Building External Corporate Venturing Capability*

ABSTRACT How firms build new capabilities to adapt to changing environments is at the core of strategic management. However, research has addressed this question only recently. In this paper, I propose a model that describes how firms develop a capability to create and develop ventures through corporate venture capital, alliances, and acquisitions. The model is based on two longitudinal case studies of large corporations operating in the information and communication technology sector in Europe. At the core of this model are learning processes that enable the firm to build up an external corporate venturing capability, by utilizing learning strategies both within and outside venturing relationships. To build this new capability, firms engage in acquisitive learning. Critical to deepening the capability acquired is adaptation of all knowledge to the firm specific context through experiential learning mechanisms. I also discuss the important role that initial conditions and knowledge management practices play in determining the direction and effectiveness of specific learning processes that lead to an external corporate venturing capability.     

When does inward technology licensing facilitate firms' NPD performance? A contingency perspective

Many firms find inward technology licensing (ITL), as a means to access external technological knowledge, an effective and relatively inexpensive way for new product development (NPD). However, although the literature has suggested some advantages and disadvantages of ITL with respect to NPD, the relationship between ITL and licensee firms' subsequent NPD performance has not yet been found convincingly evident. Sharing with many other likeminded scholars and practitioners, we believe that the dynamics between external knowledge, internal capability, external environment, and firm performance should be investigated through a contingency perspective. Thus, this study posits that a firm's propensity to develop new products through ITL is contingent upon two categories of contingency factors that are internal and external to firms. Using a dataset containing information about Chinese firms' licensing activities, we find support for our hypotheses: the positive relationship between ITL and NPD performance of a licensee firm is moderated by firms' absolute and relative absorptive capacity and the knowledge endowment in the region where the licensee firm operates.     

How does knowledge depth moderate the performance of internal and external knowledge sourcing strategies?

Management literature has consistently shown that knowledge is the most important source of competitive advantage for a firm. However, it is still not clear how knowledge can lead to competitive advantage, and how firms can find strategies to leverage their knowledge bases. This study considers the strategic implications of knowledge depth and three knowledge-sourcing strategies: R&D, strategic alliances and acquisitions. The main and interaction effects of these factors were tested in the context of the US technology firms. The results confirmed the strategic role of knowledge and external leveraging strategies. We also found that technology firms with weak knowledge depth should focus on internal R&D to accumulate knowledge in core technology areas, while those with strong knowledge depth should lower internal R&D intensity and shift their strategic resources to inter-firm alliances and acquisitions.     

A Knowledge Accessing Theory of Strategic Alliances

ABSTRACT The emerging knowledge‐based view of the firm offers new insight into the causes and management of interfirm alliances. However, the development of an effective knowledge‐based theory of alliance formation has been inhibited by a simplistic view of alliances as vehicles for organizational learning in which strategic alliances have presumed to be motivated by firms’ desire to acquire knowledge from one another. We argue that the primary advantage of alliances over both firms and markets is in accessing rather than acquiring knowledge. Building upon the distinction between the knowledge generation (‘exploration’) and knowledge application (‘exploitation’), we show that alliances contribute to the efficiency in the application of knowledge; first, by improving the efficiency with which knowledge is integrated into the production of complex goods and services, and second, by increasing the efficiency with which knowledge is utilized. These static efficiency advantages of alliances are enhanced where there is uncertainty over future knowledge requirements and where new products offer early‐mover advantages. Compared with alternative learning‐based approaches to alliance formation, our proposed knowledge‐accessing theory of alliances offers the advantages of greater theoretical rigour and consistency with general trends in alliance activity and corporate strategy.     

Acquisitions and Real Options: The Greenfield Alternative

Although acquisitions are a popular way to enter new markets, empirical evidence tends to indicate few benefits accrue to acquiring firms. This might be the case because firms use acquisitions when they should be employing an alternative mode of expansion. Applying real options theory to this issue, we suggest that greenfield start‐up ventures provide a real option alternative to acquisitions for firms establishing new international subsidiary units. To test this notion we examine a sample of Western European firms entering the emerging economies of Eastern Europe. The evidence suggests that acquisitions are a good choice only when firms enter markets containing low demand uncertainty and when these firms possess acquisition‐based strategic flexibility. Overall, our analysis indicates that greenfield ventures appear to provide firms with a real option when making the acquisition decision.     

Corporate Entrepreneurship Activities through Strategic Alliances: A Resource‐Based Approach toward Competitive Advantage*

abstract Corporate entrepreneurship (CE) activities may significantly benefit from interfirm strategic alliances, although such benefits have not been sufficiently examined in the literature. In this paper, a resource‐based framework is presented to examine how strategic alliances offer entrepreneurial firms needed resources that may not otherwise be available. We argue that CE activities are likely to lead to resource gaps. We compare various options to fill resource gaps, and identify the pros and cons of the alliance approach. We then discuss the resource conditions that provide competitive advantage for a firm, if alliances are properly used to help implement CE. Finally, we examine how different types of alliance (e.g. joint ventures, R&D alliances, and learning alliances) facilitate various CE activities, including innovation, corporate venturing, and strategic renewal.     

Tapping Deep Pockets: The Role of Resources and Social Capital on Financial Capital Acquisition by Biotechnology Firms in Biotech–Pharma Alliances

Strategic alliances with pharmaceutical firms allow small biotechnology firms to acquire needed financial capital in exchange for sharing new, cutting‐edge technologies. This study draws from aspects of resource‐based view and social capital theory to examine the factors that influence the extent of financial capital biotech firms acquire when forming an alliance with pharmaceutical firms. Using a sample of 184 alliances from the period 1995–2000, we found that alliances where the pharmaceutical firm has greater management control are associated with greater acquisition of financial capital by the biotech firm. We also found that the credibility of the pharmaceutical firm is positively associated with the extent of financial capital acquired by the biotechnology firm and that the number of patents that the biotech firm has is negatively associated to the financial capital the biotech firm receives. We discuss the implications of our findings for theory, research, and management practice.     

‘Who Knows What?’ in New Venture Teams: Transactive Memory Systems as a Micro‐Foundation of Entrepreneurial Orientation

The increasing importance of entrepreneurial behaviour has led scholars to embrace the idea that an entrepreneurial orientation (EO) is an important predictor of firm performance. While EO occupies a central position in strategic entrepreneurship research, scholars have yet to explore its origins in new ventures. Drawing on the knowledge‐based and cognitive views, we theorize that a new venture team's transactive memory system is a cognitive mechanism that spurs the development of an EO. In a field study of high‐tech new ventures in China, we examined the relationship between venture teams’ transactive memory systems (representing the distribution, integration, and utilization of the teams’ knowledge) and EO and the moderating influence of team‐, firm‐, and environment‐level factors. We found that the transactive memory system of a new venture team enhanced their EO and that this relationship was positively influenced by intra‐team trust, the structural organicity of a venture, and environmental dynamism. Our findings provide novel insights into the micro‐foundations of TMS in developing an EO in new ventures.     

Successful eco‐innovators: Exploring the association between open inbound knowledge strategies and the performance of eco‐innovative firms

The main purpose of this paper is to analyse the association between open inbound knowledge strategies and the performance of eco‐innovative firms in the food and beverage industry. We propose a mixed framework based on the eco‐innovation literature and the open innovation approach. We consider the characteristics in a traditional sector based upon a resource‐based perspective. Three types of firms are distinguished in terms of their sales growth in the Spanish food industry from the least to the most successful eco‐innovators. Using multinomial logistic regression models, it is shown that the diversity of collaborators (breadth of external sources of knowledge) and joint adoption of product and process eco‐innovations are positively associated with the probability of achieving high sales growth. Moreover, we find an inverted U‐shaped relationship between the breadth of the external search and firm performance, but only for the group of the most successful firms. Moreover, operational flexibility, knowledge‐based capabilities and company size are also positively related to the group of successful eco‐innovators.     

Collaboration practices, strategic capabilities and performance in Japanese and American product development: Do they differ?

Do New Product Development (NPD) collaboration practices differ across national subsets and, if so, does this make a difference to overall NPD performance? To address these questions, we studied the NPD programs of both Japanese and American firms and explored whether there are differences between the use of internal and external collaboration and strategic innovation practices. We further examined whether this had any significant effects on overall program performance. We found that the American firms we surveyed used collaboration practices significantly more often than the Japanese firms. However, when taking all factors into consideration, only strategic innovation capabilities were significantly linked with both overall performance and nationality. Thus, the use of collaboration without developing innovation capabilities is not enough for performance effects.     

In search of alliance-level relational capabilities: Balancing innovation value creation and appropriability in R&D alliances

In order to advance our knowledge of alliance-level relational capabilities, this paper investigates how searching across different knowledge domains affects both innovation value creation and appropriability in R&D alliances. Focusing on the alliance level of analysis, we advance that, in R&D strategic alliances, search span has a curvilinear (inverted U-shape) relationship with value creation and a positive relationship with value appropriability. Our analysis on a sample of 1515 interfirm dyadic R&D alliances confirms these hypotheses. We find that, after a threshold level of search span, joint value creation decreases. Conversely, the allied firms’ ability to appropriate the value of their jointly developed inventions grows exponentially as the alliance search span increases. Thus, value creation and appropriability may have conflicting exigencies. We argue that firms involved in R&D strategic alliances should develop the interorganizational relational capability to jointly manage the process of search that occurs at the interorganizational level, and specifically the span of their search, in ways that balance the needs of value creation and appropriability.     

Strategic Technology Management in a Mid-corporate Firm: the Case of Otter Controls

This paper examines strategic technology management in the mid-corporate sector (firms with a turnover between £1 million and £130 million). There is a considerable literature which emphasizes the importance of linking technology and strategy, but this concentrates primarily on the activities of large firms. It is suggested that smaller firms can also benefit from a more strategic approach to technology management and this could help strengthen an area of weakness in the UK economy. The research is based on an in-depth case study of Otter Controls and utilizes a framework developed by Dodgson and Rothwell to analyse the firm's acquisition of new technologies. It is suggested that this model has utility in examining strategic technology management but the addition of a network perspective helps delineate the ways in which external relationships are established and sustained. The data indicate that universities can be useful sources of technology for smaller firms, but successful transfer is dependent on management skill in creating a culture that is open and flexible. Such firms do have considerable problems in assessing the skills and competences of university departments and this adds to the risks of technology alliances. There is also evidence to suggest that even universities with long-standing industrial links lack awareness of the problems associated with management in commercial organizations.     

The Dynamics of Labour Flexibility: Relationships between Employment Type and Innovativeness

This paper investigates the relationship between flexible human resource (HR) practices and innovativeness. Testing the research model in a sample of first‐tier automotive suppliers indicates that internal flexibility practices are positively related to innovativeness. Regarding external flexibility, the association depends on the type of contingent employee: negative association for ‘short‐term hires’ and positive association for ‘consulting/contracting firms’. The relationships to innovativeness for practices associated with knowledge transfer are moderated by environmental dynamism, but the non‐knowledge related practices are not. Firms in highly dynamic environments can benefit more from flexible HR practices than firms in less dynamic environments.     

Bridging the gaps or fecklessness? A moderated mediating examination of intermediaries’ effects on corporate innovation

Intermediaries are frequently used as external institutions to bridge knowledge gaps and enlarge innovation search. Although there is a consensus that ties with intermediaries have a significantly positive impact on firms’ innovation performance since external knowledge sources are important to firms’ innovative activities, far less is known about how these intermediaries become effective drivers of corporate innovation. From the capacity-based view, this study proposes that intermediaries facilitate the development of dynamic capability which further causes remarkable innovation. A firm's dynamic capability acts as a mediator in the relationship between intermediaries and innovation performance. It is also observed that organizational structure formalization and strategic conformity negatively moderate the mediation effect. This proposed theoretical framework is proven by empirical results from a moderated mediation analysis using a sample of Chinese manufacturing firms.     

IMPACT ON FIRMS OF THE USE OF KNOWLEDGE EXTERNAL SOURCES: A SYSTEMATIC REVIEW OF THE LITERATURE

This study summarizes the main conclusions from a systematic review of the empirical literature regarding the impact on firms of the use of knowledge external sources (universities, research institutes and knowledge intensive business services). With the aim to organize the literature, we classify the different works according to the research question addressed: (i) which firms use knowledge external sources?; (ii) Do firms using knowledge external sources achieve better results?; And (iii) which firms benefit the most from using knowledge external sources? Stylized facts are that larger, more R&D intensive and high tech firms are more likely to use knowledge external sources and that use of knowledge external sources is associated to firms higher technical results. Less attention has been paid to the third question and evidence is not conclusive. Several recommendations for future research emerge. First, to take in greater consideration methodological issues so that potential biases in the results caused by sample selection and endogeneity are handled properly. Second, to pay more attention to heterogeneous outcomes. Third, to use continuous indicators of depth and breadth of links allowing for non‐linear relationships and fourth, to extend evidence for developing countries and service industries.     

Outbound open innovation in bio-pharmaceutical out-licensing

Our study investigates the outbound open innovation of firms engaged in technological venturing. Leveraging insights from the sociology theory and innovation literatures, we clarify whether social status helps entrepreneurial ventures overcome market imperfection and information asymmetry in out-licensing and illustrate the importance of specific aspects of social status building in this context. We also examine the effect of failure experiences on out-licensing. We take a dynamic view of desorptive capacity by studying an entrepreneurial venture’s learning process, both internally, in terms of its own technology trajectory, and externally, through inter-organizational alliances. We apply a negative binomial model to our novel panel of 180 firms studied over an 18-year period with controls for stocks of clinical development activities, patenting and prior licensing activities. Empirical analysis enables us to observe the impact which the firms’ technological and development status, reputation and desorptive capacity exert upon out-licensing volume. Prior outbound open innovation studies do not account for the heterogeneity of technology and R&D success and failure experiences observed in our study. We also demonstrate the contingency effect of external learning from alliances during the building-up of a firm’s desorptive capacity, or the way in which the number of co-authoring partners in scientific publications negatively moderates the positive effect of the number of commercial alliances on the volume of its out-licensing deals. Our findings contribute to the understanding of external knowledge exploitation and complement important aspects of the literatures on outbound open innovation and desorptive capacity, offering empirically rich insights for bio-pharmaceutical firms into the drivers behind volumes of out-licensing deals.     

战略联盟中企业间知识转移影响因素研究

在知识经济时代,战略联盟为企业获取知识、增强创新能力提供了一个非常好的平台,联盟中企业间如何实现有效知识转移的问题开始被密切关注,找出影响知识转移的因素是解决这一问题的前提条件。     

Learning in owner-managed small firms: Mediating artefacts and strategic space

The authors focus on the way in which owner-managers in smaller firms improve their businesses through the creation of ‘strategic space’. The term ‘strategic space’ refers to the process by which owner-managers are able to access resources, motivation and capability to review existing practices. The starting point is the owner-manager's human capital and their capacity to engage in critical reflection about their business. We highlight three concepts central to the creation of strategic space, first, social capital, which refers to the network relationships that provide access to a wide range of resources and information. Second, absorptive capacity, which describes the way in which organizational members identify, acquire and utilize knowledge from external sources. Third, mediating artefacts, which represent existing knowledge but also facilitate the translation and transformation of understanding within and between communities of practice. This process is essential to the renewal of knowledge and knowing within firms. The contribution this paper makes is to bring together these elements – human and social capital, absorptive capacity and mediating artefacts – to offer a conceptual model that illustrates the mechanism by which owner-managers create strategic space. This model provides a deeper understanding of the evolution of knowledge in smaller organizations.     

The role of customer participation in building new product development speed capabilities in turbulent environments

In a sample of 204 SMEs, this study investigates how customer co-creation impacts firms’ ability to increase new product development (NPD) speed. The results show firms that collaborate with customers in the NPD process at greater levels are able to increase NPD speed capabilities and commercialize products at a faster rate. In addition, environmental turbulence is investigated as to how it may impact the relationship between customer participation and NPD speed. The results show that customer participation in NPD allows firms to better manage turbulent environments by enhancing the speed at which new products are brought to market. Finally, the results show that NPD speed mediates the relationship between customer participation and the performance of new products, thus highlighting the importance of developing new products faster. The principle contribution of the study is the examination of an additional moderating factor in regard to customer participation and NPD speed. The second contribution of this research is that while previous studies have examined the individual impacts of customer participation on NPD speed and NPD speed on NPD performance, this research statistically demonstrates the mediating process among the three constructs.

     

Impact of culture on ‘partner selection criteria’ in East Asian international joint ventures

Selecting the right partner is important for the success of alliances and joint ventures. For international joint ventures (IJVs) from diverse cultures the partner selection process can become complicated. Prior studies have investigated the alliances and joint ventures to develop a set of objective criteria for evaluating potential partners. This paper reports the study of IJVs formed by Singapore firms in Peoples Republic of China and India. The intent was to develop a methodology for identifying partner selection criteria in a cross-cultural setting. The findings reveal that the partner selection process follows a different logic in Confucian societies. Trust has been established to be essential for developing enduring co-operative relationships. The paper explores the concept of trust in relation to commitment and control in the context of the Confucian culture. We discover that trust is critical to partner selection. Cultural differences do not significantly alter the partner selection criteria for Singapore firms. Results support the view that while Chinese may depend on networks for social solidarity, social trust does extends beyond the family and is necessary for harmonious and successful joint ventures.