Innovation and IT in an International Context

R&D strategy and operations

F. Rowe, D. Te'eni, F. Rowe, D. Te’eni

• Publisher: Palgrave Macmillan
• Year: 2014
• ISBN:
  9781137336132
• Topic: Business
• Subtopic: International Business
• Index: Business

Innovation and IT are intertwined. In order to understand how, this book takes an interdisciplinary view of innovation in an international and digital world. It addresses strategic and operational aspects of R and D and new product development, emphasizing knowledge management, configurational design, distance and diversity.

Part I

Strategizing the R&D Function

1

International Open Innovation: Taking Stock and Moving Forward

Bruno Cirillo and Giovanni Valentini

Introduction

Across a broad set of industries, innovation is crucial for the ability of firms to create and sustain competitive advantage. A recent McKinsey global survey (McKinsey, 2010) reports that 84 percent of executives contend innovation is extremely or very important to their companies’ growth strategy. Yet, if the importance of innovation is widely acknowledged, high uncertainty exists on how firms should organize for innovation. In fact, as the same survey highlights, executives find the organization of R&D to be the biggest challenge: 42 percent of respondents say improvement in this area alone would make the most profound difference in innovation performance (McKinsey, 2010).

Over the last decade, the open innovation paradigm has been increasingly indicated as the solution to firms’ problems in the innovation process. Defined as the ‘use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively’ (Chesbrough, 2006: 1), it has attracted substantial attention from practitioners and academics since the initial seminal contribution of Henry Chesbrough (2003). Although it has increasingly been considered as the paradigm for organizing innovation, we argue that there still remain a few open issues related to the process and the extent to which external knowledge might enhance performance, in particular in an internationally distributed context.

The goal of this chapter is twofold. First, it intends to discuss some of the key issues related to how to actually organize for open innovation, and to present some controversial empirical findings related to the use of external knowledge in the innovation process. It advances the idea that, although the benefits of knowledge transfers are extensively reported by extant research, the boundary conditions of the efficacy of an open innovation strategy for firm performance have yet to be properly identified.

Second, this chapter aims to present relevant avenues for future research on knowledge transfers and firm performance with a specific focus on internationally distributed contexts. To this end, it grasps some recent enquiries from the literature on multinational companies (MNCs) and exports to offer a perspective on firms’ inbound and outbound knowledge-transfer mechanisms, and their main relationships with firm performance. While any claim of comprehensiveness would certainly be foolhardy, our goal is mainly that of highlighting a few topics we believe might be interesting for future research efforts at the intersection between innovation and international business.

We consider that having a specific perspective on firms’ inbound and outbound knowledge transfers in an international context is important for at least two reasons. On the one hand, firms’ competitive advantage in global markets is highly dependent on the international diffusion of knowledge. Empirical evidence suggests that foreign sources of technology typically account for about 90 percent of a country’s domestic productivity growth, with most technologies originating from just a few technologically advanced countries (Keller, 2004). And although the concentration of technology is declining, Singh (2007) calculated that about 84 percent of all worldwide R&D funding and 92 percent of all innovations registered with the US Patent and Trademark Office are concentrated in the seven most industrialized countries. This makes economic growth worldwide highly dependent on the international diffusion of knowledge (Romer, 1990). On the other hand, the organization of R&D in a distributed context implies facing critical distances. And this in turn can produce positive as well as negative effects. For instance, distances might imply difficulties in knowledge transfers across organizational boundaries, but they might also ensure tapping into a diverse and wider knowledge base.

We thus start by presenting the background literature of this chapter. Then we move to analyze some open issues in the open innovation literature. Finally, we conclude by identifying relevant related issues in the international open innovation domain.

Background

Faster technological development, shorter product lifecycles and more intense global competition have transformed the current competitive environment for most firms. In such an environment, innovation has become crucial to achieving competitive advantage. Lately, researchers have emphasized the great potentiality of opening the boundaries of the innovation process. While in the past established firms typically relied on internally developed technical and innovative capabilities, there is mounting evidence that highlights how the innovation process is increasingly involving partners beyond firms’ boundaries, including research companies, business partners and universities. Being a world-class innovator today requires not only great scientists and research facilities, but also a suitable process for managing different sources for scientific and technological knowledge. This is ‘the era of open innovation’, as Chesbrough (2003) puts it.

Possible explanations for the increasing importance of the external sourcing of technology can be found both on the supply and on the demand side. On the one hand, the supply of technology is increasingly involving the production of scientific knowledge in almost all major disciplines. This phenomenon is creating new sources of innovation, available for tapping by interested parties, often in seemingly unrelated fields (e.g. Chatterji, 1996). Its importance is reflected by the emergence and development of markets for technologies in several industries (Arora et al., 2001; Arora and Gambardella, 2010). And, last but not least, an ever-increasing pool of displaced talent is resulting from re-engineering and downsizing.

On the other hand, the demand side shows greater competition and growing pressure on costs that requires a faster development cycle (e.g. Iansiti, 1995), increasing complexity and multidisciplinarity of resources required for innovation coupled with the necessity of being responsive to local and global markets that makes internal development more difficult (Bartlett and Ghoshal, 1997), and the search for risk-sharing technological policies (e.g. Veugelers and Cassiman, 1999). All these factors push towards the search for external sources of technology.

Accordingly, a number of studies have examined and documented the potential benefits of opening the boundaries of R&D (e.g. Cassiman and Veugelers, 2006; Laursen and Salter, 2005). Yet, though the potential benefits of knowledge exchange are out of the question, the boundary conditions of the efficacy of an open innovation strategy have yet to be properly scrutinized. Nor have its theoretical underpinnings been clearly identified. In this chapter, we intend to make a modest step in this direction. To this end, we start by analyzing some of the theoretical and empirical issues we believe deserve particular attention if we want to grasp a better understanding of the organization of innovation, and we then move to the analysis of open topics for research, building in particular upon the literature on international R&D.

Open innovation: Open issues

While a number of studies have examined drivers and consequences of an open innovation process, we believe that several questions remain open for research. This is due to both empirical and theoretical limitations of past studies, which have not fully identified the mechanisms through which opening the boundaries of R&D can have an impact on performance and (one might say, as a consequence) have not fully clarified the actual impact of open innovation on firm performance.

Our first concern relates to the level of analysis. Most of the prior (large sample) empirical literature that has looked at the drivers and consequences of opening the boundaries of R&D has used the firm as the unit of analysis, whereas most of R&D is actually conducted at the project level, and the same firm might decide to be more or less permeable in different projects (Cassiman et al., 2010). Moreover, another related source of bias that might have led to incomplete and/or inconsistent results is the little attention that literature has paid to the type of partner with whom R&D agreements are established. To better clarify this issue, consider the increased importance given to the formation of links with universities and research centers. A number of empirical studies (e.g., Veugelers and Cassiman, 2005; Laursen and Salter, 2004) have already explored the firm-level variables that promote the establishment of agreements with universities. However, while these studies allow us to discriminate between firms that establish links with universities and firms that do not, they cannot clarify for which specific activities these links are sought. Clearly, even firms that tend to establish regular agreements with universities do not involve them in all of their R&D projects. At the same time, even the few studies focusing on the project level (e.g., Fontana et al., 2006) have generally used firm- or industry-level covariates to explain project organization (i.e., not R&D project-level variables), mainly because of the lack of availability of fine-grained data (for a recent exception, see Cassiman et al., 2010).

Second, little ...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Figures and Tables
• Notes on Contributors
• Abstracts
• Introduction: A Systemic View of Innovation
• Part I: Strategizing the R&D Function
• Part II: IS Support for R&D Coordination and Design
• Part III: Innovation and Collaboration in an International Context
• Conclusion
• Author Index
• Subject Index