A new perspective on open innovation: established and new technology firms in UK bio‐pharmaceuticals

The aim of this paper is to explore open innovation (OI) implementation and its impact on firm innovation performance in sectors experiencing technological discontinuities. The paper employs the framework of inbound, outbound and coupled OI to identify processes reflecting sourcing, externalising and exchanging knowledge across organisational boundaries on upstream and downstream innovation activities and explores their impact on the innovation performance of new and established technology firms. The empirical setting is the UK bio‐pharmaceuticals sector during 1991 and 2001, a paradigmatic era of discontinous change and intensified OI implementation. First, our findings show that new technology firms (NTFs) and established technology firms (ETFs) differ in their extent and patterns of inbound, outbound and coupled OI, reflecting that they implement OI to manage their competences in light of technological change. Second, we identify a complex and multifaceted relationship between OI and patenting performance, with NTFs experiencing enhanced performance from some OI processes while ETFs experiencing challenges. The paper suggests that delineating OI into inbound, outbound and coupled, along upstream and downstream activities, offers a deeper understanding of the role of OI in innovation, guiding selective implementation in pursuing enhanced innovation performance during periods of discontinuous technological change.     

Commercialization performance of outbound open innovation projects in public research organizations: The roles of innovation potential and organizational capabilities

The current literature on open innovation (OI) has been limited to organization-level studies of inbound OI despite the importance of understanding outbound OI to improve performance of public research organizations (PRO) at project level. Our study contributes to the OI literature by investigating the relationship between the innovation potential and the commercialization performance of 189 outbound OI projects between PROs and firms, and the effect of network and project management processes on this relationship. In line with our expectation, our results demonstrate that PRO-firm outbound OI projects with technologies of high innovation potential are likely to have high commercialization performance. In addition, we empirically establish that among projects with technologies of high innovation potential, those with high resource allocation quality are more likely to have high commercialization performance. Finally, our findings indicate that among projects with technologies of high innovation potential, those with high opportunity discovery through networks are more likely to have high commercialization performance.     

Identifying Technology Commercialization Opportunities: The Importance of Integrating Product Development Knowledge

New product development (NPD) is a knowledge‐intensive activity, perhaps even more so in recent years given the shift toward more open innovation processes, which involve active inward and outward technology transfer. While the extant literature has established that knowledge is critical for NPD performance, knowledge generated through NPD can have an additional impact on external technology exploitation—as when firms go beyond pure internal application of knowledge to commercialize their technologies, for example, by means of technology outlicensing. Grounded in the knowledge‐based view of the firm, this paper examines how the integration of domain‐specific knowledge, procedural knowledge, and general knowledge generated through NPD affects a firm's proficiency in identifying technology commercialization opportunities. Additionally, analysis of how technology opportunity identification relates to technology commercialization performance is provided. Empirically, the paper draws on survey data from 193 Swedish medium‐sized manufacturing firms in four industries active with NPD, and regression analyses and structural equation modeling were used to test the hypotheses. The results highlight the importance of integrating domain‐specific and general NPD knowledge to proficiently identify technology licensing opportunities. The empirical findings also provide strong support for a subsequent link between technology opportunity identification and technology commercialization performance. Altogether, these results point to strong and previously unexplored complementarities between inward and outward technology exploitation, that is, between NPD and technology licensing. As such, the results provide important theoretical implications for research into the fields of knowledge integration, technology exploitation, opportunity identification, and technology markets. Moreover, the results have significant managerial implications concerning how knowledge generated through NPD can help firms to achieve both strategic and monetary benefits when trying to profit from technology. In particular, to set up proficient technology commercialization processes, it appears beneficial for firms to integrate knowledge that is gained through the ordinary activities of developing and commercializing products. Specifically, the integration of domain‐specific knowledge and general knowledge helps firms to match their technologies with new applications and markets, which is often the critical barrier to successful technology commercialization activities. Managers are thus encouraged to integrate domain‐specific knowledge and general knowledge from NPD to reap additional benefits in profiting from investments in innovation and technology.     

A note on outbound open innovation and firm performance

The concept of open innovation has attracted a lot of interest over the past decade. In light of a relative emphasis on inbound open innovation (indicating an outside‐in process) in prior research, this brief note addresses the relationship between outbound open innovation (indicating an inside‐out process) and firm performance. In particular, it suggests that outbound open innovation may have positive and negative effects on firm performance based on potential benefits and risks of transferring technology. To what degree these effects materialize depends on internal factors, e.g. desorptive capacity, and external factors, e.g. appropriability. Consequently, a proficient internal management of outbound open innovation is critical to avoid its potential risks and to capture its substantial benefits. In this regard, future research may substantially deepen the insights into the relevance and role of outbound open innovation.     

Outbound open innovation and its effect on firm performance: examining environmental influences

Firms may open up their innovation processes on two dimensions. While inbound open innovation refers to the acquisition of external technology in open exploration processes, outbound open innovation describes the outward transfer of technology in open exploitation processes. Prior open innovation research has focused on the inbound dimension, whereas the outbound dimension has been relatively neglected. Therefore, this article addresses the relationship between outbound open R&D strategies and firm performance. We use data from 136 industrial firms to test four hypotheses on the moderating effects of environmental factors in the relationship between open innovation strategies and firm performance. The results show that the degree of technological turbulence, the transaction rate in technology markets, and the competitive intensity in technology markets strengthen the positive effects of outbound open innovation on firm performance. By contrast, the degree of patent protection does not facilitate successful open innovation. The results are crucially important to managers because they show under what environmental conditions open innovation strategies enhance performance.     

A Bibliometric Review of Open Innovation: Setting a Research Agenda

Through an objective, systematic, and comprehensive review of the literature on open innovation (OI), this article identifies gaps in existing research, and provides recommendations on how hitherto unused or underused organizational, management, and marketing theories can be applied to advance the field. This study adopts a novel approach by combining two complementary bibliometric methods of co‐citation analysis and text mining of 321 journal articles on OI that enables a robust empirical analysis of the intellectual streams and key concepts underpinning OI. Results reveal that researchers do not sufficiently draw on theoretical perspectives external to the field to examine multiple facets of OI. Research also seems confined to innovation‐specific journals with its focus restricted to a select few OI issues, thereby exerting limited influence on the wider business community. This study reveals three distinct areas within OI research: (1) firm‐centric aspects of OI, (2) management of OI networks, and (3) role of users and communities in OI. Thus far, studies have predominantly investigated the firm‐centric aspects of OI, with a particular focus on the role of knowledge, technology, and R&D from the innovating firm's perspective, while the other two areas remain relatively under‐researched. Further gaps in the literature emerge that present avenues for future research, namely to: (1) develop a more comprehensive understanding of OI by including diverse perspectives (users, networks, and communities), (2) direct increased attention to OI strategy formulation and implementation, and (3) enhance focus on customer co‐creation and conceptualize “open service innovation.” Marketing (e.g., service‐dominant logic), organizational behavior (e.g., communities of practice), and management (e.g., dynamic capabilities) offer suitable theoretical lenses and/or concepts to address these gaps.     

Organizing for Inbound Open Innovation: How External Consultants and a Dedicated R&D Unit Influence Product Innovation Performance

Firms increasingly acquire technological knowledge from external sources to improve their innovation performance. This strategic approach is known as inbound open innovation. The existing empirical evidence regarding the impact of inbound open innovation on performance, however, is ambiguous. The equivocal results are due to moderating factors that influence a firm's ability to acquire technological knowledge from external sources and to transform it into innovation outputs. This paper focuses on a relevant yet overlooked category of moderating factors: organization of research and development (R&D). It explores two organizational mechanisms: one informal and external‐oriented (involvement of external consultants in R&D activities) and one formalized and internal‐oriented (existence of a dedicated R&D unit), in the acquisition of technological knowledge through R&D outsourcing, a particular contractual form for inbound open innovation. Drawing on a capabilities perspective and using a longitudinal dataset of 841 Spanish manufacturing firms observed over the period 1999–2007, this paper provides a fine‐grained analysis of the moderating effects of the two organizational mechanisms. The involvement of external consultants in R&D activities strengthens the impact of inbound open innovation on innovation performance by increasing marginal benefits of acquiring external technological knowledge through R&D outsourcing. Moreover, it reduces the level of inbound open innovation to which the highest innovation performance corresponds. Instead, the existence of a dedicated R&D unit makes the firm less sensitive to changes in the level of inbound open innovation, by reducing marginal benefits of acquiring external technological knowledge through R&D outsourcing, and increases the level of inbound open innovation to which the highest innovation performance corresponds. The results regarding the role of informal and formalized R&D organizational mechanisms contribute to research on open innovation and absorptive capacity, and also inform managers as to what organizational mechanism is recommended to acquire external technological knowledge, depending on the objectives that the firm pursues.     

Shareholder valuation of foreign investment and expansion

This study analyzes when different foreign investment location choices are value creating for firms at different stages of international expansion. I argue that because direct investment in developing countries is riskier than in advanced countries, shareholders may not value a firm's investment in developing countries until that firm has experience from previous international investments and capabilities to better manage and hedge the higher levels of risk and uncertainty. Using a panel of 191 U.S. manufacturing firms and their foreign investments over a 20‐year period (1981–2000), the empirical results show that firm investments in advanced and developing countries are valued differently by shareholders, depending on the firm's prior international expansion, the firm's capabilities and experiences, and the knowledge intensity of the firm's industry. These results highlight the importance of considering firm location decisions, prior experiences, and resources when analyzing. Copyright © 2006 John Wiley & Sons, Ltd.     

Intrafirm Knowledge Transfer and Employee Innovative Behavior: The Role of Total and Balanced Knowledge Flows

Research on intrafirm knowledge transfer has generally found a positive impact of knowledge inflows on the innovation of an organizational unit. However, the role of knowledge outflows during knowledge transfer is less clear. This paper argues that knowledge outflows influence innovation through a self‐learning mechanism and a fairness assessment mechanism, and play a unique and important role on team innovation. Based on this new understanding on knowledge outflows, it is necessary to examine the impacts of inflows and outflows simultaneously in innovation research. This paper expresses the sum and difference of knowledge inflows and outflows as total and balanced knowledge flows. A theoretical model is proposed to examine the distinct and synergistic effects of total and balanced knowledge flows on employees' innovative behavior of an organizational unit. The model was tested on 148 retail units of an apparel firm based on survey responses from both shop managers and staff. Results showed that total and balanced flows have independent direct effects and a synergistic effect on employee innovative behavior: employees of a unit had the highest levels of innovative behavior when knowledge flows were high and balanced at the same time. This paper contributes to the literature by taking into account both the direction and magnitude of knowledge transfer to examine team innovation.     

Technology Exploitation Paths: Combining Technological and Complementary Resources in New Product Development and Licensing

Technological resources in the form of patents, trade secrets, and know‐how have become key assets for modern enterprises. This paper addresses a critical issue in technology and innovation management, namely, the commercial exploitation of technological resources resulting from research and development (R&D) investments. Extracting economic value from these resources by maximizing the benefits for shareholders is an extremely challenging task because technological resources are intangible, idiosyncratic, uncertain, predominantly tacit, and with poorly defined property rights. In their attempt to extract the maximum value from their technological resources, firms increasingly combine their internal exploitation through new product development (NPD) with external exploitation through licensing. However, most existing studies on NPD and technology licensing have treated the two exploitation paths independently and in isolation, which has resulted in two separate research streams using different theories and addressing different managerial challenges. The purpose of this paper is to contribute to filling this gap by developing and testing a comprehensive conceptual framework that simultaneously considers the antecedents affecting the successful implementation of NPD and licensing strategies as well as their consequences on firm profitability. The paper in particular investigates the effects of the interplay between technological resources and three types of complementary resources, marketing, manufacturing, and relational. We test the model using structural equation modeling on a sample of 733 Spanish manufacturing firms observed from 2003 to 2007. The data provide support for the existence of different paths to market firm technologies: an internal path, whereby the ownership of technological resources fully explains NPD performance, and an external path, whereby high intensity of marketing and relational resources reinforces the positive effect of technological resources on licensing performance. This sustains the relevance of the resource‐based value‐enhancing effects of complementary resources in licensing, as opposed to the motivation‐reducing effects advanced by transaction cost‐based literature. Moreover, the empirical analysis shows a substitution effect between NPD and licensing, whereby their simultaneous pursuit at intense levels is associated with lower profit margins. This provides evidence of the much theorized, but seldom tested, rent dissipation effect. These findings offer several contributions to research on licensing, NPD, open innovation, and the resource‐based view of the firm. On a managerial level, they suggest that achieving maximum value from proprietary technologies may not entail exploiting them both through external and internal paths. Managers are also informed that the resource combinations that enhance licensing performance include marketing and relational resources.     

Enabling open innovation in small‐ and medium‐sized enterprises: how to find alternative applications for your technologies

A critical success factor in the practice of Open Innovation is the timely identification of opportunities for out‐licensing a firm's technologies outside its core business. This can be particularly challenging for small‐ and medium‐sized enterprise (SMEs), because of their focussed business portfolio, specialized knowledge basis, and limited financial resources that can be devoted to innovation activities. The paper illustrates a quick and easy‐to‐use methodology for the identification of viable opportunities for out‐licensing a firm's technologies outside its core business. The method uses established TRIZ instruments in combination with non‐financial weighting and ranking techniques and portfolio management tools. It has been developed by the authors in collaboration with an Italian SME working in the packaging industry.     

Learning Capability,Technological Parity,and Innovation Mode Use*

The purpose of this research was to examine whether a firm's learning capability interacts with industry technological parity to predict innovation mode use. Learning capability is conceptualized in the current research as a firm's ability to develop or acquire the new knowledge‐based resources and skills needed to offer new products. Industry technological parity is conceptualized as the extent to which similarity and equality exist among the technological competencies of the firms in an industry. Three generic modes of innovation are considered: internal, cooperative, and external innovation. These modes reflect the development of new products based solely on internal resources, the collaborative development of new products (i.e., with one or more development partners), and the acquisition of fully developed products from external sources, respectively. The premises of this research are that (1) technological parity can create incentives or disincentives for innovating in a particular mode, depending upon the value of external innovative resources relative to the value of internal innovative resources and (2) firms will choose innovation modes that reflect a combination of their abilities and incentives to innovate alone, with others, or through others. Survey research and secondary sources were used to collect data from 119 high‐technology firms. Results indicate that firms exhibit greater use of internal and external innovation when high levels of industry technological parity are matched by high levels of firm learning capability. By contrast, a negative relationship between learning capability and industry technological parity is associated with greater use of the cooperative mode of innovation. Thus, a single, common internal capability—learning capability—interacts with the level of technological parity in the environment to significantly predict three distinct innovation modes—modes that are not inherently dependent upon one another. As such, a firm's internal ability to innovate, as reflected in learning capability, has relevance well beyond that firm's likely internal innovation output. It also predicts the firm's likely use of cooperative and external innovation when considered in light of the level of industry technological parity. A practical implication of these findings is that companies with modest learning capabilities are not inherently precluded from innovating. Rather, they can innovate through modes for which conditions in their current environments do not constitute significant obstacles to innovation output. In particular, modest learning capabilities are associated with higher innovative output in the internal, cooperative, and external modes when industry technological parity levels are low, high, and low, respectively. Conversely, strong learning capabilities tend to be associated with higher innovative output in the internal, cooperative, and external modes when industry technological parity levels are high, low, and high, respectively.     

The role of internal capabilities and firms' environment for sustainable innovation: evidence for Germany

Over the past decade, sustainable innovation has occupied a top‐ranking position on the agenda of many firms. Sustainable innovation can be broadly defined as an innovation that has to consider environmental and social issues as well as the needs of future generations. Although sustainable innovation provides considerable new opportunities for companies it goes along with an increased complexity. This in turn requires certain organizational routines and capabilities to deal with the upcoming challenges. We explore what the specific driving forces are that increase the degree of sustainable innovation within a firm's innovation activities. We test them empirically for more than 1,100 firms in Germany and find that firms need to invest in internal absorptive capacities and to draw both broadly and deeply from external sources for innovation. In that sense, investments in employee training turn out to be more important than technological R&D expenditures.     

Inbound open innovation for enhanced performance: Enablers and opportunities

Open innovation, defined as a firm's purposive pursuit and integration of external inputs for new product development, offers an alternative perspective on innovation. Drawing on resource-based and capability theories, this study identifies key factors that enable inbound open innovation and increase its efficacy in a business-to-business context. Because open innovation relies on external connections, relational capability—that is, the firm's ability to make and manage relationships with other firms—should enhance the effects of inbound open innovation on firm performance. Two key resources may further enhance the moderating effects of relational capability: network spillovers that indicate knowledge-rich surroundings, and flexibility that allows for responsiveness and adaptability. The authors test these relationships with data from managers in 204 business-to-business high-tech firms, as well as secondary data pertaining to firm performance and flexibility. The results support the expectations that the ability to build interfirm relationships in a knowledge-rich environment increase the efficacy of inbound open innovation for gaining superior financial performance. Interestingly, additional analyses suggest an unexpected nonlinear interaction effect with flexibility. When firms possess strong relational capabilities and adopt an open innovation approach, they achieve higher financial performance if they have a low or a high level of flexibility. The theoretical and managerial implications of these findings are discussed.     

Antecedents of open innovation at the project level: empirical analysis of Korean firms

The concept of open innovation has recently gained wide academic attention, as it seems to have significant impact for company performance. Most empirical investigations about this emerging concept have been case studies of successful early adopters of open innovation, and their analyses have largely been at the company level. Although case studies at that level provide meaningful implications, the new phenomena merit a more in‐depth examination: that is, we need to collect and analyze data on multiple companies to explore more systematic findings about open innovations across companies. Moreover, analyses may need to go down to the individual project rather than the whole company level because innovation activities are often conducted as part of research and development (R&D) projects. To meet these needs, this study examines companies' open innovation efforts at the level of the individual R&D project. Specifically, the present study focuses on project‐level openness to better understand the mechanisms of open innovation. It explores systematic relationships between various antecedent factors and the degree of openness. Project‐level openness could be affected by team and task characteristics, such as team size, learning distance, strategic importance, technology and market uncertainty, and relevance to the main business. Relevant data collected from 303 companies in Korea were used to identify the antecedents that affect inbound and outbound openness. The research findings are expected to help provide a concrete theoretical framework suited for more generalized application and further practical development of open innovation strategy.     

Strategy,human capital investments,business‐domain capabilities,and performance: a study in the global software services industry

Research summary : In knowledge‐based industries, continuous human capital investments are essential for firms to enhance capabilities and sustain competitive advantage. However, such investments present a dilemma for firms, because human resources are mobile. Using detailed project‐level operational, financial, and human capital data from a leading multinational firm in the global IT services industry, this study finds that deliberate investments in improving general human capital can help firms develop superior capabilities and maintain high profits. This paper identifies two types of capabilities essential for success in this industry—technological and business‐domain capabilities—and provides empirical evidence justifying such investments. Theoretical and practical implications of capability‐seeking general human capital investments are discussed. Managerial summary : The primary managerial implication of this research is that capability‐seeking investments in developing general human capital through strategic learning (training and internal certifications) can enhance firm performance. Although investing in general human capital is risky, the firm considered this a strategic necessity in order to thrive in the fast paced IT services industry. By leveraging general technological skills in combination with business‐domain knowledge to address customer's business problems firms can earn and sustain higher profits. Our study also demonstrates how a developing‐country firm responded to strong competitive challenge from global rivals possessing superior capabilities by upgrading the capabilities of its employees through internal development. In doing so the firm was able to narrow the capability gap vis‐à‐vis its foreign peers and expand its business globally. Copyright © 2016 John Wiley & Sons, Ltd.     

Political capabilities,policy risk,and international investment strategy: evidence from the global electric power generation industry

Whereas conventional wisdom holds that multinational enterprises (MNEs) invest less in host countries that pose greater policy risk—the risk that a government will opportunistically alter policies to expropriate an investing firm's profits or assets—we argue that MNEs vary in their response to host‐country policy risk as a result of differences in organizational capabilities for assessing such risk and managing the policy‐making process. We hypothesize that firms from home countries characterized by weaker institutional constraints on policy makers or greater redistributive pressures associated with political rent seeking will be less sensitive to host‐country policy risk in their international expansion strategies. Moreover, firms from home countries characterized by sufficiently weak institutional constraints or sufficiently strong redistributive pressures will seek out riskier host countries for their international investments to leverage their political capabilities, which permit them to attain and defend attractive positions or industry structures. We find support for our hypotheses in a statistical analysis of the foreign direct investment location choices of MNEs in the electric power generation industry during the period 1990–1999, the industry's first decade of internationalization. Copyright © 2010 John Wiley & Sons, Ltd.     

Antecedents to and outcomes of reverse logistics metrics

Business to business reverse logistics processes are shaped in large part by a firm's strategy to meet regulatory (e.g. waste electrical and electronic equipment directive) and certification (e.g. ISO 14000) requirements. Firms adopt both recommended and internally developed reverse logistics metrics in order to monitor the performance of these processes along the entire value chain, and especially amongst both buyer and supplier marketing interactions. Unfortunately, literature regarding antecedents to and outcomes of reverse logistics metric development is scarce, leaving industrial marketing professionals with limited guidance as to how to establish and gain value from a sophisticated metric program. This study uses goal-setting theory and the knowledge-based view to conceptualize a model that examines transactions from the perspective of both the supplier (inbound reverse logistics) and customer (outbound reverse logistics) in a business to business context. This granular view reveals how actors occupying different supply chain positions manage collaborative marketing processes such as reverse logistics. Survey data were gathered from organizations affiliated with the United States Department of Defense supply chain and hypotheses were tested using partial least squares structural equation modeling. The results corroborate the assertion that information support capabilities and stated goals are antecedents to establishing metrics; however, the study uncovers outcome disparities between inbound and outbound reverse logistics processes. As the roles of both suppliers and customers in complying with take-back regulation continue to grow, the findings of this study provide marketing professionals and scholars with important insights regarding the use of reverse logistics metrics.