Chief executive scanning emphases,environmental dynamism,and manufacturing firm performance

Chief executives must allocate their scarce time for scanning efforts among relevant domains of their firms' external environment and their firms' internal circumstances. We argue that high‐performing CEOs vary their relative scanning emphases on different domains according to the level of dynamism they perceive in their external environments. The concepts of dominant logic and sector importance were used to develop predictions about which external domains and which internal domains should receive relatively more or less scanning emphasis in external environments that, overall, are more dynamic or more stable. A field survey of 105 single‐business manufacturing firms evaluated CEOs' scanning emphases and firm performance. Results indicated that, for dynamic external environments, relatively more CEO attention to the task sectors of the external environment and to innovation‐related internal functions was associated with high performance. In stable external environments, however, simultaneously increased scanning of the general sectors in the external environment and efficiency‐related internal functions produced higher performance. These relationships were strongest between relative scanning emphases among domains and sales growth. We discuss the implications of these results for researchers and practitioners. Copyright © 2003 John Wiley & Sons, Ltd.     

Workforce Composition and Innovation: How Diversity in Employees’ Ethnic and Educational Backgrounds Facilitates Firm‐Level Innovativeness

This article studies how workforce composition is related to a firm's success in introducing radical innovations. Previous studies have argued that teams composed of individuals with diverse backgrounds are able to perform more information processing and make deeper use of the information, which is important to accomplish complex tasks. We suggest that this argument can be extended to the level of the aggregate workforce of high‐technology firms. In particular, we argue that ethnic and higher education diversity within the workforce is associated with superior performance in radical innovation. Using a sample of 3,888 Swedish firms, this article demonstrates that having greater workforce diversity in terms of both ethnic background and educational disciplinary background is positively correlated to the share of a firm's turnover generated by radical innovation. Having more external collaborations does, however, seem to reduce the importance of educational background diversity. The impact of ethnic diversity is not affected by external collaboration. These findings hold after using alternative measures of dependent and independent variables, alternative sample sizes, and alternative estimation techniques. The research findings presented in this article would seem to have immediate and important practical implications. They would suggest that companies may pursue recruitment policies inspired by greater ethnic and disciplinary diversity as a way to boost the innovativeness of the organization. From a managerial perspective, it may be concluded that workforce disciplinary diversity could be potentially replaced by more external links, while ethnic diversity could not.     

An inquiry on dimensions of external technology search and their influence on technological innovations: evidence from Chinese firms

A central part of technological innovation for industrial firms involves search for new external knowledge. A well‐established stream of literature on firms' external knowledge search has demonstrated that firms investing in broader search may have a great ability to innovate. In this paper, we explore the influences of technology search on firms' technological innovation performance along three distinctive dimensions: technical, geographic, and temporal dimensions, using a unique panel data set containing information on Chinese firms that were active in technology in‐licensing and patenting during the period 2000–2009. Our findings reveal that Chinese firms' technological innovation performances are related to external technology search in quite different ways from the ones suggested in the extant literature using evidence from developed countries. We find that Chinese firms searching ‘locally’ along the technical dimension have better technological innovation performance than those searching ‘distantly’. However, when a Chinese firm in‐license relatively old (mature) technologies or those from geographically nearby areas, it will be less bounded to searching familiar technical knowledge.     

Individual differences, environmental scanning, innovation framing, and champion behavior: key predictors of project performance

Although increasing evidence points to the importance of champions for keeping product innovation ideas alive and thriving, little is known about how champions identify potential product innovation ideas, how they present these ideas to gain much needed support from key stakeholders, and their impact on innovation project performance over time. Jane M. Howell and Christine M. Shea address this knowledge gap by using measures of individual differences, environmental scanning, innovation framing and champion behavior to predict the performance of 47 product innovation projects. Champion behavior was defined as expressing confidence in the innovation, involving and motivating others to support the innovation, and persisting under adversity. Interviews with 47 champions were conducted to collect information about the innovation projects and the champions' tendency to frame the innovation as an opportunity or threat. Survey data were obtained from three sources: 47 champions provided information on their personal characteristics (locus of control and breadth of interest) and activities (environmental scanning), 47 division managers subjectively assessed project performance at two points in time, and 237 innovation team members rated the frequency of champion behavior. The results revealed that an internal locus of control orientation was positively related to framing the innovation as an opportunity, and breadth of interest was positively related to environmental scanning. Environmental scanning of documents and framing the innovation as a threat was negatively related to champion behavior, while environmental scanning through people was positively related to champion behavior. Champion behavior positively predicted project performance over a one‐year interval. Overall, the findings suggest that in scanning the environment for new ideas, the most effective source of information is the champion's personal network of people inside and outside the organization. Also, the simple labeling of an idea as a threat appears to diminish a champion's perceived influence and erode credibility in promoting an innovation. From the perspective of division managers, champions make a positive contribution to project performance over time, reinforcing the crucial role that champions play in new product development process.     

Innovation Performance in New Product Development Teams in China's Technology Ventures: The Role of Behavioral Integration Dimensions and Collective Efficacy

In emerging markets, technology ventures increasingly rely on new product development (NPD) teams to generate creative ideas and to mold these innovative ideas into streams of new products or services. However, little is known about how behavioral integration (a behavioral team process) and collective efficacy (a motivational team process) jointly facilitate or inhibit team innovation performance in emerging markets—especially in China, the world's largest emerging‐market setting with collectivist and high power distance cultures. Drawing on social cognitive theory and behavioral integration research, this article elucidates the relationships between behavioral integration dimensions (i.e., collaborative behavior, information exchange, and joint decision‐making) and innovation performance and also examines how collective efficacy moderates these relationships in China's NPD teams. Results from a sample of 96 NPD teams in China's technology ventures reveal that information exchange is positively associated with innovation performance. Collaborative behavior positively but marginally influences innovation performance, whereas joint decision‐making does not relate to innovation performance. Moreover, collective efficacy demonstrates an important moderating role. Specifically, both collaborative behavior and joint decision‐making are more positively associated with innovation performance when collective efficacy is higher. In contrast, information exchange is less positively associated with innovation performance when collective efficacy is higher. This study makes important theoretical contributions to the literature on team innovation and behavioral integration in emerging markets by offering a better understanding of how behavioral and motivational team processes jointly shape innovation performance in China's NPD teams. This study also extends social cognitive theory by identifying collective efficacy as a boundary condition for the overall effectiveness of behavioral integration dimensions. In particular, this study highlights the condition under which behavioral integration dimensions facilitate or inhibit NPD team innovation performance in China.     

Whose Innovation Performance Benefits More from External Networks: Entrepreneurial or Conservative Firms?

The primary contribution of this research is positing and empirically supporting the proposition that learning through external networks disproportionately benefits conservative, risk‐averse firms. The construct, entrepreneurial orientation (EO), is used to discriminate conservative, risk‐averse firms from proactive, risk‐seeking firms. Organizational learning theory and social capital theory are employed to support our hypotheses. Based on a study of 1978 U.S. firms, the paper suggests that the utilization of external networks (i.e., the process of learning from information, perspectives, and insights embedded in external networks) may act as a primary driver for innovation for those firms that are either not inclined and/or do not have the capabilities to adopt entrepreneurial culture. Specifically, weak EO firms' innovation performance benefits from utilizing external networks more than strong EO firms'. This research also tests for the moderating role of firm size and finds that the negative moderating effect of EO on the external network utilization–innovation performance relationship is more pronounced in small and medium sized enterprises (SMEs) than large firms.     

Goal Multiplicity and Innovation: How Social and Economic Goals Affect Open Innovation and Innovation Performance

Integrating insights from the strategic goal literature and the knowledge‐based view of the firm, this article proposes that the pursuit of social and economic strategic goals by commercial firms affects their innovation performance through different knowledge sourcing activities. The strategic goals, knowledge sourcing practices, and innovation performance of 1257 Belgian firms are investigated. Results show that both social and economic strategic goals are associated with the use of external information sources, but only the pursuit of social goals inspires firms to engage in external collaboration. No evidence is found of an inherent conflict between social and economic strategic goals. Instead, the two types of goals are independent of each other, that is, an emphasis on social goals does not preclude an emphasis on economic goals and vice versa. Moreover, firms’ external knowledge sourcing and innovation performance benefit most when strongly held social goals align with strongly held economic goals. These findings offer new insight into the nature and the effects of goal multiplicity among commercial firms. They open up a new perspective on the potential positive effects of the joint pursuit of social and economic strategic goals instead of seeing them as inherently conflicting, as past research has typically done. We illustrate how social strategic goals can deliver unique benefits to a firm, independently of and in addition to economic strategic goals. Our findings also contribute to the open innovation literature by revealing strategic goals as a driver of firms’ knowledge sourcing practices. Our findings suggest that solely emphasizing economic goals may be one reason why firms struggle to implement open innovation practices and do not reap their full benefits. The practical implications of our research are discussed.     

When Is Open Innovation Beneficial? The Role of Strategic Orientation

Various scholars have accomplished a great deal to better understand open innovation effectiveness. Case studies have detailed its performance effects, while other studies showed the effectiveness of an aspect of open innovation, such as collaboration with third parties, external technology commercialization, and cocreation. Though most studies report a positive relation between open innovation and innovation performance, some studies indicate possible negative effects. This has resulted in a call for research on what kind of organizational context suits open innovation best. This study therefore addresses two questions: (1) does performing open innovation activities lead to increased innovation performance, and to which aspects of innovation performance is open innovation most strongly related? (2) what is the moderating impact of various kinds of strategic orientation on the relation between open innovation and innovation performance? In this study, we investigate three types of strategic orientations: entrepreneurial orientation, market orientation, and resource orientation. In a survey among 223 Asian service firms, we first develop and test a comprehensive measurement scale for open innovation that captures the entire range of open innovation activities, including outside‐in activities, inside‐out activities, and coupled activities. The final scale comprises of 10 items and indicates to what extent a firm has implemented open innovation activities. Next, we study the relation between open innovation and innovation performance. The results indicate that performing open innovation activities is significantly and positively related to all four dimensions of innovation performance: new product/service innovativeness, new product/service success, customer performance, and financial performance. The impact of open innovation is not limited to a particular aspect of innovation performance; it positively affects a broad range of innovation performance indicators. Though open innovation is positively related to all four dimensions of innovation performance, the effect sizes are not equal. The impact on new service innovativeness and financial performance is relatively stronger. Regarding the influence of a firm's strategic orientation, we find that all significant moderation effects are positive. This suggests that, in general, having a more explicit strategic orientation enhances the effectiveness of open innovation. When comparing the three strategic orientations, entrepreneurial orientation strengthens the positive performance effects of open innovation significantly more than market orientation and resource orientation do. In turn, market orientation has a significantly stronger moderation effect than resource orientation. These findings provide empirical evidence of the context dependency of open innovation. Especially an entrepreneurial orientation, which is associated with proactive and entrepreneurial processes, seems to create a fertile setting for open innovation.     

Making Up Is Hard to Do: Knowledge Acquisition Strategies and the Nature of New Product Innovation

Innovation creates significant challenges for firms in high‐technology industries. This article examines how the use of external knowledge acquired from mergers and acquisitions (M&As) and joint ventures (JVs) influence the nature of innovative competence in the global pharmaceutical industry. We create a unique database on never‐before approved products that measure the scientific merit of new, exploratory product innovations, ranging from radical to incremental. We then follow their market success by recording the number of new exploitative product innovations that stem from these product innovations and that are later approved and subsequently marketed. Using a large data set spanning a 15‐year period, we find that firms were able to “make up” for their lack of exploitation or exploration innovative capabilities through the use of M&As and JVs. These external knowledge acquisition strategies were found to overcome internal processes that otherwise could cause firms to overemphasize exploitation over exploration and vice versa. Our findings suggest that acquiring external knowledge via M&As is associated with diminished exploratory product innovation, while assimilating external knowledge sourced from JVs is associated with a reduction in new exploitative product innovation.     

The ambidextrous patterns for managing technological and marketing innovation

Built upon organizational ambidexterity theory, this study provides a new perspective in managing technological and marketing innovation. It distinguishes between simultaneous and sequential patterns of innovation within a firm and takes a longitudinal approach in examining the differential effects of these two ambidextrous patterns of innovation on firm performance. Further, this study investigates the contingent roles of internal product scope and external market dynamism on the above relationships. Using panel data from 158 U.S. firms over 26 years, we find that both simultaneous and sequential patterns are positively associated with firm performance. Further, our findings indicate that a broader product scope strengthens the effect of the simultaneous pattern on firm performance, while weakening that of the sequential pattern on firm performance. When market dynamism increases, the effect of the simultaneous pattern on firm performance is strengthened, while that of the sequential pattern is weakened. Our findings offer managers guidance on the choice of innovation patterns under certain contingencies and how to better manage technological and marketing innovation over time.     

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.     

Do External Knowledge Sourcing Modes Matter for Service Innovation? Empirical Evidence from South Korean Service Firms

To source external knowledge, firms in the service area use various sourcing modes simultaneously suitable for their internal needs or external environments. Each external knowledge sourcing mode has distinctive characteristics, and as such, they can offer different advantages and/or disadvantages to the firms. Thus, the effects of external knowledge sourcing on service innovation may vary depending on the sourcing modes. The current study aims to empirically examine the different effects of various external knowledge sourcing modes on service innovation. The study identifies three external knowledge sourcing modes: joint development, technology purchasing, and external information acquisition. Three hypotheses are established to examine the relationships between the extent of utilizing each mode and service innovation performance in terms of new service introduction. The data for analysis are selected from the “Korean Innovation Survey 2006: Service Sector” (KIS 2006). It is regarded as South Korea's version of the Community Innovation Survey (CIS). The KIS 2006 data set covers joint development, technology purchasing, and external information acquisition activities of corporations in the service sector in South Korea. The study empirically analyzes the data set using a negative binomial regression model. The results first demonstrate that the extent of the joint development has an inverted U‐shaped relationship with the service innovation performance. Second, the results indicate that, on the other hand, service innovation performance decreases with the increase to the extent of the technology purchasing when the extent is below the threshold. On the other hand, it increases with the increase to the extent of the technology purchasing; this occurs when the extent exceeds the threshold. Third, the results show that external information acquisition has a positive effect on service innovation performance. These findings support that the extent of utilizing each mode has different relationships with service innovation performance. The findings suggest that service firms need to utilize joint development at a moderate level, active technology purchasing, and as much external information acquisition as possible to maximize service innovation performance. In practice, this finding can help managers of service firms select appropriate external knowledge sourcing modes and determine the optimum level of use for each mode. This study also can help firms build up strategies for external knowledge sourcing.     

Open Innovation in Practice: Goal Complementarity and Closed NPD Networks to Explain Differences in Innovation Performance for SMEs in the Medical Devices Sector

Cooperation with other organizations increases the innovation performance of organization, especially for small and medium‐sized enterprises (SMEs) as they encounter liabilities of “smallness” (e.g., limited financial resources, and manpower). In the medical devices sector, collaboration with external partners for NPD becomes increasingly important due to the complexity of the products and the development process. About 80% of companies in this sector are SMEs. These companies operate in a highly regulated sector, which affects the organization of the external network required for the new product development (NPD) process. SMEs are practicing extensively open innovation activities, but in practice face a number of barriers in trying to apply open innovation. This paper examines multiple network characteristics simultaneously in relation to innovation performance and thereby aligns with and builds further on configuration theory. Configuration theory posits that for each set of network characteristics, there exists an ideal set of organizational characteristics that yields superior performance. In this research, the systems approach to fit is used. Fit is high to the extent that an organization is similar to an ideal profile along multiple dimensions. This ideal profile represents the network profile that the 15% highest performing companies use. It is argued that the smaller the distance between the ideal profile and the network profile that is used, the higher the performance. The objective of this research is (1) to examine the relation between the ideal profile and innovation performance and (2) to examine which organization of the network profile is related to high innovation performance. Quantitative survey data (n = 60, response rate 61.9%) form the core of this research. The quantitative results are clarified and have been triangulated with qualitative interview data (n = 50). Our findings suggest the presence of an “ideal” NPD network profile (in terms of goal complementarity, resource complementarity, fairness trust, reliability trust, and network position strength): the more a company's NPD network profile differs from this ideal profile, the lower the innovation performance. In addition, the results of our study indicate that the NPD network profiles of successful and less successful SMEs in the medical devices sector significantly differ in terms of “goal complementarity,” while this is less the case for trust and resource complementarity labeled distinctive by previous research. Finally, results show that a relatively closed, focused, and consistent “business‐like” NPD networking approach, which is characterized by result orientation and professionalism, is related to high innovation performance. It is recommended that SMEs in the medical devices sector aiming to distinguish themselves from competitors in terms of innovation performance focus on goal complementarity while adopting such a business‐like attitude toward their NPD network partners.     

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.     

Process Technology Sourcing and the Innovation Context

We employ transaction cost economics (TCE) and inspiration from technology innovation management to advance a model of technology sourcing governance and performance in the international environment. We hypothesize that the innovation context moderates the relationship between process technology sourcing and performance. The innovation context is defined as external factors reflected in the appropriability regime and whether the industry is characterized by a dominant design. Moreover, we suggest that, contingent upon the innovation context, subsidiaries prefer internal development to secure a positional advantage. A multi‐industry sample of 105 subsidiaries is used to test the hypotheses. We find support for a contextual model linking process technology sourcing strategy to subsidiary performance. Motivated by TCE, we find tentative evidence for a preference order of technology sourcing beginning with internal development and ending with market sourcing, particularly when the appropriability regime is weak.     

The Impact of a Creativity‐supporting Work Environment on a Firm's Product Innovation Performance

Many scholars and practitioners have suggested that a creativity‐supporting work environment contributes to a firm's product innovation performance. Although there is evidence that such an environment enhances innovative behavior at individual level, very few studies address the effect of a creativity‐supporting work environment on product innovation performance at firm level, and the results are inconsistent. This paper examines the relationship between a firm's creativity‐supporting work environment and a firm's product innovation performance in a sample of 103 firms. For measuring a firm's creativity‐supporting work environment, a comprehensive and creativity‐focused framework is used. The framework consists of 9 social‐organizational and 12 physical work environment characteristics that are likely to enhance employee creativity. These characteristics contribute to the firm's overall work environment that supports creativity. The firm's product innovation performance is defined by two distinct concepts: new product productivity (NP productivity), which is the extent to which the firm introduces new products to the market, and new product success (NP success), which is the percentage of the firm's sales from new products. In most firms, different knowledgeable informants provided the data for the variables. The results show that firms with creativity‐supporting work environments introduce more new products to the market (NP productivity), and have more NP success in terms of new product sales (NP success). NP productivity partly mediates the relationship between creativity‐supporting work environment and NP success. The mediation model shows that the two paths from a creativity‐supporting work environment to NP success are about equally important: the direct path between creativity‐supporting work environment and NP success has a coefficient of .22, and the coefficient of the indirect path via NP productivity is .23. The creativity‐supporting work environment framework can be used in managerial practice to enhance employee creativity for product innovation. It allows applying a flexible and broad approach by influencing both social‐organizational and physical characteristics of the work environment.     

Transformational Leadership and Organizational Innovation: The Roles of Internal and External Support for Innovation*

Leadership has been suggested to be an important factor affecting innovation. A number of studies have shown that transformational leadership positively influences organizational innovation. However, there is a lack of studies examining the contextual conditions under which this effect occurs or is augmented. Therefore, this study aimed to investigate the impact of transformational leadership on organizational innovation and to determine whether internal and external support for innovation as contextual conditions influence this effect. Organizational innovation was conceptualized as the tendency of the organization to develop new or improved products or services and its success in bringing those products or services to the market. Transformational leadership was hypothesized to have a positive influence on organizational innovation. Furthermore, this effect was proposed to be moderated by internal support for innovation, which refers to an innovation supporting climate and adequate resources allocated to innovation. Support received from external organizations for the purposes of knowledge and resource acquisition was also proposed to moderate the relationship between transformational leadership and organizational innovation. To test these hypotheses, data were collected from 163 research and development (R&D) employees and managers of 43 micro‐ and small‐sized Turkish entrepreneurial software development companies. Two separate questionnaires were used to collect the data. Employees' questionnaires included measures of transformational leadership and internal support for innovation, whereas managers' questionnaires included questions about product innovations of their companies and the degree of support they received from external institutions. Organizational innovation was measured with a market‐oriented criterion developed specifically for developing countries and newly developing industries. Hierarchical regression analysis was used to test the hypothesized effects. The results of the analysis provided support for the positive influence of transformational leadership on organizational innovation. This finding is significant because this positive effect was identified in micro‐ and small‐sized companies, whereas previous research focused mainly on large companies. In addition, external support for innovation was found to significantly moderate this effect. Specifically, the relationship between transformational leadership and organizational innovation was stronger when external support was at high levels than when there was no external support. This study is the first to investigate and empirically show the importance of this contextual condition for organizational innovation. The moderating effect of internal support for innovation, however, was not significant. This study shows that transformational leadership is an important determinant of organizational innovation and encourages managers to engage in transformational leadership behaviors to promote organizational innovation. In line with this, transformational leadership, which is heavily suggested to be a subject of management training and development in developed countries, should also be incorporated into such programs in developing countries. Moreover, this study highlights the importance of external support in the organizational innovation process. The results suggest that technical and financial support received from outside the organization can be a more important contextual influence in boosting up innovation than an innovation‐supporting internal climate. Therefore, managers, particularly of micro‐ and small‐sized companies, should play external roles such as boundary spanning and should build relationships with external institutions that provide technical and financial support. The findings of this study are especially important for managers of companies that plan to or currently operate in countries with developing economies.     

How functional involvement affects the transformation of external knowledge into innovation outcomes

This paper aims at investigating organizational mechanisms through which firms involved in open innovation initiatives can acquire external knowledge, integrate it with the existing one residing in the diverse functional areas, and transform it into innovation outcomes. Following the knowledge transformation perspective, we use the notions of early‐stage and late‐stage functional involvement, and explain their mediating effects on a firm's innovation performance. Based on a sample of 131 international firms involved in open innovation projects, we find that high involvement of functions related to the early stage of the innovation process – notably new concept generation, research and development, and design and testing – fully mediates the effect of external knowledge transfer on innovation performance. Similarly, high involvement of functions related to the late stage of the innovation process – notably manufacturing, marketing, distribution, and logistics – has significant indirect effect on innovation performance but lower than that of early‐stage functional involvement. Furthermore, the empirical research reveals that early‐stage functional involvement mediates the positive effect of external knowledge transfer on late‐stage functional involvement. Theoretical and practical implications of our findings are discussed.     

Complements or Substitutes? Internal Technological Strength,Competitor Alliance Participation,and Innovation Development

While a firm can choose to develop an innovation internally or externally, the internal knowledge development and external knowledge acquisition tend to interact with each other in the innovation process. The present study examines whether internal technological strength and external competitor alliance participation serve as complements or substitutes in innovation development. Built on the knowledge‐based view, this study offers a contingency perspective on the nature of knowledge integration between internal technological strength and external alliance relationships, and how they jointly influence radical and incremental innovation differently. Adopting a random effect negative binomial model specification, a panel data set of 64 pharmaceutical firms over a 15‐year period were used to test the hypothesized effects. The findings indicate that internal technological knowledge strength has an inverted U‐shaped relationship with radical and incremental innovation. More importantly, the findings also demonstrate that the combined effect of internal and external sources of innovation can have differential effects on radical and incremental innovation development. Specifically, competitor alliance participation strengthens the effect of internal technological strength on incremental product innovation while it weakens the above effect on radical product innovation. This suggests that internal and external sources of innovation may complement each other for incremental innovation while they may represent trade‐offs for radical innovation development. The above findings provide empirical evidence for the complexity of pursuing organizational ambidexterity in innovation generation and highlight the importance of balancing the internal and external knowledge sources in pursuing innovation.     

Managing for stakeholders,stakeholder utility functions,and competitive advantage

A firm that manages for stakeholders allocates more resources to satisfy the needs and demands of its legitimate stakeholders than would be necessary to simply retain their willful participation in the firm's productive activities. We explain why this sort of behavior unlocks additional potential for value creation, as well as the conditions that either facilitate or disrupt the value‐creation process. Firms that manage for stakeholders develop trusting relationships with them based on principles of distributional, procedural, and interactional justice. Under these conditions, stakeholders are more likely to share nuanced information regarding their utility functions, thereby increasing the ability of the firm to allocate its resources to areas that will best satisfy them (thus increasing demand for business transactions with the firm). In addition, this information can spur innovation, as well as allow the firm to deal better with changes in the environment. Competitive advantages stemming from a managing‐for‐stakeholders approach are argued to be sustainable because they are associated with path dependence and causal ambiguity. These explanations provide a strong rationale for including stakeholder theory in the discussion of firm competitiveness and performance. Copyright © 2009 John Wiley & Sons, Ltd.