Creating Exploratory Innovations by Learning from Entrepreneurial Ventures

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.

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

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

Juan Andrei Villarroel Fernandez

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.

2007

Human-centered Innovation Processes

Alan Cabello Llamas

For more than a decade managers, academics, educators and politicians have indicated that innovation is the key to our future. As a result, we find a plethora of innovation initiatives around the world, from university curricula to the mission statements of banks. This push to innovate is a direct result of the recent economic downturn as well as from an ever more competitive, connected and dynamic world. In order to remain relevant in such a world, emphasis is given to generating new ideas that may lead to new products and services. Despite these initiatives, evidence indicates that investment in innovation does not correlate with success. Although the goal of innovation is clear, the processes whereby that goal may be accomplished are varied and not entirely understood. The motivation of this thesis, therefore, is to gain a better understanding of some of those innovation processes. In recent years, a growing number of firms, organizations and governments have adopted an approach to innovation that is referred to as âDesign Thinkingâ. They use the term to describe the process by which a multifunctional team tackles a problem by exploring the underlying needs of the people most affected by that problemâwhether that be customers, users, etc.âthen, based on these observations, defines the root cause or key elements of the problem and finally attempts to resolve it through an active cycle of ideating, prototyping and testing potential solutions. While the process itself is well defined and understood, its implementation and use by managers in the context of innovation management calls for further exploration. With this objective, I first conducted research within academic literature, followed by an ethnographic study focused on the use of Design Thinking by both large firms and entrepreneurial teams. The first paper of this dissertation examines the different elements in the Design Thinking process within the context of management research. The goal of the first conceptual article is thus to establish the common ground among diverse subfields of research in management upon which future research in Design Thinking may build. The second paper of this dissertation aims to uncover how large firms use Design Thinking as an approach to innovation. Based upon direct observation and interview data we find evidence of links between Design Thinking and Absorptive Capacity. We therefore propose that Design Thinking may be a helpful tool for firms who wish to innovate by an increase in their Absorptive Capacity. The third and final paper of this dissertation aims to understand the effects of Design Thinking on the venture creation process. This work is based on ethnographic research conducted at Stanford University wherein twelve teams participated in an accelerator program that uses a Design Thinking approach with the goal of creating and launching new ventures. Building on Dynamic Capabilities literature, this research finds that the teams with greater capability to iterate their venture concept through repeated cycles of attachment and detachment relative to their proposed products or services tend to be more successful.

EPFL2015

Human-centered Innovation Processes

Alan Cabello Llamas

EPFL2015