An agent-based approach to examine the ‘network knowledge advantage’ in open innovation networks: Firm openness and interorganizational network performance

In this paper we present the results of an agent-based model of open innovation, which suggest the network knowledge advantage underlying open interfirm networks of innovation, as opposed to an advantage arising from the interfirm network structure. To date, open innovation research has primarily been developed from firm-level case studies. Innovation network researchers have focused on cross-sectional studies of the strategic advantages of network structure and firm positioning as determinants of performance. However, the dynamics of learning and the accumulation of knowledge in open interorganizational networks of innovation and their effects on firm and system-level performance remain relatively unexplored, particularly given the impact of resource interdependencies that exist at the boundaries between firms. To address this important question, we explore the impact that open flows of knowledge have on productivity performance, given that firms must address the impact of interdependencies at the boundaries of such exchanges. In previous research we found that interdependencies can have a negative impact on productivity performance in relationally unstable networks. In the current model we find that a greater degree of firm openness towards interfirm exchange of knowledge has a positive impact on performance, and that even a small degree of firm openness towards building network level codified knowledge has a significant positive impact on performance. In conclusion, firm openness compensates for learning discontinuities that occur when network affiliations are loosely coupled. These findings on network-level knowledge dynamics have important implications for innovation theory and for the strategic management of collaborative innovation initiatives.

Learning from Startups: Corporate Venture Capital and Exploratory Knowledge Creation

Anu Wadhwa

Corporate venture capital (CVC), direct minority equity investments made by established companies in privately held startups, has become an important strategic tool for many large companies. In particular, firms often pursue CVC investing as a way to learn about novel technologies. Although CVC investments are inherently exploratory and have been found to enhance investing firm innovation, research has yet to establish whether CVC investing leads to the development of exploratory innovations (i.e., innovations that embody knowledge that differs from knowledge used by the firm in prior innovation efforts). In this paper we explore the conditions under which CVC investments lead to the creation of exploratory knowledge by corporate investors. Building on insights from the innovation search and interorganizational learning literatures, we argue that three characteristics of an investing firm’s portfolio of startups will impact its creation of exploratory knowledge. Using longitudinal data on a panel of 40 telecommunications equipment manufacturers, we find that investing firms produce more exploratory knowledge when their portfolios include startups that are moderately diverse and that the degree to which portfolio firms have codified their knowledge enhances the effect of diversity.

2009

Creating Exploratory Innovations by Learning from Entrepreneurial Ventures

Anu Wadhwa

Corporate venture capital (CVC), direct minority equity investments made by established companies in privately held start-ups, has become an important strategic tool for many large companies. In particular, firms often pursue CVC investing as a way to learn about novel technologies. Although CVC investments are inherently exploratory and have been found to enhance investing firm’s innovation, research has yet to establish whether CVC investing leads to the development of exploratory innovations (i.e., innovations that embody knowledge that differs from knowledge used by the firm in prior innovation efforts). In this paper, we explore the conditions under which CVC investments lead to the creation of exploratory knowledge by corporate investors. Building on insights from the recombinatory search and interorganizational learning literatures, we argue that three characteristics of an investing firm’s portfolio of start-ups will enhance its creation of exploratory knowledge. Using longitudinal data on a panel of 40 telecommunications equipment manufacturers, we find that investing firms produce more exploratory knowledge when their portfolios include start-ups that are moderately diverse, mature, and possess codified technological knowledge.

Springer2008

The sources of process innovation in user firms

Marcellus Bogers

Previous research has shown that innovation can have various sources and different forms. Innovation can thus be developed by different types of organizations or individuals for several reasons, and it can be related to product or process technologies. One particular stream of research has explored the role of users as a source of innovation. Examples of user innovations can be found in a variety of fields and settings such as mountain biking, snowboarding, open source software, scientific instruments, oil refining, semiconductor manufacturing, and even the World Wide Web. What these innovations have in common is that they were all initially developed by people or organizations that wanted to solve a specific need and benefited from using their innovation rather than selling it. A particular type of user innovator is a "user firm" which develops new or improved production technology for its own internal use. Such process innovation is characterized by determinants and outcomes, which are fundamentally different from for example product innovation. In particular, process innovation may be driven by learning-by-doing, which is a form of problem-solving or experimentation that takes place on the production floor rather than in research and development (R&D). However, the exact drivers and consequences of process innovation in general and learning-by-doing in particular are not yet fully explored. Therefore, the objective of this thesis is to increase the understanding of the antecedents and impact of process innovation in user firms by exploring the role of non-R&D activities and learning-by-doing. This thesis consists of four parts. Each of them addresses a specific aspect related to the sources of process innovation in user firms. The first paper particularly argues that process innovation relies on different learning mechanisms than product innovation. Using data from the Swiss Innovation Survey of the Swiss Institute of Business Cycle Research (KOF) at ETH Zürich, the paper shows which are the external and internal knowledge sources (related to R&D, manufacturing and marketing) that lead to innovation. The second paper further investigates R&D and non-R&D activities as sources of innovation and develops two measures to quantify the magnitude of non-R&D innovation. The results show that a substantial part of the firms develop innovations without R&D and that non-R&D process innovation has a very large impact on the overall cost reductions in the Swiss economy. In order to better understand the sources and attributes of process innovation in user firms, a questionnaire was conducted in a sample of Swiss manufacturing firms. Based on the results, the third paper shows the pervasiveness of major and especially minor process innovation. It also explores the sources of process innovation within the firms and identifies the practices related to the accounting, protection, appropriation, and monitoring of process innovation, which are often of an informal nature. The fourth paper investigates in more detail how such practices drive learning-by-doing and process innovation. The findings firstly show which complementary systems of practices are implemented in user firms to promote the innovative contribution of production floor workers and secondly how these practices drive learning-by-doing for either major or minor process innovation.

EPFL2009

The sources of process innovation in user firms

Marcellus Bogers

EPFL2009