When purchasing professional services supports innovation

This paper explores the potential contribution that purchasing KIBS may have on innovation at the buying firm. It integrates the results of a systematic literature review on purchasing KIBS with literatures respectively on purchasing and KIBS contribution to innovation. Based on the outcomes of an extensive study of the literature, a theoretical framework is proposed in order to understand what could boost innovation outcomes of purchasing KIBS, especially for the buying firms. The framework suggests observing the KIBS triad configuration, i.e. the relationship between KIBS providers, the purchasing function and the user area within the buying firm, and its contingencies and characteristics. Overall, the paper suggests that the way KIBS are purchased can influence their effect on the innovation they generate, offers insights on aspects that need to be considered to increase potential innovation outcomes, and draws attention to the strategic role that purchasing can play in this context. In this way, it moves beyond the debate on purchasing involvement in NPD (new product development) and shows another domain (KIBS services) in which purchasing can contribute to the development of innovation.     

How the performance rationales of organisations providing farm advice explain persistent difficulties in addressing societal goals in agriculture

This article posits that an economic analysis of the full diversity of organisations providing agricultural advice is needed to explore how societal issues related to environment and occupational health are addressed in the provision of such advice. Our theoretical framework draws on existing research in institutional economics applied to services, in particular to Knowledge Intensive Business Services (KIBS). The methodology is based on a case study, the French seed potato supply chain. The results consider all the KIBS suppliers that deliver advice to farmers in the supply chain. They demonstrate the importance of organisations (linked to upstream and downstream industries) that are often neglected in studies on the pluralism of farm advisory services. Four main types of KIBS are described: client-owned advisory organisations; integrated services where service are developed primarily to accompany a commercial activity; consultancy firms; and parastatals. Each of them design both front-office and back-office service activities, according to their own profitability objectives. The analysis of the performance rationale of these different types of KIBS organisations provides an in-depth understanding of their economic strategies and the reasons why they address – or ignore – the possible adverse effects of their activity on occupational health and the environment. In such a context, public policy seems necessary to frame collective action and integrate environment and human health issues into farm advice. The conditions of efficiency of such interventions are discussed.     

Exploring the contribution of innovation intermediaries to the new product development (NPD) process: a typology and an empirical study

In the ‘knowledge economy’ upheld by the European Lisbon strategy, knowledge‐intensive services are considered a key driver for innovation and competitiveness. A category of knowledge‐intensive services that has become of utmost importance in the last few decades is new product development (NPD) services, which interconnect distant knowledge domains with the client firms. In addition to NPD service providers, web‐based innovation intermediaries have started to help innovative firms access dispersed bodies of knowledge. Despite the heterogeneity of their characteristics, however, a clear typology of the strategies used by traditional NPD service providers and web‐based intermediaries to interact with their knowledge sources and with their clients is missing. This typology would be very useful for those firms that are willing to collaborate with innovation intermediaries because it could highlight the typologies of NPD problems different intermediaries are apt to address and the managerial challenges that working with them entails. Developing such a classification framework is the main goal of this paper. The typology proposed in this paper suggests that innovation intermediaries should be distinguished based on the following: (1) the way they access their distributed knowledge sources and (2) the way they deliver value to their clients. By combining these two dimensions, four categories of innovation intermediaries are identified, which are named brokers, mediators, collectors and connectors. A multiple case study analysis involving four innovation intermediaries and 12 of their clients is presented in the paper. The analysis provides exploratory insights into (1) the typologies of NPD problems that each class of intermediaries addresses and (2) the managerial challenges that working with each of them entails. These preliminary findings call for further theoretical and empirical research into the complex interaction among innovation intermediaries, their dispersed sources of knowledge and their clients.     

Product–service innovation and performance: the role of collaborative partnerships and R&D intensity

Treating the intersection of the strategic partnerships, R&D intensity and servitisation literatures, this study explores empirically whether external collaborative service development and provision and industrial R&D intensity help to unpack the complex relation between product–service innovation (servitisation) and performance. We argue that manufacturing firms implementing services benefit from strategic partnerships with Knowledge‐Intensive Business Service (KIBS) firms. KIBS partnering provides opportunities for downsizing, externalising risks and sharing knowledge. Additionally, manufacturers in R&D‐intensive industries are more likely to benefit from implementing service provision than firms in other sectors because of industry dynamics and reduced customer uncertainty. The study surveys executives in 370 large manufacturers worldwide. Results reinforce the importance of concentric strategic partnerships to successful product–service innovation in high R&D industries.     

Innovation Management Practices Compared: The Example of Project‐Based Firms*

The importance of project‐based firms is increasing, as they fulfill the growing demands for complex integrated systems and knowledge‐intensive services. While project‐based firms are generally strong in innovating their clients' systems and processes, they seem to be less successful in innovating their own products or services. The reasons behind this are the focus of this paper. The characteristics of project‐based firms are investigated, how these affect management practices for innovation projects, and the influence of these practices on project performance. Using survey data of 203 Dutch firms in the construction, engineering, information technology, and related industries, differences in characteristics between project‐based and nonproject‐based firms are identified. Project‐based firms are distinguished from nonproject‐based firms on the basis of organizational configuration, the complexity of the operational process, and the project management capabilities of the firm. Project‐based firms also differ with regard to their level of collaboration and their innovation strategy, but not in the level of autonomy. A comparison of 135 innovation projects in 96 of the firms shows that project‐based firms do not manage their innovation projects different from other firms. However, the effects of specific management practices on project performance are different, particularly the effects of planning, multidisciplinary teams and heavyweight project leaders. Differences in firm characteristics provide an explanation for the findings. The implication for the innovation management literature is that “best” practices for innovation management are firm dependent.     

Knowledge spillovers: cooperation between universities and KIBS

Knowledge is increasingly perceived as a fulcral factor to company competitiveness. As the transfer of knowledge is one of the key functions of knowledge intensive business services (KIBS), this research seeks to analyse how the transfer of knowledge takes place between the higher education sector and KIBS type firms. The empirical results show that cooperation between KIBS and universities occurs irrespective of the typology (whether professional or technological in focus). We also empirically establish how geographic proximity is the factor bearing greatest influence over cooperation while such cooperation proves to have a positive impact on the company capacity to innovate. We furthermore find that this innovation capacity also drives a positive company financial performance.     

Innovation support for new technology-based firms: the Swedish Teknopol approach

Small and medium sized firms in general and new technology-based firms in particular, serve as promoters of future economical growth. Therefore, it is of crucial importance to understand and satisfy their needs for innovation support services in regard to both the type of service and quality of delivery (e.g. confidentiality, speed).¹ Drawing upon a database of 259 new technology-based firms (NTBF) and 106 researchers, we have identified four needs bundles: marketing, technology, financing and soft service support. We have evaluated the effectiveness of the Swedish Teknopol scheme to meet these needs based upon 35 in-depth interviews with NTBFs. The conclusions of the evaluation are presented both for policy makers and NTBF managers.     

Incumbents in a dynamic Internet related services market: Does customer and competitive orientation hinder or help performance?

The Internet challenges many incumbent firms to adapt their marketing strategies by developing and offering new products involving Internet technology. Existing literature on market orientation and performance of services suggests that market orientation, and its components, are likely to facilitate effective adaptation. In contrast, the marketing innovation literature suggests market orientation may be too reactive and inhibit effective adaptation. Our results suggest some merit to both perspectives. Client orientation hindered performance of Internet advertising services, while competitive orientation facilitated performance. In addition, limited support was found that suggested superior performance occurs in an environment with a diverse client base and clients possessing in-house capabilities that “compete” with agencies for Internet advertising services. Implications for incumbents pursuing product growth strategies via new, technology related services in dynamic environments are discussed.     

Unlocking solution provision competence in knowledge-intensive business service firms

Business services markets are very competitive and a key challenge for knowledge-intensive business service (KIBS) firms is delivering effective solutions for business customers. As solution providers, KIBS firms need to invest competencies that supports their capacity to solve customers' problems. We examine how KIBS firms address this challenge by investigating how solution-provision competence (SPC), as a firm-level competence, contributes to the delivery of effective solutions, and how and when KIBS firms leverage SPC to transform knowledge gained from various search paths into effective solutions for customers. The results show that distal search enriches knowledge diversity, which helps foster solution-provision competence but only up to a point, after which the relationship turns negative, with distal search showing a diminishing effect on solution-provision competence. In addressing the diminishing returns of distal search to solution-provision competence, we show that higher levels of proximal search and strategic flexibility reverse the diminishing effect of high levels of distal search on solution-provision competence; however, employee collaboration did not help counter the diminishing returns (e.g., marginal benefits). Finally, we demonstrate that solution-provision competence helps KIBS firms offer effective solutions tailored to business customers' specific needs.     

In Search of Innovation and Customer‐related Performance Superiority: The Role of Market Orientation,Marketing Capability,and Innovation Capability Interactions

Understanding the mechanisms through which firms realize the value of their market‐based knowledge resources such as market orientation is a central interest of innovation scholars and practitioners. The current study contends that realizing the performance impact of market orientation depends on know‐how deployment processes and their complementarities in functional areas such as marketing and innovation that co‐align with market orientation. More specifically, this study addresses two research questions: (1) to what extent can market orientation be transformed into customer‐ and innovation‐related performance outcomes via marketing and innovation capabilities; and (2) does the complementarity between marketing capability and innovation capability enhance customer‐ and innovation‐related performance outcomes? Drawing upon the resource‐based view and capability theory of the firm, a model is developed that integrates market orientation, marketing capability, innovation capability, and customer‐ and innovation‐related performance. The validity of the model is tested based on a sample of 163 manufacturing and services firms. In answer to the first research question, the findings show that market orientation significantly contributes to customer‐ and innovation‐related performance outcomes via marketing and innovation capabilities. This finding is important in that market‐based knowledge resources should be configured with the deployment of marketing and innovation capabilities to ensure better performance. In answer to the second research question, the findings indicate that market orientation works through the complementarity between marketing and innovation capabilities to influence customer‐related performance but not innovation‐related performance. Managers are advised to have a balanced approach to managing the deployment of capabilities. If they seek to achieve superiority in customer‐related performance, marketing capability, innovation capability, and their complementarity are essential for attracting, satisfying, building relationships with, and retaining customers. On the other hand, this complementarity would be considerably less important if firms placed greater emphasis on achieving superiority in innovation‐related performance. In contrast to many existing studies, this study is the first to model the roles of both innovation capability and marketing capability in mediating the relationship between market orientation and specific performance outcomes (i.e., innovation‐ and customer‐related outcomes).     

What they know vs. what they do: how acquirers leverage technology acquisitions

Existing research suggests that in acquisitions of small technology‐based firms by large established firms post‐merger integration both enables and hinders acquirers' efforts to leverage the technology of acquired firms. This apparent paradox can be resolved once we account for the qualitatively distinct ways in which acquirers leverage technology acquisitions. Integration helps acquirers use the acquired firm's existing knowledge as an input to their own innovation processes (leveraging what they know), but hinders their reliance on the acquired firm as an independent source of ongoing innovation (leveraging what they do). We also show that experienced acquirers are better able to mitigate the disruptive consequences of the loss of autonomy entailed by integration, though we find no evidence that they achieve greater coordination benefits from integration. Copyright © 2007 John Wiley & Sons, Ltd.     

Convergence and unbundling of corporate R&D in telecommunications: is software taking the helm?

This paper presents a view of the changing structure of corporate R&D in telecommunications – one that is close to Adam Smith’s insightful and enduring idea of division of labor – that perhaps we are witnessing the beginnings of vertical disintegration and unbundling of important segments of the industry’s R&D activity. The paper maintains that the emergence of an independent software industry – aided by the convergence of computer, telecommunications and imaging technologies – and the rapid growth of technology-based alliances are at the heart of this trend. So extensive is the vertical disintegration of R&D that, in 1997, the top 10 independent software vendors in the US spent more on R&D than the combined spending by AT&T and Lucent whose sales were well over three times as large. It appears that the source of future innovation in the telecommunications industry lies not in its services segment but rather in telecommunications and Internet equipment firms and independent software firms. Increasingly, the fortunes of large service providers like AT&T will depend less on innovation and more on their ability to configure and market complete one-stop-shopping solutions to customers by combining internal resources with outsourced technologies, products and services.     

Success Through Customer-Driven New Product Development: A Comparison of U.S. and New Zealand Small Entrepreneurial High Technology Firms

Although high-tech, entrepreneurial firms may be small in size, they often play a large role in developing innovative products and thus spurring economic growth. Managers from firms of all sizes may gain useful insights by examining the new-product development (NPD) practices of these small, technology-based firms. And in an era of increasingly global competition, those managers can benefit from understanding the NPD practices of firms from various countries. William Souder, David Buisson, and Tony Garrett contribute to that understanding by describing the results of a study that compares the relative NPD proficiency of small, technology-based firms in the United States and New Zealand. The firms participating in the study (26 from the U.S. and 29 from N.Z.) operate in rapidly growing, highly competitive markets characterized by evolving customer needs. The participating companies share similar goals: creating technically superior products with unique features for emerging markets, with the ultimate goal of becoming the product and market leaders within their respective industries. Despite these similarities, the study reveals several important differences between the U.S. and N.Z. participants. Overall, the N.Z. respondents had higher levels of NPD performance than those of their U.S. counterparts. In particular, the relationship marketing and customer-focused NPD practices of the N.Z. firms set them apart from the U.S. firms. Top-level managers from the N.Z. participants report higher levels of satisfaction than their U.S. counterparts with the results of their NPD efforts. The results of the study indicate that repondents from the two countries differ in terms of the focus of their NPD mangement systems and the manner in which they strive to achieve success. For the U.S. firms in the study, their NPD management systems focus on the characteristics of the project manager. The N.Z. respondents place greater emphasis on marketing skills and NPD proficiencies. The results suggest that the higher levels of NPD performance acheived by the N.Z. firms in the study arise from greater insights into their users' needs, together with better capabilities for acting on those insights.     

How Banks Apply Marketing Expertise to Develop New Derivatives

For banks operating in the fiercely competitive derivatives market, the difference between the leaders and the also-rans often boils down to their respective approaches to product innovation. To achieve market leadership in this highly volatile field, a bank must develop and continually refine the processes and the expertise necessary for identifying new areas of business and attracting and retaining customers. Although the development of derivatives is a complex, expensive process, such development efforts provide the means for satisfying existing clients as well as attracting new customers. F. Axel Johne and M. Panos Pavlidis examine the managerial practices of banks that are acknowledged leaders in bringing new derivatives to market ahead of their competitors. In particular, they examine how those first-mover banks apply their marketing expertise and they review the advantages those banks enjoy as a result of their success in product innovation. The banks studied fall into one of two groups: highly active innovators and less active innovators. The study reveals several significant differences between the two groups with respect to managing marketing inputs for product innovation purposes. First, compared to less active banks, the highly active innovators take a more sophisticated, market-based approach to identifying innovation opportunities. Rather than looking for innovations that offer a close fit with existing products and competencies, they analyze the benefits sought by target clients and initiate innovation efforts based on those analyses. Highly active innovators recognize the important role that internal marketing plays in encouraging functional specialists to work together for the purpose of identifying follow-on development opportunities. Internal marketing also helps to ensure that all parties understand and can support the planned innovation. The highly active innovators in this study do not take a formulaic approach to the development of new derivatives; instead, they rely on marketing expertise to identify and capitalize on business opportunities. Rather than concentrate solely on improving the core technical features of a product, the highly active innovators also recognize the importance of product augmentation innovation (to ensure the appropriate support for various market segments), process innovation (so they can reduce prices, when necessary), and market innovation (to ensure that they pursue the optimal mix of markets).     

Repeating a familiar pattern in a new way: The effect of exploitation and exploration on knowledge leverage behaviors in technology acquisitions

Research Summary: We identify two types of knowledge leverage behaviors undertaken by acquiring firms: integrated and independent knowledge leverage. We address how the prior exploitation or exploration orientation of acquirers influence these two modes of knowledge leverage behaviors. The degree of exploitation of acquirers promotes integrating their existing knowledge with acquired knowledge in innovative actions. In contrast, the degree of exploration of acquirers increases the likelihood that new innovations will use acquired knowledge without integrating it with their prior knowledge. In addition, the firm's prior acquisition rate moderates the relationship between the acquiring firms’ previous exploitation or exploration orientation and their knowledge leverage mode. The findings of this article suggest that pre‐acquisition innovation capabilities are distinct from but influence the post‐acquisition innovation actions. Managerial Summary: Firms often undertake acquisitions to gain access to new knowledge, but they can differ dramatically in how they leverage acquired knowledge. We show that the firm's prior innovation patterns drive this choice. Firms that have previously focused on incremental innovations in their internal innovation efforts tend to integrate acquired knowledge with their own prior knowledge. In contrast, firms that have previously pursued bold innovations tend to leverage acquired knowledge alone in new innovations. Thus, we show that firms use acquisitions as a means to extend their internal innovation patterns—firms that have focused on incremental innovations extend that with acquisitions by linking new innovations to their prior knowledge while firms that have pursued bold initiatives use acquired knowledge to move in new technology directions.     

The rise of IT services clusters in India: A case of growth by replication

The Indian IT services sector has grown from small beginnings at the bottom of value creation to a major player in the global information and communications technology (ICT) industry. It commands a 55% share in the global market for IT services. India's IT sector value proposition in terms of low cost with large supply of high quality talent is compelling. As a result, India has become the premier choice not only for outsourcing IT services by the developed-world's multinational corporations (MNCs) but also for locating their own Global In-house Centers (GICs), which simultaneously compete and partner with local firms. This gave rise to six additional clusters beyond the earliest, largest and robust cluster, Bangalore. The paper provides a review of relevant literature; develops a conceptual framework for evaluation of clusters; and presents data and analysis with respect to relative size, growth, specialization, MNC presence and connectivity to local firms through expatriates and returning Indians, ,innovation; and discusses adequacy of ICT infrastructure for future growth. Although there are clear signs that the Indian IT sector has been moving towards a regime of providing high-end value added services, the sector's value proposition – lower cost combined with a large supply of high quality talent – remains the single most compelling reason for the rise and growth of multiple export clusters. Thus the sector's growth appears to be a case of growth by replication rather than innovation. The paper concludes that the Indian IT sector's value proposition in terms of lower cost combined with large supply of high quality talent remains the single most compelling reason for the rise and growth of multiple IT services export clusters. While the old adage, “people follow jobs” still holds for large part of the labor force, there is little doubt that the sprawling IT services clusters in India - with more to come from Tier II and Tier III cities – indicate, in fact, that “jobs follow talent." Both local firms and the MNCs, through their GICs, are pushing the boundaries of location farther and farther to continue to leverage cost advantage and available pools of talent.     

The strategic dilemmas of innovative enterprises: proposals for high‐technology sectors

High levels of research and development (R&D) expenditure, pressure for innovation and the creation of new knowledge are features that distinguish high‐technology (high‐tech) enterprises from other, less technologically advanced, firms. Confronted with multiple contemporary approaches to strategy and turbulence in their environment, these enterprises make strategic choices continuously and dynamically. This paper proposes a model and matrix for the classification of high‐tech enterprises’ development strategies (with regard to their specific features), which are then verified. Qualitative research was conducted in 61 medium and large high‐tech companies based in Poland that operate either in Poland or in the global marketplace. The results show that high‐tech firms have the fundamental goal of developing R&D activity as a resource (and its redundancy) rather than product/market goals. The studied firms strive above all for leadership in innovation, creating new technologies based on their own R&D resources, while also using outside sources and mostly applying the personalisation approach in knowledge management. However, they choose different paths for product and market development, depending on the opportunities presented by the environment, and the firm's ability to identify and take advantage of these.     

A Closer Look at Cross‐functional R&D Cooperation for Innovativeness: Innovation‐oriented Leadership and Human Resource Practices as Driving Forces

Because cross‐functional research and development (R&D) cooperation appears to drive innovation, many firms have invested considerably in it. However, despite substantial efforts to improve information and communication infrastructures or to bring departments in closer proximity with one another, structural investments often fail to produce the desired positive impact on cross‐functional R&D cooperation. This failure may arise because firms undertaking these structural investments do not manage their employees adequately. Extant research acknowledges the importance of motivating and enabling members of the R&D function to cooperate with other functions. Yet empirical studies investigating the relative importance of leadership and different human resource (HR) practices for enhancing cross‐functional R&D cooperation are scarce. Drawing on the resource‐based view and organizational support theory, this study investigates how innovation‐oriented leadership and HR practices might support members of the R&D function and encourage cross‐functional R&D cooperation, which enhances product program innovativeness. Specifically, members of the R&D function who are supported in their innovation efforts through innovation‐oriented leadership and HR practices should reciprocate for the support they receive by intensifying their cross‐functional cooperation to achieve greater product program innovativeness. Relying on multi‐informant data from 125 firms with assessments from marketing and R&D managers, this study shows that innovation‐oriented leadership and HR practices have different effects on cross‐functional R&D cooperation. A structural equation modeling‐based analysis of the hypothesized relationships reveals that innovation‐oriented leadership, rewards, and training and development have considerable positive effects. In contrast, recruitment does not drive cross‐functional R&D cooperation. Because firms usually operate in dynamic markets, and increasingly acquire relevant information from customers when generating innovations, this study also considers market‐related dynamism and customer integration as important contingency factors. For firms facing market‐related dynamism and those relying on customer integration, leadership and training and development are particularly effective for enhancing cross‐functional R&D cooperation. By integrating two theoretical perspectives, this study not only advances knowledge on the antecedents of cross‐functional R&D cooperation, but also helps explain differences in their relative effectiveness. Furthermore, it both adds to the discussion of whether monetary rewards are appropriate means to foster innovation and challenges existing assumptions about the role of recruiting for innovation.     

Improving R&D/Marketing relations: R&D's perspective

Abstract
Successful product innovation hinges on close R&D/marketing relationships, especially in technology-based organizations. However, there is evidence that linkage problems are common and when they are not overcome failure is the usual result.
R&D's perspective on what R&D, marketing and senior management can do to improve their relationship with marketing is presented. The recommendations are based on suggestions from R&D directors involved in new product development efforts in 83 technology-based companies. Also presented is how the need for integration has changed over time and where it is going in the future.