is the first model providing a holistic picture of this particular type of BMI. Our findings allow for deep insights into BMI processes in incumbent companies and uncover in detail the importance of boundary spanning activities in this realm. By providing these insights, we pave the ground for a new stream of BMI research that focuses on the in‐depth understanding of the role of collaboration and network effects in recent BMI processes. In addition, we show practical benefits for partners in BMI alliances. These insights may help to overcome the traditional fear of negative effects that is still very often prevalent in companies when it comes to issues of partnering with firm external players in strategic issues.     

How to approach business model innovation: the role of opportunities in times of (no) exogenous change

Firms need to show dynamic adaptability and innovate their business models to achieve survival and growth, in particular when they are exposed to high levels of exogenous change. However, business model innovation also takes place in the absence of exogenous change. We know relatively little about firms’ approaches to opportunities for business model innovation in both of these environmental settings. The objective of this study is to understand how firms exposed to various environmental conditions explore and exploit business model innovation opportunities. In a qualitative multiple case analysis, the study compares the approaches to business model innovation used by four firms exposed to high levels of exogenous change with those of four firms operating in the absence of exogenous change. The findings are contrasted with entrepreneurial opportunity discovery and creation theories. The results reveal that firms exposed to high levels of exogenous change focus on discovering objective opportunities, whereas firms operating in the absence of exogenous change concentrate on creating opportunities for business model innovation. However, this study revealed that when the firms further explore and exploit these opportunities, they tend to combine the behaviours that the two opportunity perspectives suggest. This study contributes to the literature on business model innovation by emphasising the relationship between environmental context and approach to business model innovation and by reinforcing the link with entrepreneurship theory.     

A rolling stone gathers no moss: the effect of customers' perceived business model innovativeness on customer value co‐creation behavior and customer satisfaction in the service sector

Both researchers and practitioners have been focusing extensively on business model innovation, as it has shown to positively influence business performance. Although the effect of business model innovativeness on customer behavior might be an important mediator between business model innovation and business performance, it has not yet been analyzed. In line with recent calls to consider the customer side in business model innovation research, our paper addresses this problem by studying the influence of customers' perceived business model innovativeness (CPBMI) on customer satisfaction and customer value co‐creation behavior in the service sector. We, therefore, emphasize customers' perceptions and reactions to business model changes. Relying on data from a large‐scale survey of restaurant customers, we find that perceived value creation innovativeness and value proposition innovativeness positively affect customer satisfaction and customer value co‐creation behavior. In addition, we identify a significant indirect effect of CPBMI on customer satisfaction via customer value co‐creation behavior. Our findings allow deriving concrete implications for both researchers and practitioners.     

Incubation matters: Measuring the effect of business incubators on the innovation performance of start‐ups

This article explores the role of business incubators on the innovation performance of start‐ups; in addition, we also investigate how the incubation effect moderates other important factors driving their innovation performance. The empirical evidence comes from a sample of firms located in Northern Italy belonging to the manufacturing (mechanical engineering firms) and service sectors (knowledge‐intensive business services). The results suggest that the incubation effect is very important in shaping the innovation performance of new ventures (measured as a percentage of sales of new‐to‐market innovations). Moreover, it positively moderates the impact of (1) the internal technical capabilities and (2) the adoption of a limited portfolio of collaborations for innovation.     

“Squeezing R&D”: A Study of Organizational Slack and Knowledge Creation in NPD,Using the SECI Model

During new product development (NPD), functional areas such as marketing, R&D, and manufacturing work together to understand customer needs, create product concepts, and solve technical issues. NPD is dependent on the creation of new knowledge and the interplay between tacit knowledge (knowledge that is difficult to articulate and codify) and explicit knowledge (knowledge that can be codified and documented). Knowledge creation requires time and resources, and the dichotomy facing senior management is how much spare capacity in NPD teams—so‐called organizational slack—is appropriate. Too much organizational slack and precious development resources will be wasted; but when slack is eliminated, there is a danger that knowledge creation will be severely hindered. There have been very few studies of organizational slack at the project level, and so the aim of our research was to examine the impact of changes in organizational slack on knowledge creation in NPD projects. Six projects were studied at two companies, over a two‐year period. Multiple sources of data were used to determine how changes in organizational slack impacted knowledge creation, which was operationalized using Nonaka's socialization, externalization, combination, and internalization (SECI) model. It was found that the creation of knowledge in NPD projects is susceptible to changes in organizational slack. A significant finding was that every time there were changes in organizational slack, there was always some impact on knowledge creation. Increased slack enabled knowledge creation; but, importantly, the impacts of decreasing organizational slack were often very negative and disrupted the work of NPD teams, particularly at the end of projects. Managers who feel that “squeezing R&D” is important should think again—their action might disrupt knowledge creation and compromise innovation.     

Which Tangible and Intangible Assets Matter for Innovation Speed in Start‐Ups?*

The launch of the first product is an important event for start‐ups, because it takes the new venture closer to growth, profitability, and financial independence. The new product development (NPD) literature mainly focuses its attention on NPD processes in large firms. In this article insights on the antecedents on innovation speed in large firms are combined with resource‐based theory and insights from the entrepreneurship literature to develop hypotheses concerning the antecedents of innovation speed in start‐ups. In particular, tangible assets such as starting capital and the stage of product development at founding and intangible assets such as team tenure, experience of founders, and collaborations with third parties are considered as important antecedents for innovation speed in start‐ups. A unique data set on research‐based start‐ups (RBSUs) was collected, and event‐history analyses were used to test the hypotheses. The rich qualitative data on the individual companies are used to explain the statistical findings. This article shows that RBSUs differ significantly in their starting conditions. The impact of starting conditions on innovation speed differs between software and other companies. Although intuition suggests that start‐ups that are further in the product development cycle at founding launch their first product faster, our data indicate that software firms starting with a beta version experience slower product launch. The amount of initial financing has no significant effect on innovation speed. Next, it is shown that team tenure and experience of founders leads to faster product launch. Contrary to expectations, alliances with other firms do not significantly affect innovation speed, and collaborations with universities are associated with longer development times.     

Organizing Continuous Product Development and Commercialization: The Collaborative Community of Firms Model

The increased importance of knowledge creation and use to firms' global competitiveness has spawned considerable experimentation with organizational designs for product development and commercialization over the last three decades. This paper discusses innovation‐related organizational design developments during this period, showing how firms have moved from stand‐alone organizations to multifirm network organizations to community‐based organizational designs. The collaborative community of firms model, the most recent organizational design in this evolutionary process, is described in detail. Blade.org, a purposefully designed collaborative community of firms dedicated to the continuous development and commercialization of blade servers, a computer technology with large but unforeseeable market potential, is used as an illustrative case. Blade.org's organizational design combines a community “commons” for the collective development and sharing of knowledge among member firms with explicit institutional mechanisms for the support of direct intermember collaboration. These design elements are used to overcome the challenges associated with (1) concurrent technological and market experimentation and (2) the dynamic coordination of a complex emergent system of hardware, software, and services provided by otherwise independent firms. To date, Blade.org has developed more than 60 new products, providing strong evidence of the innovation prowess of the collaborative community of firms organizational model. Based on an analysis of the evolution of organizational designs and the case of Blade.org, implications for innovation management theory and practice are derived.     

Competence and Governance in Strategic Collaboration: The Differential Effect of Network Structure on the Creation of Core and Noncore Technology

Whereas most of the literature on the benefits of alliances for learning and innovation has taken on a competence perspective, this paper provides an alternative integrated framework based on both a competence and governance point of view. The former focuses on the role of knowledge flows as means to access new knowledge, whereas the latter is centered around the core concepts of opportunism and freeridership in knowledge exchange situations. Although it has generally been acknowledged that competence‐based benefits of collaboration may come at a price of elevated risks due to knowledge spillovers and freeridership, such a governance view remains understudied. This paper explains how a firm's alliance network structure affects benefits as well as risks of collaboration in the context of the creation of core and noncore technology. In the case of core technology, firms attach more value to reducing governance‐based risks relative to obtaining competence‐based benefits. The opposite is found when firms develop noncore technology. This paper contributes to the existing literature by going beyond the common idea that competence and governance perspectives are either complementary or competing. Instead, this study shows that for technology‐based collaboration, they can both apply at the same time, implying a trade‐off in some cases and offering synergy in other cases. Based on an empirical test in three different industries (pharmaceuticals, chemicals, and automotive), there is support for most of our hypotheses. Direct ties have an inverted U‐shaped effect on both core and noncore technology, and the effect is relatively stronger for the former. The results furthermore show that indirect ties play a positive role in noncore technology development and that this effect is not hampered by the number of direct ties a firm has. In contrast, indirect ties seem to hamper core competence development when companies have a lot of direct ties. Finally, firms are found to benefit from nonredundancy in their alliance network in their efforts to strengthen their core technology. The joint effect of these three network characteristics leads to optimal results for core and noncore technologies under quite different alliance network structures. This poses a problem for the ambidexterity of companies, when they simultaneously try to strengthen core and noncore technologies.