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Network Forms of Open Innovation: Ecosystems, Platforms, Communities and Consortia

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“Master Class” lecture on network forms of open innovation, given at the R&D Management Conference 2019 in Paris — June 20, 2019

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Network Forms of Open Innovation: Ecosystems, Platforms, Communities and Consortia

  1. 1. Network Forms of Open Innovation: Ecosystems, Platforms, Communities and Consortia Joel West KGI – Keck Graduate Institute The Claremont Colleges R&D Management Conference 2019 20 Juin 2019
  2. 2. Today’s agenda • Les publicités • Open innovation • OI and networks • Need for research • Examples of possible linkages • Conclusions
  3. 3. • Founded 1997 • Interdisciplinary graduate school • Industry-focused, professional orientation • Prepare students for biotech industry • One of 7 Claremont Colleges • East Los Angeles County • 6,200 undergrad, 2,800 grad • 7 schools: 7 presidents, budgets… • Swiss cantons, not US university KGI: Keck Graduate Institute † Funded by the Keck Foundation, which funded two 10m telescopes in Hawai‘i
  4. 4. Research strategy: related diversification Software engineer/manager/entrepreneur Research Program Platforms: Standards+Ecosystems Personal computers: Japan, Macintosh Wireless voice: 1G, 2G, 3G Smartphones: iPhone, Symbian Open Source Software Open source platforms Open source communities, ecosystems Open Innovation OI platforms OI communities, crowds OI alliances, consortia Entrepreneurial Commercialization Digital communications Photovoltaic solar power 3D printing & communities
  5. 5. 1. The concepts of open innovation have a natural fit to the many network forms of organizations 2. These forms are understudied by OI researchers 3. Thus, there is a research opportunity Today’s Message
  6. 6. Open Innovation
  7. 7. “Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.” Henry Chesbrough, Open Innovation: Researching a New Paradigm (2006) Definition of OI
  8. 8. • Coined by Chesbrough (2003) • 3 managerial books (2003, 2006, 2011) • 2 edited volumes (Chesbrough Vanhaverbeke, West, 2006, 2014) • Google Scholar • Publications: 8,600 (in title) • Chesbrough: 65,000 citations • Special issues: Research Policy (2014), Industrial & Corporate Change (2016), California Management Review (2017), R&D Management (2006, 2009, 2010, 2019) “Open Innovation” Concept
  9. 9. OI is distinguished by “The centrality of the business model in converting R&D into commercial value.” “A business model has two important functions. It must create value within the value chain; and it must capture a piece of value for the focal firm in that chain.” — Chesbrough et al (2006: 11, 31) Centrality of the Business Model
  10. 10. Networks and OI
  11. 11. “[R]esearch on organizational practices and arrangements that are network-like … shares a common focus on lateral or horizontal patterns of exchange, interdependent flows of resources, and reciprocal lines of communication.” (Powell, 1990: 296) What is a Network?
  12. 12. • Original emphasis of OI • Pair of organizations (West et al, 2006) • Firms not individuals (Piller & West, 2014) • Transactional views • Today network forms of interfirm relations are increasingly common • More relational than market/transactional (Powell, 1990) • OI needs more network research (Vanhaverbeke, 2006; West, 2014a) Gap: Not enough OI network research
  13. 13. “[F]irms have engaged in a range of strategies for managing relationships with external counterparts, including alliances, networks, communities, consortia, ecosystems, and platforms. In each case, … [they] reflect a pattern of recurrent relationships rather than a single market transaction, demonstrating an interdependency of reciprocity and repeated interactions that helps mitigate the risks of opportunism (Powell, 1990; Jones et al., 1997).” (West 2014a: 72) Linking OI to networks
  14. 14. • Alliances and Networks of Alliances (West, 2014b) • Communities & crowds (West & Lakhani, 2008, West & Sims, 2018) • Consortia (West & Gallagher, 2006; Olk & West, 2019) • Ecosystems (West & Wood, 2013; Bogers et al 2019) • Platforms (West, 2014a) My Own OI Network Research
  15. 15. Alliances
  16. 16. • Normally about partnering to pool knowledge and competencies (Sarkar et al, 2001) • Nominal goal is complementarity in value creation (e.g. Deeds & Hill, 1996; Rothaermel, 2001) • One issue is how firms find complementary partners (Hitt et al, 2000, 2004; Li et al, 2008; Shah & Swaminathan, 2008) • Focus on alliance success (e.g. Doz, 1996; Olk, 2002) Prior Research: Strategic Alliances
  17. 17. • Key issue often knowledge races/spillovers • Partners have complementary knowledge • Firms want to learn from each other — and block partners from learning from them (Hamel, 1991; Mowery et al, 1996; Kale et al, 2000) • Such zero-sum efforts undercut the alliance • In response, alliances seek to build trust and restrict opportunism (Das & Teng, 1998, 2001) Prior Research: Strategic Alliances
  18. 18. • At the level of the alliance • Challenges of R&D alliances (Roijakkers et al, 2014) • Relational drivers of successful cooperation (Wubben et al, 2014) • Does openness lead to more internationalization? (Moreno-Menéndez & Casillas, 2014) • Analyzing a network of alliances • Using networks to support inbound OI (Mooty & Kedia , 2014) • Network embeddedness as barrier to opening innovation (Nakazono et al, 2014) OI Research on Alliances
  19. 19. Communities & Crowds
  20. 20. • Traditionally, “community” referred to local geographic communities (Putnam, 1995) • Today, management researchers are interested in studying online communities (West & Lakhani, 2008; Dahlander et al, 2008; O’Mahony & Lakhani, 2011; Dahlander & Frederiksen, 2012) • Most often studied: Open source software communities (Dahlander & Wallin, 2006; West & O’Mahony, 2008) Communities
  21. 21. Definition of Community (1) Communities are “aggregates of people who share common activities and/or beliefs and who are bound together principally by relations of affect, loyalty, common values, and/or personal concern (i.e., interest in the personalities and life events of one another).” Brint (2001: 8)
  22. 22. Definition of Community (2) Communities are “networks of interpersonal ties that provide sociability, support, information, a sense of belonging, and social identity.” Wellman (2002: 4)
  23. 23. Definition of Community (3) “[W]e define community as ‘a voluntary collection of actors whose interests overlap and whose actions are partially influenced by this perception.’ ” O’Mahony & Lakhani (2011: 7) O’M&L: Communities can help or hurt firms
  24. 24. Open Innovation & Community (1) “[W]e are only interested in those involved in creating innovation outside the boundaries of the firm.… First, … we consider a community to be a voluntary association of actors. … Secondly, [here] we focus on innovations that are explicitly brought to market” West & Lakhani (2008: 225)
  25. 25. Open Innovation & Community (2) “We define virtual communities as voluntary associations of individuals or organizations united by a common goal regardless of geographic proximity…we are interested in virtual communities … that are external to the firm, even if … they may include employees of the focal firm.” West & Sims (2018:62)
  26. 26. Various forms and phenomena • Open source software (West & Gallagher, 2006; West & O’Mahony, 2008 • Other software (Fichter, 2009) • Other digital goods (Jeppesen & Frederiksen, 2006) • Open source hardware (Raasch et al, 2009; Greul et al, 2018) OI Research on Communities
  27. 27. • Communities have many potential benefits for firm OI strategies (West & Sims, 2018) • They can source inventions, ideas, knowledge (West & Bogers, 2014) • Increase customer loyalty (Algesheimer et al., 2005) • Provide complements (Jeppesen & Frederiksen, 2006) • Spur adoption (West & O’Mahony, 2008) • Enable entrepreneurial entry (Gruber & Henkel, 2006; Dahlander, 2007; Greul, West & Bock, 2018) How Communities Impact OI
  28. 28. Communities Overlap with Crowds West & Sims (2018)Boudreau & Lakhani (2009)
  29. 29. • Large network • Unknown potential contributors • Self-identifed/selected participants • Usually (not always) competing • To solve a particular organizational problem What is a Crowd? Surowiecki (2005), Benkler (2006), Howe (2006), Estellés-Arolas & González (2012), Poetz & Schreier (2012), Afuah & Tucci (2012), Brabham (2013)
  30. 30. • Ways to form crowd • Open, closed, reconfigurable closed (Viscusi & Tucci, 2018) • Use of crowd • Contests (Brabham, 2008; Jeppesen & Lakhani, 2010) • Gated contest (Diener & Piller, 2013; Piller & West, 2014) • Labor market (Howe, 2006) • Grand challenge (Scotchmer, 2004; Murray et al, 2012) • Crowd-community hybrids • Cooperative crowdsourcing, social production, user generated content, crowd scince (West & Sims, 2018) Different Types of Crowds
  31. 31. • Firms sponsor crowds • Crowdsourcing contests (Dodgson et al, 2006; King & Lakhani, 2009) • Crowdsourcing business models (Alio, 2004) • Firms work with existing crowds (Felin et al, 2017) • Some inputs are innovation, some are not (West & Sims, 2018) OI & Crowds
  32. 32. Consortia
  33. 33. Definition of R&D Consortium “[T]wo or more companies sharing resources to create a new legal entity in order to conduct cooperative research and development activities” Olk & Young (1997: 856) Focus on R&D and firm success is natural (but understudied) fit to open innovation
  34. 34. • Firms trade off private interests against collective benefits (Ring et al, 2005) • Firms have high heterogeneity of interest, influence and expectations (Olk, 1999, 2002) • Key issues of creating (Doz et al, 2000) and maintaining alignment of interests (Olk & Young, 1997) • While most consortia limit benefits to members, open consortia allow spillovers more broadly (West & Gallagher, 2006; Olk & West, 2019) Prior Research on Consortia
  35. 35. Simcoe (2006) • The central issue of OI consortia is tradeoff between shared value creation and private value capture • Firms need consortium to create value • Often engage in rivalry to capture value • Central issue for consortium, members, policymakers is managing this tension Central OI Issue: Private vs. Shared
  36. 36. • Standardization consortia (Simcoe, 2006; Dittrich & Duysters, 2007) • Open source software (West & Gallagher, 2006) • Pharmaceutical consortia (Olk & West, 2019) But generally, limited research on how OI relates to consortia (Vanhaverbeke et al, 2014) OI Research on Consortia
  37. 37. Ecosystems/Platforms
  38. 38. “Ecosystems allow firms to create value that no single firm could have created alone” Adner (2006) Ecosystems are “an interdependent network of self- interested actors jointly creating value” Bogers et al (2019) Definition: Ecosystem
  39. 39. Definition: Platform “[A]n evolving technological system, when it is strongly functionally interdependent with most of the other components of this system, and when end- user demand is for the overall system, so that there is no demand for components when they are isolated from the overall system” Gawer & Henderson (2007: 4)
  40. 40. Platforms & Ecosystems Platforms combine two constructs • Interfaces: define interoperability and integration of separately created modular components (Baldwin & Clark, 2000; Baldwin, 2008, 2012; Baldwin & Woodard, 2009; West, 2006) • Ecosystem: third parties contribute complements that make the core offering more valuable (West& Wood, 2013; Gawer & Cusumano, 2014; Jacobides et al, 2018)
  41. 41. OI Focuses on Sponsor Benefits • OI is about firms managing external innovation for their benefit (Chesbrough, 2006; Chesbrough & Bogers, 2014) • Sponsors are organization that control/influence network for their benefit (O’Mahony, 2007) • Platform sponsor (Eisenmann et al, 2009; Parker & Eisenmann, 2017) • Ecosystem sponsor (Bogers et al, 2019) • But OI should also consider success of member firms (West & Wood, 2013)
  42. 42. Many natural overlaps of OI with ecosystem/platforms: • Complementarity (Teece, 1986; West, 2006; Jacobides et al, 2018) • Shared value creation (Vanhaverbeke & Cloodt, 2006; Bogers et al, 2019) • Coordination (West & Gallagher, 2006; Chesbrough, 2007) Natural Affinity of Ecosystems & OI
  43. 43. Conclusions
  44. 44. • Creating, organizing, forming, joining • Value creation vs. value capture tradeoff • Coordinating joint value creation • Managing/mitigating opportunism for private value capture • Contracting/institution building • Measures of private and shared success • Does shared success accrue to participants? Common Issues
  45. 45. • Membership • Alliances are about firms • Many communities include individual members • As do some platforms (think iPhone apps…) • Consortia, regional ecosystems have university/nonprofits • Governance • Consortia (& alliances) have most formal governance • Ecosystems/platforms often controlled by sponsor firm • Communities vary in degree of formalization Important Differences
  46. 46. • Networks have inherent trade-off of collective value creation and private value capture (Simcoe, 2006) • Some firms seek to advantage their value capture (Bekkers et al, 2002, 2011) • Other firms accept cooperative value creation as commodity inputs to private value capture (West & Gallagher, 2006) • Firms with strong value capture fund consortia solely for value creation (Olk & West, 2019) Value Creation vs. Value Capture
  47. 47. • Similarities/differences of these or hybrid forms • Linking business model to network choices and design • Participation/motivation/strategies of new (and small) firms • Link (disconnect) of success at network & firm level Research Opportunities
  48. 48. Thank You…

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