The Effect of Selective Openness on Value Creation in User Innovation Communities

Open innovation research and practice recognize the important role of external complementors in value creation. At the same time, firms need to retain exclusive control over some essential components to capture value from their product and/or service system. This paper contributes to the literature by analyzing some of the trade‐offs between openness to external value creation and closedness for internal value capture. It focuses on selective openness as a key variable and investigates how it affects value creation by external complementors, specifically the members of user innovation communities. Openness, it is hypothesized, matters to community members: The more open a product design is, the higher their sense of involvement in the innovation project, and the larger the effort they devote to it. Unlike prior literature, different forms and loci of openness are distinguished, specifically the transparency, accessibility, and replicability of different components of the product being developed. Hypotheses are tested based on survey data (n = 309) from 20 online communities in the consumer electronics and information technology hardware industries. Multilevel regression analysis is used to account for clustering, and thus nonindependent data, at the community level. We find that openness indeed increases community members’ involvement in the innovation project and their contributions to it. Interestingly, however, some forms and loci of openness strongly affect community perceptions and behavior, while others have limited or no impact. This finding suggests that, at least in relation to user communities, the trade‐off that firms face between external value creation and internal value capture is softer than hitherto understood. Contingency factors that may be able to explain these patterns are advanced. For example, users are expected to value the form of openness that they have the capabilities and incentives to exploit. The findings in this paper extend the literature on selective openness in innovation. They emphasize the need to study the demand for different forms of openness at the subsystem level and align supply‐side strategies to it. In managerial practice, a careful assessment of the demand for openness enables firms to successfully use selective openness and to effectively appropriate value from selectively open systems.     

The relationship of industry structure to open innovation: cooperative value creation in pharmaceutical consortia

With its focus on value creation and value capture, open innovation research explicitly or implicitly examines the competitive impacts of collaboration. However, to date such research has not considered the effects of a blockbuster industry structure upon open innovation. Here, we examine a particular form of multilateral collaboration, the open R&D consortium, in which the results from collaboration are allowed to spill over to members and nonmembers alike. We do so in the context of the pharmaceutical industry, a stable but fragmented industry defined by the ongoing search for blockbuster hits protected by strong appropriability. Using a novel data set, we identify 141 such consortia that involve two or more of the 30 largest pharma firms. We show that firms financially support such consortia, in part, because their value creation activities benefit members without disrupting the value capture or other aspects of the incumbent industry structure. We discuss the implications of these findings for research on multilateral collaboration in blockbuster industries, and open innovation more generally.     

Value Creation and Value Capture Alignment in Business Model Innovation: A Process View on Outcome-Based Business Models

Industrial manufacturers are innovating their business models by shifting from selling products to selling outcome-based services, where the provider (manufacturer) guarantees to deliver the performance outcomes of the products and services. This form of business model innovation requires a profound yet little understood shift in how value is created, delivered, and captured. To address this research gap, our study examines two successful and four unsuccessful cases of this shift. We find that effectiveness in business model innovation hinges on the three process phases that unfold in collaboration with the customers: value proposition definition, value provision design, and value-in-use delivery. We also find that that success is determined by the alignment of specific value creation and value capture activities in each phase: identifying value creation opportunities—agreeing on value distribution in value proposition definition, designing the value offering—deciding on the profit formula in the value provision design, and finally refining value creation processes—regulating incentive structures in the value-in-use delivery. Our process model contributes to the literature and practice on business model innovation by providing a thorough understanding of how alignment of value creation and value capture processes is ensured, whilst paying special attention to their interdependence and the interactions between provider and customer.     

Entrepreneurial co‐creation: societal impact through open innovation

New open innovation initiatives, such as accelerators, living labs, social innovation labs and open labs, involve for‐profit and not‐for‐profit actors working closely together to co‐create both business value and societal impacts. However, there is a lack of theoretical underpinning to understand how and why co‐creation by actors generate different types of social value in the concurrent pursuit of business and social value. Adopting an inductive case study approach, we find that different types of entrepreneurs who co‐exploit co‐identify opportunities for co‐creation, generate potentially competing social and business values. We develop four propositions relating to how and why profit orientation and key resource contributions of entrepreneurs co‐identifying an opportunity to co‐create decide the nature of social value generated. We discuss avenues for future research and practical implications, underlying the importance of developing entrepreneurialism as ways to generate different social impacts through open innovation approaches, such as co‐creation.     

The importance of internal alignment in smart city initiatives: An ecosystem approach

Within the growing literature on smart cities, much research has focused on issues related to the formation stage of these initiatives. After initial subsidies expire, however, a number of smart city initiatives face problems with respect to value creation and value capture. To analyse these processes, the paper links value creation (i.e. activities focusing on innovation challenges) to value capture (i.e. activities referring to actual individual firm-level profit generation) in smart city initiatives. Based on an in-depth survey of the literature, the purpose of the paper is to better understand how processes of internal alignment foster value creation and value capture during the growth of smart city initiatives. By focusing on the determinants of internal alignment facilitating value creation and value capture, the paper examines these determinants in the context of four smart city initiatives in the Netherlands in 2016. The paper shows that internal alignment of actors aimed at integrating joint and business objectives is critical for the growth of smart city initiatives. From the theoretical view point, the paper points at challenges concerning internal alignment of different actors in the smart city initiative after the formation stage. From the managerial point of view, it becomes increasingly important to manage expectations of different partners and their learning efforts to account for internal alignment during the growth of the smart city initiative.     

Value creation in the quadruple helix: a micro level conceptual model of principal investigators as value creators

Conceptual models of the quadruple helix have largely taken a macro perspective. While these macro perspectives have motivated debates and studies, they fall short in understanding value creation activities at the micro level of the quadruple helix. The purpose of this paper is to address this deficit by focussing on the fundamental research question how value is collectively created, captured, and enhanced at the micro level of the quadruple helix. Drawing on theoretical considerations centred on simmelian ties, boundary work and value postures (motives, creation, destruction and drivers), we develop a micro level conceptual model of principal investigators (PIs) as value creators in the quadruple helix. Scientists in the PI role engage in boundary spanning activities with other quadruple helix actors. This engagement builds strong simmelian ties with these actors and enables PIs to develop collective value motives by bridging diverse knowledge and creating common value motives. Our conceptual model extends understanding of the quadruple helix at the micro level and highlights the importance of PIs having strong simmelian ties in order to realise collective and individual value motives. The paper concludes with some suggestions for future avenues of research on this important topic.     

Resource orchestration for team‐based innovation: a case study of the interplay between teams,customers, and top management

The resource orchestration concept has attracted considerable interest in contemporary innovation research. However, resource orchestration is a manager‐centric framework and not all of its components necessarily reflect the value‐creation processes of organizations focusing on team‐based innovation. Drawing on a single‐case study of an innovative Swedish software company, we illustrate the roles of autonomous teams, customers, and top managers in orchestrating resources for team‐based innovation. Moreover, we introduce the concept of resource flocculation to describe how key actors co‐orchestrate various resource orchestration processes. The study contributes to research on resource orchestration by adapting the model to the conditions characterizing team‐based innovation, and to research on team‐based innovation by addressing how innovative teams are related to overall resource orchestration processes and, ultimately, organizational innovation outcomes.     

The network orchestrator as steward: Strengthening norms as an orchestration practice

B2B literature widely agrees that value is co-created through network dynamics. The Network Orchestration concept draws our attention to practices that allow the assembling and management of a network for value creation and value capture. Among these orchestration practices, some aim at bringing actors together, while others seek to align the behaviours of different actors. Yet, to date, the literature has paid limited attention to this specific subset of orchestration activities. This study proposes to look at those precise activities that seek to strengthen common norms between business actors. Our work draws on an in-depth abductive study based on 54 interviews with different actors of a distribution network. First, the findings reveal the existence of four common norms among the network actors. Second, they illustrate the specific roles played by distributors regarding the strengthening of those common norms. We propose the term ‘stewardship’ to encapsulate these specific network dynamics.     

Co‐creation in Radical Service Innovation: A Systematic Analysis of Microlevel Processes

This empirical paper presents the results of a detailed case‐study investigation of co‐creation in radical service innovation. The rationale for the paper is that detailed interventions must be tracked to offer a realistic account of how co‐creation occurs. This provides a strong empirical contribution to the emerging body of scholars developing the co‐creation paradigm, predominantly characterized by conceptual advances in service‐dominant logic. Our focus is on radical service innovation, which is disruptive in the sector. The overall aim of the paper is to unravel the nature of microlevel processes of co‐creation in radical service innovation. The study adopts sequential analysis to examine co‐creation. Patterns of sequences of actions and interactions associated with 40 incremental developments, involving multiple actors, are investigated. These co‐created innovative developments underpin the emergence of a radical telematics‐based motor insurance service. The findings suggest that the co‐creation path is not simple or uni‐faceted, and the paper unravels the nature of complex patterns of activities and interactions, Our in‐depth systematic analysis illuminates a combination approach with two main patterns of sequences: one dominated by ad‐hoc and enduring independent innovation activities by network actors and one dominated by lead‐firm innovation and interaction activity. The findings advance knowledge of the way co‐creation occurs in radical service innovation. The study results suggest that managerial attention be placed to, first, finding ways to induce independent innovative behavior from network partners and, second, to the development of interaction mechanisms to foster sharing and visualization of such innovation advances.     

Value capture mechanisms in publicly funded research

There is increasing pressure on academic scientists to acquire research funding and to produce impactful research that stakeholders external to the research can capture value from. However, our understanding of the mechanisms by which funded scientists do this remain unclear. We conceptualize a two stage process of value capture in publicly funded research, the first being resource exchange and knowledge exploration and the second, exploiting the funded research to expand its use. Based on this framing we ask, what are the mechanisms through which value in use is captured in publicly funded research? We draw on interviews with 41 health science principal investigators (PIs) in New Zealand along with related secondary material. Our findings identify two value capture in use mechanisms – boundary spanning and brokering – that PIs employ to extend the use of their funded research to a diverse range of ecosystem actors. While boundary spanning facilitates efficient and deep value capture with select ecosystem actors, brokering allows for wider value capture by identifying, combining and balancing multiple ecosystem interests simultaneously. Our research shows that PIs are not only at the nexus of science to business interactions, their influence surpasses industry to incorporate much broader ecosystem engagement.     

Value in business and industrial marketing: Past,present, and future

This article offers an overview of research on the ‘value’ that businesses and industrial marketers analyze, create, and deliver. First, value literature (up to and around 2005 and post 2005) is discussed. This review highlights the changes in our notions of value and helps to identify seven areas for consideration that should drive future research: value proposition, relationship form, capabilities management, value metrics, temporal horizon, innovation imperative, and tactical focus. Following this depiction of value analysis, value creation, and value delivery, we present a process model for value orchestration in business and industrial marketing. Three activities collectively form the basis of value orchestration, namely structuring activities, bundling activities, and leveraging of resources.     

Facilitating open innovation processes through network orchestration mechanisms

Participation in open innovation networks presents challenges, as firms must recognize value before being willing to openly collaborate, yet opportunities typically cannot be realized without active engagement. Innovation intermediaries can address these tensions through orchestration mechanisms which create value at different levels of innovation networks. This paper addresses an important research gap by identifying the role of intermediaries in delivering open innovation activities across different levels and describing how these activities form interrelated orchestration mechanisms. A longitudinal case study follows the development of an open innovation network from inception, based on interviews and observations with participants including start-ups and large firms. Findings highlight how intermediary activities and practices align with orchestration mechanisms used simultaneously at different levels and create value for members. A multi-level analysis contributes to the open innovation literature by describing the interdependent nature of value creation within the innovation intermediary model.     

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

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

The Value of Customer Cocreated Knowledge during the Innovation Process

Customer cocreation during the innovation process has recently been suggested to be a major source for firms' competitive advantage. Hereby, customers actively engage in a firm's innovation process and take over innovation activities traditionally performed by a firm's employees. Despite its suggested importance, previous research has revealed contradictory findings regarding its impact, the nature of involved customers, and the channels of communication that enable cocreation. To provide a more fine‐grained picture, customer cocreated knowledge is first delineated into its key value dimensions of relevance, novelty, and costs, and then their impact on various innovation outcomes is investigated. Next, the study examines the antecedent role of customer determinants; that is, lead user characteristics and customer–firm closeness, on these knowledge value dimensions. Finally, we explore how these effects are moderated by the type of communication channel used. An empirical validation of the conceptual model is performed by means of survey data from 126 customer cocreation projects. The data analysis indicates that customer cocreation is most successful for the creation of highly relevant but moderately novel knowledge. Cocreation with customers who are closely related to the innovating firm results in more highly relevant knowledge at a low cost. Yet, cocreation with lead users produces novel and relevant knowledge. These effects are contingent on the richness and reach of the communication channels enabling cocreation. Overall, the findings shed light on opportunities and limitations of customer cocreation for innovation and reconcile determinants originating in relationship marketing and innovation management. At the same time, managers obtain recommendations for selecting customers and communication channels to enhance the success of their customer cocreation initiatives.     

Write Code,Save Lives: How a Community Uses Open Innovation to Address a Societal Challenge

This study explores how a community uses open innovation over time to tackle a global societal challenge. we conduct an in‐depth case study of OpenMRS, an open‐source software community providing affordable medical record‐keeping software in developing nations. We develop a process model that describes how inbound, outbound, and coupled open innovation influenced the community through four discrete phases of community development. We explain how the founders’ vision led to the creation of the community, and how increasing community participation and community governance facilitated its growth. Interestingly, we found that economic opportunities made possible by open innovation may paradoxically create challenges to community sustainability. Ultimately, this study expands our understanding of open innovation communities in different settings, and their role in addressing societal challenges.     

Leveraging External Sources of Innovation: A Review of Research on Open Innovation

This paper reviews research on open innovation that considers how and why firms commercialize external sources of innovations. It examines both the “outside‐in” and “coupled” modes of open innovation. From an analysis of prior research on how firms leverage external sources of innovation, it suggests a four‐phase model in which a linear process—(1) obtaining, (2) integrating, and (3) commercializing external innovations—is combined with (4) interaction between the firm and its collaborators. This model is used to classify papers taken from the top 25 innovation journals, complemented by highly cited work beyond those journals. A review of 291 open innovation‐related publications from these sources shows that the majority of these articles indeed address elements of this inbound open innovation process model. Specifically, it finds that researchers have front‐loaded their examination of the leveraging process, with an emphasis on obtaining innovations from external sources. However, there is a relative dearth of research related to integrating and commercializing these innovations. Research on obtaining innovations includes searching, enabling, filtering, and acquiring—each category with its own specific set of mechanisms and conditions. Integrating innovations has been mostly studied from an absorptive capacity perspective, with less attention given to the impact of competencies and culture (including “not invented here”). Commercializing innovations puts the most emphasis on how external innovations create value rather than how firms capture value from those innovations. Finally, the interaction phase considers both feedback for the linear process and reciprocal innovation processes such as cocreation, network collaboration, and community innovation. This review and synthesis suggests several gaps in prior research. One is a tendency to ignore the importance of business models, despite their central role in distinguishing open innovation from earlier research on interorganizational collaboration in innovation. Another gap is a tendency in open innovation to use “innovation” in a way inconsistent with earlier definitions in innovation management. The paper concludes with recommendations for future research that include examining the end‐to‐end innovation commercialization process, and studying the moderators and limits of leveraging external sources of innovation.     

Open Service Innovation: The Role of Intermediary Capabilities

This study examines how intermediaries, in general, and those with digital service platforms specifically, engage with clients to help them innovate their services within their service ecosystem. Based on an embedded, longitudinal case study, the results reveal the cumulative development and deployment of technological, marketing, and co‐creation capabilities by intermediaries, and how these capabilities allow intermediaries to engage with clients, so as to enable clients’ open service innovation despite their internal challenges. In turn, this article extends theory on service innovation by clarifying the role and function of intermediaries in service ecosystems in enabling clients to leverage open service innovation. Second, this study contributes to resource‐based scholarship by clarifying how these three sets of capabilities and their micro‐foundations relate to each other. Despite the obvious importance of technological capabilities, online intermediaries are more than just “virtual” service platform providers. The intermediary’s technological and marketing capabilities assist clients in dealing with project‐related and organizational challenges to open service innovation. Acting as a higher‐order capability, co‐creation capabilities—through shaping marketing and technological capabilities over time and also through conditioning their deployment—improve the proficiency of these capabilities. The findings advance insights on the agential role of the intermediary’s co‐creation capabilities, purposefully developed and deployed to foster client engagement, and thus support service organizations in leveraging open service innovation.     

Value creation by knowledge‐based ecosystems: evidence from a field study

A growing number of research and development‐driven companies are located in knowledge‐based ecosystems. Value creation by these ecosystems draws on the dynamics of single firms (interacting and partnering) as well as the ecosystem at large. Drawing on a field study of a Dutch high‐tech campus, two key sources of value creation are identified: (1) facilitation of the innovation process for individual companies and (2) creation of an innovation community. Furthermore, the coevolution of the ecosystem's business model with firm‐level business models explains why technology‐based firms join, stay in, or leave the ecosystem at a certain point in time. A remarkable finding is that ecosystem managers have to deliberately facilitate exit routes for companies that no longer fit the ecosystem in order to enhance and reinforce its business model. As such, this study suggests a dynamic capability perspective on knowledge‐based ecosystems that need to develop a business model at the ecosystem level to create sufficient innovative capacity and entrepreneurial fitness.     

Open innovation change agents in large firms: how open innovation is enacted in paradoxical settings

This paper theorizes how change agents in large firms enact open innovation with small firms. The open innovation change agent is highlighted as a key internal actor for the transformational work needed to put open innovation into practice. The paper presents an empirically grounded theoretical model of how these actors work, emphasizing the two activities of ‘anchoring’ and ‘navigating’, with the purpose of bridging the inside and outside of the corporation. In applying a paradox perspective on open innovation enactment, it is explained how these change agents act as both catalysts and guards for collaboration, continuously balancing different paradoxical demands. Theoretical and managerial implications in relation to these findings are discussed.     

Product Design Innovation and Customer Value: Cross‐Cultural Research in the United States and Korea

Innovation is one of the key drivers of success that a firm must utilize to develop a competitive advantage. The ability to innovate is especially important for a firm's survival in dynamic, changing environments. Customer demands are constantly changing, and more purchases are made when a firm's product design incorporates what customers perceive as cutting‐edge innovations. Satisfying customer demands is a distinct challenge for product designers because firms must develop a clear understanding of what aspects of design the customer wants. Although the importance of design has increased, very little research has been done to explain the relationship between product innovation and product design. Studies indicate that design innovation may create greater customer value through improvements in design value. Previous research has been limited and has not provided a clear concept of design innovation or defined the relationship between design innovation and marketing competencies. This paper seeks to offer a conceptual definition of design innovation, and to define the link between design innovation and marketing competencies. This paper utilizes cross‐cultural research to discover how these concepts differ due to cultural differences between the United States and Korea. This research contributes substantially to our understanding of the relationship between design innovation and customer value.