Cybernetics and Systems

Social and Business Decisions

Sergio Barile, Raul Espejo, Igor Perko, Marialuisa Saviano

• Publisher: Routledge
• Year: 2018
• ISBN:
  9780429944604
• Edition: 1
• Topic: Business
• Subtopic: Knowledge Capital
• Index: Business

Society is now facing challenges for which the traditional management toolbox is increasingly inadequate. Well-grounded theoretical frameworks, such as systems thinking and cybernetics, offer general level interpretation schemes and models that are capable of supporting understanding of complex phenomena and are not impacted by the passage of time.

This book serves the knowledge society to address the complexity of decision making and problem solving in the 21st century with contributions from systems and cybernetics.

A multi-disciplinary approach has been adopted to support diversity and to develop inter- and trans-disciplinary knowledge within the shared thematic of problem solving and decision making in the 21st century. Its conceptual thread is cyber/systemic thinking, and its realisation is supported by a wide network of scientists on the basis of a highly participative agenda.

The book provides a platform of knowledge sharing and conceptual frameworks developed with multi-disciplinary perspectives, which are useful to better understand the fast changing scenario and the complexity of problem solving in the present time.

Theme II
Sustainability and the Anthropocene

Marialuisa Saviano, Hernan Lopez Garay, Sandro Schlindwein, Markus Schwaninger and Ray Ison

Managing open innovation with public partners

The case of smart cities

Alberto Ferraris,¹ Stefano Bresciani² and Armando Papa³

Keywords: smart city, open innovation, public organizations, public partner, smart city management

1 Introduction and objectives

The main goal of this paper is to study the challenges found and the strategies followed by firms developing open innovation strategies with public partners in smart cities projects. For the last decade, the management of inbound and outbound knowledge flows is increasingly relevant in corporate strategies. Under the shadow of this new knowledge strategy, academia has tried to understand this topic producing a growing stream of literature on open innovation from Chesbrough’s (2003) seminal research. However, most of this research has focused on knowledge partnerships between firms. Both mainstream literature on open innovation and the older research on r&d cooperation have traditionally neglected the r&d cooperation between firms and public organizations (Perkmann et al., 2013; Sandulli et al., 2017).

Nowadays, an increasing number of public organizations are participating in open innovation strategies (Lee et al., 2012) in smart city projects (Sandulli et al., 2017; Scuotto et al., 2016; Ferraris et al., 2017). In fact, some of the open innovation adoption in public organizations is explained by the growing interest of policymakers for smart cities programs. However, partnerships with public organizations in open innovations strategies differ from partnerships with private organizations in a number of ways. In first place, public organizations do not need to compete and therefore have a lower pressure to innovate (Perry and Rainey, 1988). In second place, decision making in public organizations are moderated by political action and strict bureaucratic processes, creating significant organizational slack and misalignment of objectives with private partners (Damanpour and Schneider, 2009). In third place, public organizations have weaker absorptive capacity and therefore their ability to profit from new technologies may be limited, reducing the attractiveness of new technologies (Inkpen and Beamish, 1997). For these reasons, firms need to develop specific open innovation strategies when dealing with public partners.

Within the scope of smart cities programs, firms and public organizations tend to cooperate to develop innovations, which usually are more radical than incremental (Sandulli et al., 2017). Nowadays, firms are increasing the number and the relevance of their alliances within smart cities because modern cities are a great locus of innovation (Florida, 2003; Scuotto et al., 2016; Ferraris and Santoro, 2014). So, the concept of “smart city” has become quite popular between scholars and practitioners. One of the well-known definitions of a smart city is “a city that aims at connecting the physical infrastructure, the IT infrastructure, the social infrastructure, and the business infrastructure to leverage the collective intelligence of the city” (Hollands, 2008).

Firms involved in smart cities projects usually follow a business model experimentation approach because of the high technological risk of a large number of these projects. Most of the literature on smart cities has studied the phenomenon either from a technological perspective or from the perspective of the innovation ecosystem which is closer to the lens and challenges of policymakers (Almirall et al., 2014; Neirotti et al., 2014). In this research we make a relevant contribution focusing on the firms’ perspective and on how firms deploy strategies depending on the characteristics of the smart city project. More specifically, we address the following main key challenges for open innovation with public partners in smart cities: (i) the governance of public-private alliances; (ii) the role of public managers; (iii) the management of intellectual property rights with public organizations.

2 Methodology and results of the case studies

This study uses a multiple-case research design. We have studied the strategies of seven large corporations with a clear open innovation strategy in different smart cities. We used multiple data sources. First, we collected and analyzed extensive secondary materials. Then, we conducted deep semi-structured interviews on the different aspects of the project and their open innovation (OI) strategy with each project manager for these smart city projects.

Our data shows that firms used smart cities as testbeds of future technologies and products and services. However, current procurement processes limited the scalability of successful projects to a larger number of citizens. Fund sourcing was critical for assessing the risk of the project for the city. When research funds came from the firm or other governmental bodies (mostly European public bodies), public organizations were more flexible in managing the relationship. However, when funds from the public organization were required, innovation projects were treated as normal procurement projects, creating several pitfalls and disfunctionalities. Risks also defined the role of public managers. For low risk projects, public managers played the role of coordinators of the network of actors involved in the project leaving the leadership of the project to private partners, while for higher risk projects they took the leadership and reinforced the formal controls over the project.

Because of the high uncertainty of smart city exploration projects, most managers in our interviews argued that firms and city governments required more informal alliance governance mechanisms in order to forge a more flexible and adaptive relationship. However, despite the reluctance of public partners, some of the firms in our sample supported the adoption of equity governance mechanisms in smart cities initiatives. Equity governance is useful when partners have concerns over the retention of intellectual property (IP) outcomes. Furthermore, the appropriability regime was stronger when shared knowledge relied on the core competencies of the firm and when experimentation strategies of the firms were more focused on business models than on technology. When risk was much lower, the project was more focused on initial stages of a technology, the distance of the technologies to the market was larger and consequently the appropriability regime was weaker also because firms were looking for cross-fertilization of ideas and projects throughout the smart city ecosystem. For high-risk projects, scalability of initial pilots was only possible under innovation-friendly organizational processes.

Despite this, contractual provisions are the most common governance mechanism in smart city alliances, since they are more flexible than joint ventures and at the same time they may help managing exchange uncertainty in a variety of ways. The high levels of uncertainty especially in most exploration smart city projects require resource flexibility and continuous mutual adaptation. However, public-private contracts are based on traditional modes of public procurement where public partners require to know the solution they need in advance and to work with prescreened vendors. These standard procedures are highly bureaucratic and involve detailed request for proposals, a cumbersome and slow selection process, and messy contract negotiations. Therefore, these procedures are a strong barrier to innovation since they often make it challenging for public partners to work with entrepreneurs, start-ups or SME, as well as to attract private partners for small projects where transaction costs and bureaucratic efforts may overwhelm the expected profits. City governments in several cities recognized public procurement procedures as one of the major challenges in smart city projects and consequently promoted more flexible contracts, longer-term relationships, raised the threshold for the instigation of the official procurement process or relaxed some of the rules around private-public partnerships.

Finally, we found that the development of the innovation ecosystem was built through the own firms’ network in the case of private partners in the ecosystem, while public ...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Foreword
• Preface
• An overview
• Keynotes contributions
• THEME I Human aspects of managing systems
• THEME II Sustainability and the Anthropocene
• THEME III Smartness and Big Data
• THEME IV Democracy, transparency and social dynamics
• THEME V Interactions revolution
• THEME VI Knowledge and organisation
• THEME VII Systems thinking and system dynamics
• THEME VIII Quantum modelling
• THEME IX Reflexivity, second order science and context
• Participant universities
• Participant associations
• Partners
• Sponsor
• Strategic committee
• About the editors
• About the keynotes
• Contributor index
• Subject index