How Firms Make Friends:
Communities in Private-Collective Innovation
Defense Doctoral Thesis by Matthias Stuermer
ETH Zürich, September 30th 2009

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

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

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

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

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

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

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

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

Apple iPhone
low Degree of openness high
September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 10

Apple iPhone Nokia N810
low Degree of openness high
September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 11

Apple iPhone Nokia N810 Openmoko
low Degree of openness high
September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 12

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3 The Credible Sponsor: Participant's Motivation and
Organization Attributes in Collaborative Digital Innovation
Perceived firm attributes Individual Identification, Motivation, and Contribution
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September 30th 2009 How Firms Make Friends: Communities in Private-Collective Innovation 30

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

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

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

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

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

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

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

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

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

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

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