open innovation Flashcards
innovation funnel
idea generation (ideas fly around freely without limits)
conceptualization (actual concepts are created)
development (concepts are developed into actual products)
commercialization (when the product or service is released to the market)
open innovation
about including outsiders in the innovation process
open innovation in the idea generation and conceptualization
passively screening the environment for new ideas and actively inviting new ideas from partners, entrepreneurs, or freelance investors
open innovation in the development phase
licensing-in technologies from external partners, which later can be jointly developed to serve the specific needs of the company)
open innovation in the commercialization phase
Licensing-out developed products and technologies to external partners with commercialization capabilities
potential partners for open innovation
universities (can provide state-of-the-art scientific input for R&D)
suppliers (can integrate their innovation processes with those of the companies to make innovation more efficient)
technology entrepreneurs (can provide ready solutions that could take long to develop internally)
competitors (can help overcome mutual R&D problems)
limitation of using only internal r&d
Only internal R&D for innovation -old ways of thinking (inertia) & efforts spent on solutions that exist elsewhere -ineffective innovation -lower competitiveness
open innovation can be useful to:
reduce the negative effects of organizational inertia
enlarge the pool of ideas and solutions for innovation
shorten the time to market for new products
advantages of open innovation
enables access to new product and business model ideas, new technological solutions, and new commercialization capabilities, leading to more efficient innovation and a faster time-to-market
Knowledge based view (KBV)
a firm’s competitiveness is determined by its ability to uniquely recombine internal and external knowledge elements in unique ways
internal innovation according to KBV
Internal innovation activities (R&D) - innovation know-how - combinative capabilities (ability to re-combine knowledge elements in unique ways) -enhanced competitiveness
know-how
a deep understanding of how and why something works
characteristics of know-how
resides in the organization
cannot be bough from the market
combinative capabilities
the ability to recombine knowledge elements in unique ways to produce competitive products
external innovation according to KBV
more open innovation -> greater absorptive capacity -> competitive advantage
factors affecting the management of internal and external R&D
Absorptive capacity
not invented here syndrome
need for coordination
absorptive capacity
the ability to locate valuable external knowledge, evaluate its usefulness, and utilize it for commercial purposes
Strong internal R&D –> Greater absorptive capacity –> Greater ability to evaluate outside knowledge and to benefit from it
not invented here syndrome
resistance to knowledge, ideas, and technology that are developed outside of the company
Strong internal R&D –> Overconfidence in internal innovation capabilities –> suspicion towards the value of ideas and knowledge from external sources
need for coordination
benefiting from external knowledge requires effort to identify potential partners with valuable knowledge, allocate tasks between the focal firm partners, exchange knowledge, monitor progress of collaboration
if the r&d system is overburdened with these activities, the cost of coordination with new external knowledge sources may exceed the benefits
relationship between internal and external R&D
low share of external innovation (low innovation performance due to not invented here syndrome)
very strong share of external innovation (low absorptive capacity leading to excessive coordination burden leading to low innovation performance)
moderately strong share of external innovation (healthy balance between absorptive capacity, NIH, and coordination costs, thus high innovation performance)
determinants of complementary of internal and external R&D
balance between absorptive capacity, NIH, and coordination costs, due to efficiency in organizational processes, and openness of organizational culture
Paradox of openness
While sharing knowledge with partners is vital for joint value creation, it also allows partners to capture some of the value created with the shared knowledge (knowledge leakage)
knowledge protection mechanisms
patent
secrecy
complexity
patent
A form of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time
secrecy
efforts to keep knowledge secret
Secrecy measures are sets of rules that limit the transfer of knowledge to specified others, social interactions with them or restrictions on physical access to certain locations
when secrecy is most useful
Secrecy is particularly effective for protecting knowledge that is easier to keep invisible from potential imitators e.g. innovations based on complex or tacit knowledge that is difficult to codify and replicate
complexity
encouraging the development of know-how through internal informal interactions
appropriability strategy
a firms approach to protecting their knowledge against being copied and to appropriating the returns from their innovative activities
formal innovation
enables more sustained exchanges between the focal firm and its external environment, but it requires greater managerial effort to find suitable partners, agree on contracts and coordinate joint efforts
selective revealing
firms rely on a strategy that involves partial disclosure of some central part of the traded knowledge while controlling access to other parts of the knowledge
Openness-appropriability tradeoff
there is a concave relationship between the strength of a firm’s knowledge protection strategy and the number of collaborations it has, which is stronger for hard openness (formal collaborations) and firms that collaborate with competitors
effect of weak knowledge protection strategy
signals to potential partners that there is no knowledge worth protecting, leading to low number of external collaborators
effects of strong knowledge protection strategy
signals to potential partners that there is knowledge worth protecting but little willingness to share it. could signal a potential difficult collaboration and thus lead to low number of external colllaborations
effects of moderately strong knowledge protections strategy
Signals to potential partners that there is knowledge worth protecting but also a willingness to share it, thus High number of external collaborations
two levels of engagement of open innovation
soft form of openness
hard form of openness
soft form of openness
drawing knowledge from external parties without entering into legally binding agreements
effect of strong secrecy on soft form of openness
strong secrecy mechanisms may discourage informal collaborators
hard form of openness
formal collaborations to jointly develop innovations
effect of strong knowledge protection strategy on hard form of openness
scares of hard collaborators more than soft collaborators because soft collaborators may have other incentives to collaborate than accessing a focal firm’s knowledge
impact of collaboration with competitors
Firms who cooperate with competitors are “forgiven” by potential innovation partners for having a strong knowledge protection strategy, this is not perceived as a lack of willingness to share knowledge
relying excessively on external input for r&d can lead to
excessive coordination burden, resistance from internal r&d department, lower absorptive capacity in the future
