How constraints and knowledge impact open innovation

Laursen and Salter (2006) examined the impact of a firm's search strategy for external knowledge on innovative performance. Based on organizational learning and open innovation literature, we extend the model hypothesizing that the search strategy itself is impacted by firm context. That is, both ‘constraints on the application of firm resources’ and the ‘abundance of external knowledge’ have a direct impact on innovative performance and a firm's search strategy in terms of breadth and depth. Based on a survey of Swiss‐based firms, we find that constraints decrease and external knowledge increases innovative performance. Although constraints lead to a broader but shallower search, external knowledge is associated with the breadth and the depth of the search in a U‐shaped relationship. Copyright © 2013 John Wiley & Sons, Ltd.     

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.     

The up- and downside of collaboration in core and non-core technologies – Selective,contingent, and orchestrated openness in R&D collaborations

This paper contributes to the current debate about the “knowledge sharing-protecting” tension in R&D collaborations by introducing a new angle for analyzing this paradox. Considering the role of internal knowledge sources of the firm, the paper introduces and empirically analyses the interplay between three knowledge governance mechanisms (selective, contingent, and orchestrated openness) and the different technological fields of the firm (core, related non-core, and distant non-core technologies). Based on a unique first-hand large-scale project-level dataset from a Global 100 firm across a 10-year span, this research finds that R&D collaborations selectively conducted in firm’s related non-core technological fields promise the best innovation performance. Further, by orchestrating its projects across core and non-core technological fields in the same knowledge portfolio, the firm can leverage a network of inter-connected projects when collaborating with external partners. As such, the firm can strategically “distribute” collaboration risks across multiple projects, while optimize its access to external knowledge that it intends to get. Finally, contrary to the common assumption, this study does not find any discriminating factors against market-based partners in their contribution to innovation in both core and non-core technologies.     

Where to search for process innovations? The mediating role of absorptive capacity and its impact on process innovation

While the potential of open innovation to develop product-related improvements through the use of external knowledge sources is undeniable, our understanding of how firms become process innovators remains limited. Distinguishing between product and process innovation is important, as insights gleaned from investigating product innovation may not relate directly to the study of process innovation. This study provides new insight into open innovation and absorptive capacity by proposing the mediating role of absorptive capacity – potential and realized – on the relationship between knowledge search from external sources and process-related innovation activities. We test our model using a sample of 171 auto component suppliers in Iran, and find evidence that the learning effects of external scanning increase when a firm learns how to better manage external searches in terms of external absorptive capacity routines. Our results indicate that, while knowledge search from value chain partners is related to process innovation, knowledge search from universities and other research organizations is not, and that potential absorptive capacity mediates the relationship between external knowledge search and process innovation. These findings shed further light on the relationship between a firm’s openness and its process innovation.     

Learning from openness: The dynamics of breadth in external innovation linkages

We explore how openness in terms of external linkages generates learning effects, which enable firms to generate more innovation outputs from any given breadth of external linkages. Openness to external knowledge sources, whether through search activity or linkages to external partners in new product development, involves a process of interaction and information processing. Such activities are likely to be subject to a learning process, as firms learn which knowledge sources and collaborative linkages are most useful to their particular needs, and which partnerships are most effective in delivering innovation performance. Using panel data from Irish manufacturing plants, we find evidence of such learning effects: establishments with substantial experience of external collaborations in previous periods derive more innovation output from openness in the current period. © 2013 The Authors. Strategic Management Journal published by John Wiley & Sons Ltd.     

External knowledge search,innovative performance and productivity in the Korean ICT sector

In recent years, Korea’s Information and Communication Technology (ICT) industry has grown rapidly. The prosperity of the ICT industry has brought growing recognition that rising productivity and innovative performance have made major contributions to ensuring competitive advantage in international markets. In this context, recent studies stress the importance of external knowledge for improving both innovative performance and productivity. This paper empirically investigates the effects of firms’ external knowledge search behavior on their productivity as well as their innovative performance in the Korean ICT manufacturing sector. Based on firm-level data from the Science and Technology Policy Institute (STEPI), this study indicates that incremental innovation and productivity are both related to external knowledge search.     

When Does Search Openness Really Matter? A Contingency Study of Health‐Care Innovation Projects

Given the growing popularity of the open innovation model, it is increasingly common to source knowledge for new product ideas from a wide range of actors located outside of organizational boundaries. Such open search strategies, however, might not always be superior to their closed counterparts. Indeed, widening the scope of knowledge sourcing at the ideation stage typically comes at a price given the substantial monetary and nonmonetary costs often incurred in the process of identifying, assimilating, and utilizing external knowledge inputs. Considering both the benefits and costs of search openness, the authors develop a project‐level contingency model of open innovation. This model suggests that search openness is curvilinearly (taking an inverted U‐shape) related to new product creativity and success. They hence assume that too little as well as too much search openness at the ideation stage will be detrimental to new product outcomes. Moreover, they argue that the effectiveness of open search strategies is contingent upon the new product development (NPD) project type (typological contingency), the NPD project leader (managerial contingency), and the NPD project environment (contextual contingency). To test these propositions empirically, multi‐informant data from 62 NPD projects initiated in the English National Health Service (NHS) were collected. The econometric analyses conducted provide considerable support for a curvilinear relationship between search openness and NPD outcomes as well as for the hypothesized contingency effects. More specifically, they reveal that explorative NPD projects have more to gain from search openness at the ideation stage than their exploitative counterparts. Moreover, the project‐level payoff from search openness tends to be greater, when the project leader has substantial prior innovation and management experience, and when the immediate work environment actively supports creative endeavors. These findings are valuable for NPD practice, as they demonstrate that effective knowledge sourcing has much to contribute to NPD success. In particular, pursuing an open search strategy might not always be the best choice. Rather, each NPD project is in need of a carefully tailored search strategy, effective leadership, and a supportive climate, if the full value of external knowledge sourcing is to be captured.     

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.     

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.     

Mapping the Impact of Social Media for Innovation: The Role of Social Media in Explaining Innovation Performance in the PDMA Comparative Performance Assessment Study

Social media (SM) allow users to easily create, edit, or share content. The vast numbers of individuals that converge around sites like LinkedIn, Facebook, or Twitter embody a rich source of external knowledge that could be utilized for new product development (NPD). Complementing other channels for open innovation (OI), SM can provide access to novel information about customer needs and technological solutions unknown to the firm. Anecdotal evidence suggests that there are considerable benefits from using SM during an innovation project, but empirical evidence is scarce. Contributing to the perspective of openness in search, a number of hypotheses propose how SM as a new channel for OI can contribute to firm performance. This model is tested using data from the PDMA Comparative Performance Assessment Study, identifying factors influencing the relationship between SM and NPD performance. The findings indicate that utilizing information from SM channels can lead to higher performance, but that this link is influenced by the formalization of a firm's NPD process. This study also finds that the ability of a firm to benefit from external search in SM strongly depends on complementary internal processes when organizing and conducting this activity. Furthermore, managers have to take care when utilizing information from SM channels in radical projects, as for this kind of project only a weak significant performance contribution of SM could be found.     

Understanding the Antecedents,Contingencies, and Performance Implications of Process Innovation: A Dynamic Capabilities Perspective

This paper examines one of the most important sources of competitiveness in dynamic industries—the capability of firms to introduce process innovations. While the management of product innovation has received considerable theoretical and empirical attention in the literature, our knowledge about how firms become process innovators—and why many firms fail to do so—remains underdeveloped. In order to provide novel insights into the configuration of firms' process innovation activities and their performance implications, this paper draws on the dynamic capabilities approach. More specifically, this study aims to shed light on the antecedents, contingencies, and performance consequences of interfirm differences in process innovation success, that is, firms' propensity and effectiveness of implementing new production, supply chain, or administrative processes. Particular emphasis is placed upon the analysis of potential complementarities or substitution effects between innovation activities such as internal and external research and development, prototyping, external knowledge acquisition, and employee training. Cross‐sectional data from a large‐scale survey of German manufacturing and service firms serves as the basis for testing the hypotheses advanced in this paper. Findings suggest that by engaging in a broad range of different innovation activities, firms can indeed increase the likelihood of achieving process innovation success, which is in turn positively related to firm financial performance. Yet decreasing marginal returns to innovation activities have to be considered as process innovation propensity was found to increase with the number of activities pursued simultaneously only up to a point, after which negative marginal returns set in (inverted U‐shaped relationship). Furthermore, while environmental turbulence was found to have surprisingly little influence when it comes to translating process innovation success into firms' subsequent financial performance, industry membership as well as the nature of the innovation process (i.e., internal generation, external adoption, or cocreation of an innovation) emerged as key contingency factors. These findings have important theoretical as well as practical implications for managing new process introductions.     

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.     

An empirical examination of vacillation theory

Research summary : Since Nickerson and Zenger (2002) proposed how vacillation may lead to organizational ambidexterity, large‐sample empirical tests of their theory have been missing. In this paper, we empirically examine the performance implications of vacillation. Building upon vacillation theory, we predict that the frequency and scale of vacillation will have inverted U‐shaped relationships with firm performance. We test our hypotheses using patent‐based measures of exploration and exploitation in the context of technological innovation and knowledge search. Managerial summary : Firms often shift their focus on technological innovation and knowledge search from seeking new and novel knowledge (i.e., exploration) to extending and refining existing knowledge (i.e., exploitation) or vice versa. We examine how the frequency and scale of firms vacillating between exploration and exploitation may affect their performance. We find that both too infrequent or too frequent changes and a too small or too large scale of changes are not desirable. Copyright © 2016 John Wiley & Sons, Ltd.     

Institutional adversity,external knowledge sources,and new ventures' innovation: An institutional polycentrism theory perspective

Why do some new ventures thrive while others fail? In this study, we investigate the unique relationship between external knowledge sourcing of new ventures and its innovative outcomes, and its contextual embeddedness. The investigation is based on the Knowledge-based view and theory of institutional polycentrism across entrepreneurs, nested in different institutional contexts. Our framework generates hypothesis about the negative impact of higher levels of institutional adversity, on new venture's innovation at the national level. We then found the contingent role of adversity in institutions based on the relationship between external knowledge sourcing and new venture innovation. We examine this question using data from 28,660 entrepreneurs from 47 countries. We use Global Entrepreneurship Monitor, Freedom House, IEF, POLCON and Political Risk Services data for 2009–2013. We apply multilevel estimation framework to test our hypotheses. We find the new ventures that have high level of external knowledge sourcing tend to be more innovative: the ones that search widely through different external sources. Further, we find that the benefits to external knowledge sourcing depend on institutional environmental conditions, however new venture innovation should ensure the external knowledge sourcing are used robustly to develop a resource mechanism to deal with the institutional adversity.     

Contingent contingency: Knowledge heterogeneity and new product development performance revisited

This paper re-conceptualizes the meaning of knowledge heterogeneity—an important but under-developed collective-level concept that influences innovation. The new conceptualization extends the construct of knowledge heterogeneity beyond the traditional assessments of variability in professional background. This research further explores the quadratic relationship between knowledge heterogeneity and new product development performance. Drawing on and synthesizing knowledge clarity and uncertainty avoidance literature to consider work context, the possibility of a positive quadratic, rather than a linear or a negative quadratic, relationship between knowledge heterogeneity and innovation is suggested. This relationship is explored using data collected from 128 new product development teams from companies in knowledge-intensive and innovation-oriented industries located in Taiwan. Results are discussed in terms of the hypothesized positive quadratic relationship. The outcome of the study is discussed in terms of the influence of the knowledge structure and cultural factors, which suggest potential contingent contingencies across different contexts.     

Ambidextrous balance and channel innovation ability in Chinese business circles: The mediating effect of knowledge inertia and guanxi inertia

Drawing on organizational learning theory and literature on guanxi, this study examines how and why ambidextrous learning balance influences firm innovation capability in Chinese business circles. We propose a U-shaped relation between ambidextrous learning balance and firm innovation capability which is mediated by guanxi inertia and knowledge inertia in different ways. Specifically, ambidextrous learning balance has an inverted U-shaped impact on guanxi inertia and further influences firm innovation capability. Whereas, ambidextrous learning balance has a linear positive influence on innovation capability through a decreased level of knowledge inertia. Based on survey data collected from, The results obtained from a sample of 197 Chinese channel enterprises using SEMs analysis provide strong support for our hypotheses. In addition, the findings based on firms with unbalanced ambidextrous learning indicate that as opposed to exploratory learning, higher level of exploitative learning leads to an increase in guanxi inertia and a decrease in knowledge inertia. These conclusions reveal how ambidextrous learning balance influence innovation capability for a firm with inherent learning preference which is not discussed by the extant research. At the same time, this study fills the gap of ambidextrous learning balance by considering the influence of culture. Our work also informs foreign practitioners of the optimal ways of learning for innovation in China.     

The Innovation Value Chain in New Technology‐Based Firms: Evidence from the U.K.

Innovation is central to the survival and growth of firms, and ultimately to the health of the economies of which they are part. A clear understanding both of the processes by which firms perform innovation and the benefits which flow from innovation in terms of productivity and growth is therefore essential. This paper demonstrates the use of a conceptual framework and modeling tool, the innovation value chain (IVC), and shows how the IVC approach helps to highlight strengths and weaknesses in the innovation performance of a key group of firms—new technology‐based firms. The value of the IVC is demonstrated in showing the key interrelationships in the whole process of innovation from sourcing knowledge through product and process innovation to performance in terms of the growth and productivity outcomes of different types of innovation. The use of the IVC highlights key complementarities, such as that between internal R&D, external R&D, and other external sources of knowledge. Other important relationships are also highlighted. Skill resources matter throughout the IVC, being positively associated with external knowledge linkages and innovation success, and also having a direct influence on growth independent of the effect on innovation. A key benefit of the IVC approach is therefore its ability to highlight the roles of different factors at various stages of the knowledge–innovation–performance nexus, and to show their indirect as well as direct impact. This in turn permits both managerial and policy implications to be drawn.     

Evaluating internal and external knowledge sources in firm innovation and productivity: an industry perspective

Both internal knowledge – investment in internal R&D and information and communication technologies (ICT) as well as external knowledge – knowledge spillovers and active collaboration with partners are rapidly fostering firm productivity and innovation. In this study, we investigate the role of internal and external knowledge in firm productivity and innovation. In addition, we test interactions between investment in R&D and ICT as well as between knowledge spillovers and knowledge collaboration in their association to firm innovation and productivity. We use a recombinant innovation approach and four samples for firms in manufacturing, creative, ICT and science, and professional services industries during 2002–2014 and for pre-and post-crisis periods to perform our analysis. In addition to innovation and productivity, we also examine the role of internal and external knowledge as a conduit to the development of innovation internally and the co-creation of innovation with external partners. Our results lead to managerial and policy implications.     

Perspective: Leveraging Open Innovation through Paradox

In search of fresh ideas, firms increasingly engage with external contributors in open innovation collaborations. However, research has found that such collaborations frequently fail, and has pointed to conflicting demands of control and openness. On the one hand, firms want controlled and selective participation, clarity of purpose, and a choice of ideas based on their own current capacity and value appropriation strategies. On the other, their external contributors tend to want open and unfettered participation, the creative potential of the idea per se, and unrestricted knowledge sharing. This article proposes to shift the conceptual frame from looking at the tensions between control and openness as problems to looking at them as synergies. Drawing on the literature of open innovation and organizational paradox, this article contributes a novel perspective on open innovation that suggests how firms can leverage open innovation collaborations through paradox by combining practices based on differentiation and integration.