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.     

Product and environmental social performance: Varying effect on firm performance

Corporate social performance (CSP) consists of actions in different domains that vary in the information they provide stakeholders, and hence, in their effect on firm performance. To demonstrate this, the authors examine the impact of CSP on firm performance in two areas—the product and the environment, referred to as product social performance (PSP) and environmental social performance (ESP), respectively. PSP has a stronger positive impact on firm performance compared to ESP. The findings using disaggregated measures of PSP and ESP indicate negativity bias in that PSP weakness has a stronger negative impact on firm performance compared to PSP strength. Copyright © 2013 John Wiley & Sons, Ltd.     

Social capital and its effect on networked firm innovation and competitiveness

International and local policymakers have repeatedly encouraged the development of clusters—a dense geographic concentration of interconnected businesses—to boost competitiveness at both the firm and regional levels, as well as foster innovation and new product development. Following this trend, many initiatives have started to provide services and infrastructure that can facilitate the establishment of formal and informal ties between firms, local institutions or research centres, as well as upgrade the stock of human and intellectual capital. In this scenario, the present study empirically documents the effects of an innovation network, established by a regional government institution, on the participating firms. In particular, firm-level primary data, derived from the participants of “Polo di Innovazione ICT - Abruzzo” in Italy, empirically support how the cognitive, structural and relational dimensions of the social capital developed within a cluster initiative affect the performance of participating firms, unveiling a negative moderation effect arising from firms' involvement in the cluster program.     

Competencies and firm performance: examining the causal ambiguity paradox

Resource‐based theory argues that resources must be valuable, rare, inimitable, and lack substitutes to confer competitive advantage. Inimitability is a lynchpin of resource‐based theory and central to understanding the sustainability of competitive advantage. Although scholars recognize a positive relationship between causal ambiguity and inimitability, the relationship among critical resources called competencies, causal ambiguity, and firm performance remains an unresolved conundrum. One perspective suggests that causal ambiguity regarding competencies and performance is necessary among internal and external managers for sustainable competitive advantage because it severely limits imitation. Causal ambiguity, therefore, enhances firm performance. Another view holds that causal ambiguity places a constraint on the transfer and leveraging of these competencies within a firm. In this case, causal ambiguity may adversely influence firm performance. This paper takes a resource‐based view to develop and test hypotheses that relate managers' perceptions of causal ambiguity to their firm's performance. The hypotheses examine relationships between firm performance and (1) causal ambiguity regarding the link between competencies and competitive advantage, and (2) causally ambiguous characteristics of competencies. Research involving 224 executives in 17 organizations provides valuable insights into the relationships between causal ambiguity and firm performance. A model is then developed based on these findings. Particular consideration is given to the differing ways top and middle managers in a firm may experience causal ambiguity and to how these differences may be understood and managed. Copyright © 2001 John Wiley & Sons, Ltd.     

Effects of innovation types on firm performance

Innovation is broadly seen as an essential component of competitiveness, embedded in the organizational structures, processes, products and services within a firm. The objective of this paper is to explore the effects of the organizational, process, product and marketing innovations on the different aspects of firm performance, including innovative, production, market and financial performances, based on an empirical study covering 184 manufacturing firms in Turkey. A theoretical framework is empirically tested identifying the relationships amid innovations and firm performance through an integrated innovation-performance analysis. The results reveal the positive effects of innovations on firm performance in manufacturing industries.     

Learning orientation, firm innovation capability, and firm performance

Contemporary organizations require a strong learning orientation to gain competitive advantage. Based on in-depth interviews with senior executives and a review of the literature, the present investigation delineates four components of learning orientation: commitment to learning, shared vision, open-mindedness, and intraorganizational knowledge sharing. A framework is tested using data from a broad spectrum of US industries. Learning orientation is conceptualized as a second-order construct. Its effect on firm innovativeness, which in turn affects firm performance, is examined. The results generally support theoretical predictions, and some interesting findings emerge.     

Partners' centrality diversity and firm innovation performance: Evidence from China

While most studies of firm innovation with a social network perspective have focused on the focal firm's network structure, we explore the value of second-order social capital by examining partners' network structure to better understand firm innovation. Specifically, we examine how centrality diversity of the focal firm's network partners affects its innovation performance. A longitudinal study of Chinese publicly listed manufacturing firms from 2000 to 2016 indicates that partners' centrality diversity in a firm's board interlock network is positively related to that firm's innovation performance. We also find that the focal firm's knowledge breadth weakens the effect of partners' centrality diversity on innovation performance for the focal firm, while the proportion of non-independent ties between the focal firm and its network partners strengthens the effect.     

Configurations of social media-enabled strategies for open innovation,firm performance,and their barriers to adoption

The use of social media offers tremendous innovation potential. Yet, while current research emphasizes success stories, little is known about how firms can leverage the full potential of their social media use for open innovation. In this paper, the authors address this gap by conducting a configurational analysis to develop an integrative taxonomy of social media-enabled strategies for open innovation. This analysis stems from the integration of internal and external variables such as social media communication activities, organizational innovation seekers, potential innovation providers, the stages of the open innovation process, and their relationship with different performance outcomes and barriers to social media adoption for open innovation. Through an empirical study of 337 firms based in eight countries, four clusters have been identified that are characterized as distinct strategies: “marketing semi-open innovators,” “cross-department semi-open innovators,” “cross-department full process semi-open innovators” and “broad adopters open innovators.” The findings reveal the trade-offs associated with different strategies for implementing social media for open innovation and provide insights of the use of these strategies. By doing so, they suggest a more nuanced approach that contrasts with the traditionally positive (or even rosy) depiction of the effects of social media on open innovation. Accordingly, managers are encouraged to contemplate their organizational competencies, capabilities, and their strategic intent when drafting social media strategies for open innovation. Selective approaches, along with greater adoption leading to greater benefits, are shown to be more rewarding than a middle way that spreads things too thin. Avenues for further research include qualitative explorations of the trajectories unfolding through implementing social media strategies for innovation activities and the use of objective performance measures rather than subjective perceptions from informants to understand the complex relationships between social media adoption and performance.     

Industry cognitive distance in alliances and firm innovation performance

This paper focuses on the role of industry cognitive distance in innovation alliances on firm innovation performance. Drawing from the literature on technological cognitive distance in alliances, we elaborate on the role of industry cognitive distance between partners and its impact on managerial attention to investigate the role of numbers of alliances of low (intra-industry) and high (inter-industry) industry cognitive distance on firm innovation performance. Intra-industry alliances offer lower opportunities for innovation compared to inter-industry alliances and are less demanding on firm management due to higher cognitive similarity between partners from the same industry. We propose that trade-offs between innovation opportunities and management efforts result in an inverted U and a U-shaped relationship between the number of intra- and inter-industry alliances and innovation performance, respectively. We find support for both hypotheses in the context of the UK bio-pharmaceutical sector.     

Staff localization and environmental uncertainty on firm performance in China

This paper examined the form of the localization–performance relationship as moderated by environmental uncertainty. We postulated that the positive impact of staff localization on firm performance only continues to a certain point. Beyond this point, the costs of a high degree of staff localization outweigh the benefits. The negative effect of an increase in localization beyond an optimal point is expected to be stronger under the condition of high environmental uncertainty. Both the curvilinear relationship and the moderating effect of environmental uncertainty are confirmed through the survey results of 111 MNC subsidiaries operating in China. The result suggests that MNCs should pay particular attention to balance their deployment of local staff and expatriates in their international expansion.     

Changes in firm knowledge couplings and firm innovation performance: The moderating role of technological complexity

We investigate the effect of changes in a firm's knowledge couplings on its innovation performance. We develop arguments to explain how changes in couplings among existing knowledge domains and those between new and existing knowledge domains affect the generation of valuable inventions. We also examine how observed domain complexity, an indicator of the inherent interdependencies among knowledge domains, moderates the effects of changes in a firm's knowledge couplings on innovation performance. Our results suggest that a change in couplings among existing knowledge domains hurts innovation outcomes, but not when the degree of domain complexity is high, whereas coupling new and existing knowledge domains leads to improved outcomes, but not when the degree of domain complexity is high. Copyright © 2013 John Wiley & Sons, Ltd.     

Supplier traits for better customer firm innovation performance

Previous research on embedded ties with suppliers in an innovation context has ignored the need for customer firms to assess and select suppliers on the basis of market orientation strategies and relationship marketing attributes. To address this void, this study investigates the effects of suppliers' downstream customer orientation and supplier-customer homophily (i.e., similarity of the supplier and the customer) on the customers' innovation performance. Data pertaining to new product development projects with contributions from supplier firms was collected on both sides of the supplier-customer dyad. The analysis shows that downstream customer orientation and supplier-customer homophily have a significant impact on the customer firms' new product efficiency (i.e., project cost and project speed) and new product effectiveness (i.e., innovativeness), which in turn positively influence new product performance in terms of profitability, market share, and growth.     

Challenges of open innovation: the paradox of firm investment in open-source software

Open innovation is a powerful framework encompassing the generation, capture, and employment of intellectual property at the firm level. We identify three fundamental challenges for firms in applying the concept of open innovation: finding creative ways to exploit internal innovation, incorporating external innovation into internal development, and motivating outsiders to supply an ongoing stream of external innovations. This latter challenge involves a paradox, why would firms spend money on R&D efforts if the results of these efforts are available to rival firms? To explore these challenges, we examine the activity of firms in open‐source software to support their innovation strategies. Firms involved in open‐source software often make investments that will be shared with real and potential rivals. We identify four strategies firms employ – pooled R&D/product development, spinouts, selling complements and attracting donated complements – and discuss how they address the three key challenges of open innovation. We conclude with suggestions for how similar strategies may apply in other industries and offer some possible avenues for future research on open innovation.     

The effect of CEOs on firm performance

The extent to which CEOs influence firm performance is fundamental to scholarly understanding of how organizations work; yet, this linkage is poorly understood. Previous empirical efforts to examine the link between CEOs and firm performance using variance decomposition, while provocative, nevertheless suffer from methodological problems that systematically understate the relative impact of CEOs on firm performance compared to industry and firm effects. This study addresses these methodological problems and reexamines the percentage of the variance in firm performance explained by heterogeneity in CEOs. The results of this study suggest that in certain settings the ‘CEO effect’ on corporate‐parent performance is substantially more important than that of industry and firm effects, but only moderately more important than industry and firm effects on business‐segment performance. Copyright © 2008 John Wiley & Sons, Ltd.     

Inside-out and outside-in orientations: A meta-analysis of orientation's effects on innovation and firm performance

The inside-out and outside-in orientations place differing levels of emphasis on internal versus external resources and capabilities as sources of competitive advantage. While the inside-out orientation primarily considers organizational resources, followed by competitors and customers (implicitly), the outside-in orientation appears to reverse the order by first examining customers and competitors and then the degree to which the firm responds to them, implicitly addressing organizational resources. Existing empirical evidence does not clarify the comparative effects of inside-out and out-side in orientations on innovation performance. This paper draws on 232 independent studies (N = 38,051) analyzed systematically through a quantitative meta-analytic synthesis in order to develop a detailed contextualized elaboration of the relationships between the inside-out and outside-in orientations and innovation performance. Going beyond the direct effects, we also extend the literature by investigating the moderating effects of industry type (high-tech vs. low-tech), economic development (developed vs. developing countries), and cultural context (collectivist vs. individualist cultures). Our findings shed light on the relative value of inside-out and outside-in orientation for innovation performance, the direct and indirect effects of the two orientations on firm performance, and the conditions under which the effectiveness of each is enhanced.     

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.     

Reconfiguration,restructuring and firm performance: Dynamic capabilities and environmental dynamism

Research summary: Reorganization has been proposed as a key dynamic capability. This study compares the performance outcomes of two forms of reorganization, differing in their pervasiveness: organizational restructuring and organizational reconfiguration. Our dynamic panel data analysis of large U.S. corporations between 1985 and 2004 finds contrasting performance outcomes for these two forms of reorganization: in general, the more pervasive restructuring is associated with positive performance outcomes, while the more limited reconfiguration is associated with negative performance outcomes. However, outcomes vary by environment. Consistent with dynamic capabilities theory, we find evidence that in dynamic environments reconfiguration outcomes turn positive, while restructuring outcomes turn negative. We discuss implications for dynamic capabilities theory and managerial policy. Managerial summary: Firms need to reorganize in order to adapt to change. This study compares the financial performance consequences of two forms of reorganization: organizational restructurings and organizational reconfigurations. Restructurings involve fundamental change in organizational principles and are typically irregular; reconfigurations involve incremental change and are frequent. Examining a set of large U.S. corporations, we find these two forms of reorganization have contrasting financial consequences, depending on context. In the general case, fundamental restructurings have positive consequences, while incremental reconfigurations have negative consequences. However, this general result reverses in specifically dynamic environments, where reconfigurations are positive financially, while restructurings are negative. We conclude that the relative frequency of reconfigurations helps adaptation in dynamic environments. Managers should choose forms of reorganization according to the rate of environmental change. Copyright © 2016 John Wiley & Sons, Ltd.     

Vertical integration,innovation, and alliance portfolio size: Implications for firm performance

We examine the consequences of alliance portfolio configuration by focusing on contingencies that affect the impact of alliance portfolio size on innovation and financial performance. While increasing alliance portfolio size is expected to positively impact innovation and financial performance, we propose that, at high levels of innovation of the focal firm, increasing alliance portfolio size dampens financial performance. We also propose that firm boundaries moderate the impact of alliance portfolio size on innovation and financial performance differently. Specifically, vertically integrated firms benefit less (more) than their vertically specialized counterparts in leveraging higher innovation (financial) performance with increasing alliance portfolio size. Our analysis suggests that both vertical scope and innovation levels of the firm play an important role in understanding how alliance portfolios impact performance. Copyright © 2013 John Wiley & Sons, Ltd.     

From crisis to opportunity: environmental jolt,corporate acquisitions,and firm performance

This study incorporates the external environmental context into the study of corporate acquisitions by examining the performance implications of corporate acquisitions during an environmental jolt that alters the levels of environmental munificence. We posit that compared to the periods before and after an environmental jolt, corporate acquisitions during a jolt would be positively related to firm performance. Furthermore, we suggest that organizational slack would improve firm performance and accentuate the positive relationship between corporate acquisitions and firm performance during an environmental jolt; however, it would have negative impact on firm performance and make the acquisition‐performance relationship more negative before and after a jolt. Using the Asian Economic Crisis as a natural experiment, we found general support for our core arguments based on a sample of firms from Hong Kong and Singapore. Our work demonstrates that firms can capitalize on the opportunities created by the changes in an environmental jolt. Copyright © 2009 John Wiley & Sons, Ltd.