How Firms Make Friends:
Communities in Private-Collective Innovation

Defense Doctoral Thesis by Matthias Stuermer
ETH Zür...
Overview

1. How firms make and don't make friends
2. Thesis papers and their findings
3. Additional research papers
4. Co...
How Firms May Adopt the Open Source Model




                      Integrating externally available
Level 1              ...
How Firms May Adopt the Open Source Model




                      Revealing proprietary source code under an
Level 2
   ...
How Firms May Adopt the Open Source Model

                      Building a firm-sponsored community by
Level 3           ...
How Firms May Adopt the Open Source Model

                      Building a firm-sponsored community by
Level 3           ...
Why and How to Gain Control

A)Community-driven OSS projects
         Meritocracy: exercise of control on the basis of kn...
How May Firms Influence on OSS Communities?

 Influence of corporations increases when...
          firms reveal previou...
Balancing Act Between Openness and Control

 Control decreases contributions *
          Transparency increases contribu...
Apple iPhone




      low                                 Degree of openness                                  high

 Sept...
Apple iPhone                            Nokia N810




      low                                 Degree of openness       ...
Apple iPhone                            Nokia N810                                            Openmoko




      low      ...
Overview

1. How firms make and don't make friends
2. Thesis papers and their findings
3. Additional research papers
4. Co...
Structure of my Doctoral Thesis
 Appendix




            Paper 1      Paper 2                 Paper 3




September 30th ...
Structure of my Doctoral Thesis

                      Introduction
 Appendix




            Paper 1       Paper 2       ...
Structure of my Doctoral Thesis

                      Introduction
                                                      ...
Structure of my Doctoral Thesis

                      Introduction
                                                      ...
Thesis Papers and their Theory and Data

Paper Theory                 Method                      Dataset                 ...
1 Enabling Knowledge Creation through Outsiders:
         Towards a Push Model of Open Innovation

 Published: 2010 in sp...
1 Enabling Knowledge Creation through Outsiders:
         Towards a Push Model of Open Innovation

                Current...
1 Enabling Knowledge Creation through Outsiders:
         Towards a Push Model of Open Innovation

                Current...
1 Enabling Knowledge Creation through Outsiders:
         Towards a Push Model of Open Innovation

Example of adopting
lev...
1 Enabling Knowledge Creation through Outsiders:
         Towards a Push Model of Open Innovation
                        ...
2 Extending Private-Collective Innovation:
         A Case Study

 Published: 2009 in R&D Management, vol. 39 (2)
 Findi...
2 Extending Private-Collective Innovation:
         A Case Study

Example of
mitigation strategy for
“difficulty to differ...
2 Extending Private-Collective Innovation:
         A Case Study

Example of
mitigation strategy for
“difficulty to differ...
3       The Credible Sponsor: Participant's Motivation and
         Organization Attributes in Collaborative Digital Innov...
3       The Credible Sponsor: Participant's Motivation and
         Organization Attributes in Collaborative Digital Innov...
3      The Credible Sponsor: Participant's Motivation and
            Organization Attributes in Collaborative Digital Inn...
3      The Credible Sponsor: Participant's Motivation and
            Organization Attributes in Collaborative Digital Inn...
Overview

1. How firms make and don't make friends
2. Thesis papers and their findings
3. Additional research papers
4. Co...
Additional Research Papers
                Proceedings of HICSS 2007:
  4             Sampling in Open Source Software Dev...
Overview

1. How firms make and don't make friends
2. Thesis papers and their findings
3. Additional research papers
4. Co...
Conclusions

 Firms benefit investing in open source software
    → private-collective model of innovation
 Balancing ac...
Conclusions

 Firms benefit investing in open source software
    → private-collective model of innovation
 Balancing ac...
Sources of Competitive Advantage

 Traditional views
          Industry structure view *
          Resource-based view ...
Sources of Competitive Advantage

 Traditional views
          Industry structure view *
          Resource-based view ...
Firm-Driven Open Source Communities as an Example
 of Interorganizational Competitive Advantage
Determinants of relational...
Ari Jaaksi, Head of OSS Operations at Nokia
“But we believe the world is changing and the competitive
advantage comes from...
Ari Jaaksi, Head of OSS Operations at Nokia
“But we believe the world is changing and the competitive
advantage comes from...
Ari Jaaksi, Head of OSS Operations at Nokia
“But we believe the world is changing and the competitive
advantage comes from...
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Defense Doctoral Thesis by Matthias Stuermer
ETH Zürich, September 30th 2009

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How Firms Make Friends: Communities in Private-Collective Innovation

  1. 1. How Firms Make Friends: Communities in Private-Collective Innovation Defense Doctoral Thesis by Matthias Stuermer ETH Zürich, September 30th 2009
  2. 2. Overview 1. How firms make and don't make friends 2. Thesis papers and their findings 3. Additional research papers 4. Conclusions September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 2
  3. 3. How Firms May Adopt the Open Source Model Integrating externally available Level 1 open source software → open innovation September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 3
  4. 4. How Firms May Adopt the Open Source Model Revealing proprietary source code under an Level 2 open source license → full control by the firm Integrating externally available Level 1 open source software → open innovation September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 4
  5. 5. How Firms May Adopt the Open Source Model Building a firm-sponsored community by Level 3 renouncing some of the project's control Revealing proprietary source code under an Level 2 open source license → full control by the firm Integrating externally available Level 1 open source software → open innovation September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 5
  6. 6. How Firms May Adopt the Open Source Model Building a firm-sponsored community by Level 3 renouncing some of the project's control Revealing proprietary source code under an Level 2 open source license → full control by the firm Integrating externally available Level 1 open source software → open innovation September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 6
  7. 7. Why and How to Gain Control A)Community-driven OSS projects  Meritocracy: exercise of control on the basis of knowledge *  Technical contributions and organizational-building behavior lead to authority and control ** B)Firm-driven OSS projects  Business model: value creation and value appropriation  Firms need control to appropriate returns of investment  Balancing act between openness and control * Weber (1978) ** O'Mahony and Ferraro (2007) September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 7
  8. 8. How May Firms Influence on OSS Communities?  Influence of corporations increases when...  firms reveal previously proprietary code  firms employ core developers who previously contributed as unpaid volunteers  firms contract intermediary OSS firms and individuals  New challenges in firm-driven OSS projects  Possible crowding-out effects of intrinsic motivation  Create incentives to attract external contributions September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 8
  9. 9. Balancing Act Between Openness and Control  Control decreases contributions *  Transparency increases contributions strongly  Accessibility increases contributions slightly **  Balancing is difficult  Too much control: communities may not contribute with all of their energy, interest, and creativity  Too little control: results may not serve the firm's goals * Shah (2006), Dahlander and Magnusson (2005) ** von Krogh et al. (2009) September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 9
  10. 10. Apple iPhone low Degree of openness high September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 10
  11. 11. Apple iPhone Nokia N810 low Degree of openness high September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 11
  12. 12. Apple iPhone Nokia N810 Openmoko low Degree of openness high September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 12
  13. 13. Overview 1. How firms make and don't make friends 2. Thesis papers and their findings 3. Additional research papers 4. Conclusions September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 13
  14. 14. Structure of my Doctoral Thesis Appendix Paper 1 Paper 2 Paper 3 September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 14
  15. 15. Structure of my Doctoral Thesis Introduction Appendix Paper 1 Paper 2 Paper 3 September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 15
  16. 16. Structure of my Doctoral Thesis Introduction My paper thesis: “How Firms Make Appendix Friends...” Paper 1 Paper 2 Paper 3 September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 16
  17. 17. Structure of my Doctoral Thesis Introduction My paper thesis: “How Firms Make Appendix Friends...” Paper 1 Paper 2 Paper 3 Co-Author on Paper 4 Paper 5 Paper 6 additional research papers September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 17
  18. 18. Thesis Papers and their Theory and Data Paper Theory Method Dataset My contribution longitudinal quantitative archival research design, data 11 open innovation analysis, new measures data: newsgroups and source code commits analysis, method creation, theory development expert interviews: conducting interviews, private-collective 22 model of innovation grounded theory building with Nokia members, contractors and coding of transcripts, grounded theory building, voluntary contributors theory writing online survey: research design, survey 33 motivation, identification, structured equation questionnaire to modeling (SEM) Maemo and Openmoko development and testing, data gathering, hypothesis marketing community development, link to theory September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 18
  19. 19. 1 Enabling Knowledge Creation through Outsiders: Towards a Push Model of Open Innovation  Published: 2010 in special issue on open innovation in the International Journal of Technology Management  Finding: characteristics of the context that enables external contributions → push-model of open innovation  Data: Eclipse newsgroup messages (372k messages) and source code history (63 Mio LOC)  Method: longitudinal analysis, distinction between IBM and non-IBM contributors September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 19
  20. 20. 1 Enabling Knowledge Creation through Outsiders: Towards a Push Model of Open Innovation Current concept of open innovation Exploitation of existing ideas Licensing innovations to other firms September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 20
  21. 21. 1 Enabling Knowledge Creation through Outsiders: Towards a Push Model of Open Innovation Current concept of Push model of open innovation open innovation Exploitation of Innovations existing ideas pushed back Inducing new external innovations useful for the firm Licensing innovations Free revealing of → level 2 of the to other firms knowledge open source model September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 21
  22. 22. 1 Enabling Knowledge Creation through Outsiders: Towards a Push Model of Open Innovation Example of adopting level 3 of the open source model: founding an independent governance body → Developer activity before and after Eclipse Foundation September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 22
  23. 23. 1 Enabling Knowledge Creation through Outsiders: Towards a Push Model of Open Innovation announcement of Eclipse Foundation Example of adopting level 3 of the open source model: founding an independent governance body → Developer activity before and after Eclipse Foundation September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 23
  24. 24. 2 Extending Private-Collective Innovation: A Case Study  Published: 2009 in R&D Management, vol. 39 (2)  Finding: benefits, costs and mitigation strategies of Nokia using and contributing open source software in a commercial product → private-collective innovation  Data: 23 interviews in the Maemo community (300 pages) → Nokia managers, developers, contractors, voluntary contributors  Method: grounded theory building through coding the transcripts September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 24
  25. 25. 2 Extending Private-Collective Innovation: A Case Study Example of mitigation strategy for “difficulty to differentiate:” Selective source code revealing → Hybrid software stack of Maemo September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 25
  26. 26. 2 Extending Private-Collective Innovation: A Case Study Example of mitigation strategy for “difficulty to differentiate:” Selective source code revealing → Hybrid software stack of Maemo September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 26
  27. 27. 3 The Credible Sponsor: Participant's Motivation and Organization Attributes in Collaborative Digital Innovation  Under review: special issue on digital innovation in Organization Science  Finding: impact of perceived firm characteristics on the intrinsic and extrinsic motivation of contributors  Data: survey on the Maemo and Openmoko communities → 1233 responses, 27.9% response rate  Method: structured equation modeling testing 10 hypotheses on openness, credibility, identification, motivation and contribution September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 27
  28. 28. 3 The Credible Sponsor: Participant's Motivation and Organization Attributes in Collaborative Digital Innovation September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 28
  29. 29. 3 The Credible Sponsor: Participant's Motivation and Organization Attributes in Collaborative Digital Innovation Perceived firm attributes Individual Identification, Motivation, and Contribution September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 29
  30. 30. 3 The Credible Sponsor: Participant's Motivation and Organization Attributes in Collaborative Digital Innovation Perceived firm attributes Individual Identification, Motivation, and Contribution ⊘       September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 30
  31. 31. Overview 1. How firms make and don't make friends 2. Thesis papers and their findings 3. Additional research papers 4. Conclusions September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 31
  32. 32. Additional Research Papers Proceedings of HICSS 2007: 4 Sampling in Open Source Software Development: The case for using the Debian GNU/Linux Distribution Working paper: 5 A Lightweight Model of Component Reuse: A Study of Software Packages in Debian GNU/Linux Revise and resubmit Organization Science: 6 How Component Dependencies Predict Change in Complex Technologies September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 32
  33. 33. Overview 1. How firms make and don't make friends 2. Thesis papers and their findings 3. Additional research papers 4. Conclusions September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 33
  34. 34. Conclusions  Firms benefit investing in open source software → private-collective model of innovation  Balancing act managing an open source community – especially as a firm  Ways on how to incentivize contributions  Proposition: Network with the community becomes a new source of sustainable competitive advantage September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 34
  35. 35. Conclusions  Firms benefit investing in open source software → private-collective model of innovation  Balancing act managing an open source community – especially as a firm  Ways on how to incentivize contributions  Proposition: Network with the community becomes a new source of sustainable competitive advantage September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 35
  36. 36. Sources of Competitive Advantage  Traditional views  Industry structure view *  Resource-based view ** * Porter (1980) ** Wernerfelt (1984), Barney (1991) September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 36
  37. 37. Sources of Competitive Advantage  Traditional views  Industry structure view *  Resource-based view **  Dyer and Singh (1998): Relational view  Network of relationships with other organizations  Embedded interfirm resources are difficult to imitate  Results in interorganizational competitive advantage * Porter (1980) ** Wernerfelt (1984), Barney (1991) September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 37
  38. 38. Firm-Driven Open Source Communities as an Example of Interorganizational Competitive Advantage Determinants of relational rents Subprocesses facilitating relational rents → Duration of safeguards Relation-specific assets → Volume of interfirm transactions → Partner-specific absorptive capacity Knowledge-sharing routines → Incentives to encourage transparency and discourage free riding → Ability to identify and evaluate potential complementarities Complementary resources and capabilities → Role of organizational complementarities to access benefits of strategic resource complementarity → Ability to employ self-enforcement rather than third-party governance enforcement Effective governance → Ability to employ informal versus formal self-enforcement governance mechanisms Dyer and Singh (1998) September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 38
  39. 39. Ari Jaaksi, Head of OSS Operations at Nokia “But we believe the world is changing and the competitive advantage comes from how many others can you get from participating in this network. This network becomes more important than trade secrets.” September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 39
  40. 40. Ari Jaaksi, Head of OSS Operations at Nokia “But we believe the world is changing and the competitive advantage comes from how many others can you get from participating in this network. This network becomes more important than trade secrets.” → this was November 2006 → June 2009: partnership Nokia and Intel based on Maemo → August 2009: Maemo shall supersede Symbian as a platform September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 40
  41. 41. Ari Jaaksi, Head of OSS Operations at Nokia “But we believe the world is changing and the competitive advantage comes from how many others can you get from participating in this network. This network becomes more important than trade secrets.” → this was November 2006 → June 2009: partnership Nokia and Intel based on Maemo → August 2009: Maemo shall supersede Symbian as a platform → October 2009: N900, new smartphone based on Maemo September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 41
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