Resource allocation strategy for innovation portfolio management

Our study demonstrates empirically that the choice of resource allocation strategy affects innovation performance. Allocating resources to a broader range of innovation projects increases new product sales, an effect that appears to outweigh that of resource intensity. In addition, we find that the performance benefit of breadth is higher for firms that allocate resources selectively at later stages of the innovation process. This breadth‐selectiveness effect is greatest for firms intending to create relatively more novel products, departing further from their knowledge base. Based on these results, we theorize that breadth increases performance because it spreads firms' bets on unproven innovative endeavors. Limiting resource commitments by selecting out deteriorating projects prevents an escalation in the costs of breadth. This advantage increases with the uncertainty implicit in greater innovative intent. The paper thus contributes to theory of how resource allocation strategies influence performance outcomes of innovation project portfolios. Copyright © 2013 John Wiley & Sons, Ltd.     

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.     

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.     

Balancing the Two Knowledge Dimensions in Innovation Efforts: An Empirical Examination among Pharmaceutical Firms

This study investigates the relationships between the two knowledge dimensions (knowledge breadth and knowledge depth) and two types of innovations (radical innovation and incremental innovation). While existing literature identifies knowledge in general as an important driver of innovation, the exact relationships between knowledge breadth/depth and incremental/radical innovations are not clear. Drawing from the knowledge‐based view, this study advances the understanding of the relationships between knowledge dimensions and types of innovations by hypothesizing a nonlinear relationship between knowledge breadth and radical innovation as well as a nonlinear relationship between knowledge depth and incremental innovation. Furthermore, the moderating effects of the interaction between knowledge breadth and knowledge depth on the above‐mentioned relationships are also examined. Due to the different natures of the two types of innovations, it is hypothesized that knowledge depth positively moderates the relationship between knowledge breadth and radical innovation while knowledge breadth negatively moderates the relationship between knowledge depth and incremental innovation. To empirically test the hypotheses, secondary data from multiple sources were collected on 64 pharmaceutical firms over 15 years. Due to the panel data structure and observed dispersion issues in the dependent variables, negative binomial random effects models were formulated to test the hypotheses. The statistical results largely support the proposed hypotheses. The results demonstrate that while knowledge breadth positively contributes to the development of radical innovations and knowledge depth positively contributes to the development of incremental innovations, both relationships are subject to diminishing returns. Furthermore, while the finding did support the negative moderating effect of the knowledge breadth on incremental innovation, the positive moderating effect of knowledge depth on radical innovation is not supported. While the effect is not explicitly hypothesized, knowledge breadth seems to have a direct impact on incremental innovation as well.     

突破性创新、互补性资产与企业间合作的整合研究

主导企业在技术变革中经历了技术劣势后，这种劣势在何种程度上转化为商业劣势取决于突破性创新的破坏幅度。如果新技术只破坏了主导企业的技术能力而没有破坏互补性资产的价值．那么主导企业的绩效将会改进：如果新技术同时破坏了主导企业的技术能力和互补性资产的价值．那么主导企业的绩效将会下滑。正是由于大量突破性创新属于前者并且主导企业控制了大部分的互补性资产．开发了突破性创新的新进入企业只能与主导企业建立合作关系．共同分享创新利润。     

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.     

Appropriability and the retrieval of knowledge after spillovers

Research summary: Firms create and capture value through innovation. In technology‐driven firms, there has been an explicit emphasis on appropriability through imitation deterrence and cumulative inventions that build on prior firm innovation. We introduce systematic empirical evidence for a third mechanism of appropriability namely, knowledge retrieval, which is defined as the re‐absorption of previously spilled knowledge. We extend previous studies which consider technological complexity and organizational coupling as predictors of appropriability by examining their impact on knowledge retrieval. We find that technological complexity has a curvilinear relationship with retrieval while organizational coupling has a negative relationship. We discuss the implications of these findings for theories of absorptive capacity, organizational design and appropriability of innovation. Managerial summary: It is a widely held assumption that knowledge should be protected and held tightly within the firm to ensure value creation and value capture. The implicit recognition is that knowledge spillovers, or knowledge leakage, is detrimental to performance. By examining the patterns of citations among patents of 142 semiconductor firms, we study how organizational structure and technological complexity play a role. We find that moderate technological complexity improves appropriability. If imitation deterrence is paramount, then the optimal structure would be a tightly‐coupled organization. In other instances, loosely‐coupled organizations may be superior because they foster internal cumulative innovations and, if spillovers were to occur, they also maximize knowledge retrieval. Our findings suggest that all is not lost when spillovers occur and that firms can continue to benefit in downstream innovations. Copyright © 2015 John Wiley & Sons, Ltd.     

Make,buy, organize: The interplay between research,external knowledge,and firm structure

We bridge current streams of innovation research to explore the interplay between R&D, external knowledge, and organizational structure—three elements of a firm's innovation strategy, which we argue should logically be studied together. Using within‐firm patent assignment patterns, we develop a novel measure of structure for a large sample of American firms. We find that centralized firms invest more in research, and patent more per R&D dollar, than decentralized firms. Both types access technology via mergers and acquisitions, but their acquisitions differ in terms of frequency, size, and integration. Consistent with our framework, their sources of value creation differ: while centralized firms derive more value from internal R&D, decentralized firms rely more on external knowledge. We discuss how these findings should stimulate more integrative work on theories of innovation. Copyright © 2013 John Wiley & Sons, Ltd.     

Creating incentives for innovation? The relationship between pay dispersion in R&D groups and firm innovation performance

Innovation is a critical organizational outcome for its potential to generate competitive advantage. While the contribution of knowledge workers to the generation of innovation is widely recognized, little is known about how organizational incentive mechanisms stimulate or inhibit these workers' behaviors that promote innovation. This study examines the relationship between pay dispersion in R&D groups and firm innovation using employee‐level compensation data in US high‐technology firms. The results show that (1) pay dispersion in R&D groups is negatively related to firm innovation and (2) this negative relationship is alleviated in firms with greater financial slack. This study contributes to the innovation literature by illuminating the implications of organizational incentive systems for successful innovation. Copyright © 2013 John Wiley & Sons, Ltd.     

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.     

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.     

The role of institutional arbitrage in the search for product innovation: Firm level evidence from Norway

Evolutionary theorizing conceptualizes the discovery of new products as a successful outcome from searching for innovation in which firms combine new and old knowledge and resources. Prior research has shown that the propensity for discovering new products is greatest when firms cross a technological and/or organizational boundary in the search for new knowledge. In this paper, we add a new dimension to this literature: we examine whether, and to what extent, crossing a national boundary, as when firms use knowledge from network partners in foreign countries, influences the likelihood that firms will introduce new products into the market. Drawing on theorizing on institutional arbitrage in the literature on national innovation systems (NIS) and varieties of capitalism (VOC), we propose that companies that cross a national boundary in searching for innovation are significantly more likely to introduce new products. Detailed survey data on firms; data on their network partners, including their location; and regression analysis show that the use of knowledge from actors in foreign NIS has a positive influence on product innovation.     

Does the market for ideas influence the rate and direction of innovative activity? Evidence from the medical device industry

Prior work argues that the “market for ideas” supports an open system of innovation, allowing for efficient development of technology across firms. Although this literature has described important features of this market, how it influences the rate and direction of innovation remains an open question. We exploit an exogenous shock to a subset of U.S. medical device firms to study this question. We first document the breakdown in the market for ideas after a federal investigation made it more difficult for the leading orthopedic firms to work with physician‐inventors. We then present evidence of a dramatic decline in the rate of innovation for these firms. Further, a marked shift in direction occurs toward lower‐quality inventions and away from product categories where physician knowledge is critical. Copyright © 2014 John Wiley & Sons, Ltd.     

When general recommendations fail: how to search in single innovation project settings

External sources are main elements of a firm's search strategy as they positively influence a firm's innovation activities. While previous research has almost exclusively focused on search patterns on firm level, we focus on search mechanisms in single innovation project settings. Based on an inductive case study of eight cross‐industry innovation projects, we present a theoretical framework of three archetypes. In our research, we transfer the concept of breadth and depth from firm to project level and present decisive criteria. We provide evidence that search on project level is not only influenced by breadth and depth, but the character of search represented by its level of abstraction plays a major role. Furthermore, we show that at least in our context and contrary to firm level, not always high levels of breadth and depth are required. In addition, our research contributes to an enhanced operation of search in firms applying our archetypes.     

One foot in,one foot out: how does individuals' external search breadth affect innovation outcomes?

The “variance hypothesis” predicts that external search breadth leads to innovation outcomes, but people have limited attention for search and cultivating breadth consumes attention. How does individuals' search breadth affect innovation outcomes? How does individuals' allocation of attention affect the efficacy of search breadth? We matched survey data with complete patent records, to examine the search behaviors of elite boundary spanners at IBM. Surprisingly, individuals who allocated attention to people inside the firm were more innovative. Individuals with high external search breadth were more innovative only when they allocated more attention to those sources. Our research identifies limits to the “variance hypothesis” and reveals two successful approaches to innovation search: “cosmopolitans” who cultivate and attend to external people and “locals” who draw upon internal people. © 2014 The Authors. Strategic Management Journal published by John Wiley & Sons Ltd.     

Complementary technologies,knowledge relatedness,and invention outcomes in high technology mergers and acquisitions

Prior research on M&As and invention outcomes has not systematically examined the influence of two types of knowledge differences. Knowledge relatedness has typically been equated with knowledge similarity and the separate influence of knowledge complementarity has been overlooked. Similarly, studies examining innovation outcomes of M&As have typically focused on the role of technological knowledge and overlooked the influence of scientific knowledge. We develop a model of relatedness and invention performance of high‐technology M&As that considers science and technology similarity and complementarity as important drivers of invention. We test the model using a sample of M&As from the drug, chemical, and electronics industries and a fine‐grained measure of knowledge relatedness that distinguishes between science and technology relatedness. We find that complementary scientific knowledge and complementary technological knowledge both contribute to post‐merger invention performance by stimulating higher quality and more novel inventions. This suggests that high‐technology firms seeking acquisitions should search for, identify, and acquire businesses that have scientific and technological knowledge that is complementary to their own. Our results also suggest that similarities in knowledge facilitate incremental renewal, while complementarities would make discontinuous strategic transformations more likely, and that absorptive capacity research should be expanded to consider complementarities as well as similarities. Copyright © 2010 John Wiley & Sons, Ltd.     

Geographic scope,isolating mechanisms,and value appropriation

Extending extant literature on geographic scope that has primarily focused on its role in value creation, I investigate the value appropriation aspect of geographic scope of knowledge acquisition. I maintain that isolating mechanisms created via geographic scope of knowledge acquisition can help firms prevent competitors from accessing their innovative knowledge and, by doing so, can help firms capture a larger proportion of economic returns from innovation, thus helping them enjoy better financial performance. Mediating and moderating effect analyses with patent‐ and firm‐level data of the semiconductor industry corroborate the value appropriation aspect of geographic scope. Copyright © 2014 John Wiley & Sons, Ltd.     

How knowledge affects radical innovation: Knowledge base,market knowledge acquisition,and internal knowledge sharing

This paper examines how existing knowledge base (i.e., knowledge breadth and depth) interacts with knowledge integration mechanisms (i.e., external market knowledge acquisition and internal knowledge sharing) to affect radical innovation. Survey data from high technology companies in China demonstrate that the effects of knowledge breadth and depth are contingent on market knowledge acquisition and knowledge sharing in opposite ways. In particular, a firm with a broad knowledge base is more likely to achieve radical innovation in the presence of internal knowledge sharing rather than market knowledge acquisition. In contrast, a firm with a deep knowledge base is more capable of developing radical innovation through market knowledge acquisition rather than internal knowledge sharing. Copyright © 2012 John Wiley & Sons, Ltd.     

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.     

Strategic planning as a complex and enabling managerial tool

Research summary : The role of the strategic planning process in the ongoing generation of innovative knowledge is vital to the survival and growth of a firm, especially when technologies and market conditions are rapidly changing. We analyze data from a survey of firms in high‐technology industries to determine whether it is possible to break the commonly experienced trade‐off between strategic planning's positive influence on firm profitability and its negative influence on firm innovation. We draw on Adler and Borys's (1996) conceptualization of bureaucratic process types to identify several firm characteristics that have the potential to affect whether employees perceive strategic planning as enabling to their creative endeavors. We find that contingent effects between strategic planning and the identified firm characteristics exist that can break the trade‐off. Managerial summary : A tension exits in the literature about whether strategic planning hurts or helps innovative activity. Our analysis of data from 227 business units in high‐technology industries indicates that strategic planning is a complex process that can be perceived by employees as enabling or coercive. Our results confirm that strategic planning negatively affects innovative activity but positively affects profitability for average firms. We find, however, controllable firm characteristics—risk‐taking and knowledge‐based reward systems—affect the trade‐off. Given the higher levels of risk‐taking and knowledge‐based reward systems, firms can use strategic planning to achieve both high returns on investment and a high level of innovative activity. Copyright © 2015 John Wiley & Sons, Ltd.