Innovation is widely recognized as an engine of economic growth and was always conducted based on firms' inhouse research and development (R&D) capabilities. Recently, the innovation process has been regularly changed to be more open. Thus, innovation has become a result of an interaction between different actors inside and beyond the four walls of the firm's labs. This change has been conceptualized as a shift from "closed innovation model" to "open innovation model" (Chesbrough 2003a). This thesis investigates the shift towards open innovation model on the firm level, using data from Germany and Egypt. More specifically, the thesis scrutinizes two dimensions of the phenomenon; (i) the influence of openness on the firm's innovation performance (chapters 2 and 3), and (ii) the managerial Determinants of adopting an open innovation strategy (chapters 4 and 5) The thesis is structured in six chapters. Chapter 1 gives an overview of the study, including a brief open innovation background, the motivation of this study and a summary of the main contributions. Chapter 6 sets out the main conclusion and future research directions. The study’s key contributions are outlined in four quantitative empirical papers presented in chapters 2, 3, 4, and 5 and the main findings are summarized as follows. Chapter 2 examines the relationships between various openness strategies and innovation novelties. The current conceptualization of openness is restricted mainly to breadth and depth concepts (Laursen and Salter, 2014), which overlook the heterogeneity between external sources of knowledge. We argue that external sources are heterogonous concerning their knowledge novelty and knowledge accessibility. In designing their openness strategy, firms should consider those two aspects to define the direction of openness (i.e. market sources or science sources), and the form of openness (i.e. search or collaboration strategy). The combination of both direction and form of openness generates four different openness strategies, namely market-driven search, market-driven collaboration, science-driven search, and science-driven collaboration. We hypothesize that each external openness strategy influences firms' innovation novelties (i.e. firm-novelties or market-novelties) differently. Our empirical analysis relies on a sample of 4457 German firms that participated in the German community innovation survey CIS in 2005, 2009, 2013, and 2017. The results support our assumptions. Findings show that a market-driven search strategy is more strongly correlated to firm-novelty than to market novelty and that using a collaboration form of openness with the same sources does not enhance innovation novelty. In contrast, a science-driven collaboration strategy is more strongly associated with market novelty than firm-novelty and that deploying a search form of openness with the same sources does not influences innovation novelties. We provide targeted recommendations for innovation management practitioners and researchers based on these results. Chapter 3 explores how open is innovation in emerging markets. The chapter focuses on examining to what extent open innovation practises are adopted in developing countries and measuring the impact of openness on product and process innovations. Prior studies focused on measuring innovation by using product innovation related indicators, and process innovation is widely overlooked within open innovation literature. We argue that, despite the relation between product and process innovation, they are different in nature. Therefore, open innovation might influence both types of innovation differently. To address the aim of this chapter, we used data from 1750 innovative firms who participated in the Egyptian national innovation survey in 2015. The findings show that firms acquire knowledge for innovation from, on average, four external sources of knowledge out of nine listed in the survey (i.e. breadth of openness). In this regard, customers, suppliers and followed by other sources such as exhibition and fairs are the most important sources of knowledge. Firms in the sample do not recognise universities and research institutes as important sources of knowledge for their innovation activities. The findings support our argument that open innovation might influence differently on different types of innovation. Open innovation only has a positive influence on firms' ability to introduce new products. However, there is no relationship between openness levels and process innovations. Chapter 4 investigates the paradox of R&D capacity and external collaboration strategy, as well as the moderating role of appropriation strategy. This paradox hearkens back to the absorptive capacity and spillover economic views of knowledge management. From the absorptive capacity perspective, internal R&D capacity improves firms’ ability to leverage external sources of knowledge for innovation. Accordingly, the R&D capacity is an essential stimulant of adopting an open innovation strategy. On the other hand, investing in internal R&D generates outcomes that spill over beyond the investing firm's ability to benefits from them. This spillover issue is qualified to arise more during external collaboration as the firm should reveal its knowledge to attract potential partners for innovation. Hence, the spillover risk might hinder adopting an open innovation strategy. Accordingly, investing in internal R&D associates with firms probability to adopt external collaboration concavely. However, the presence of strong appropriation strategy flattens the concavity level by mitigating the risk of spillover and turning it into a business opportunity through the purposive management of knowledge outflows. The findings support our argument and show a concave relationship between R&D capacity and external collaboration; this concavity becomes flattened if the firm has a robust internal appropriation strategy. Chapter 5 investigates the persistence of openness strategy from an organizational learning perspective. To capture the persistence of openness, we used longitudinal panel data of German enterprises for ten years between 2007 and 2015. The chapter’s first finding confirms the innovation paradigm shift from closed to open innovation, particularly from 2011 on. We interpret this shift as a strategy to rejuvenate the innovation process and share risks of innovation after the economic downturn caused by the global financial crisis 2008-2009. The second finding shows that openness is a persistent strategy (i.e. state-dependent strategy), which means that the current level of openness depends on the previous state of openness. Open innovators are more likely to continue engaging in collaborative innovation activities than closed innovators as they develop their "openness capability" over time. With the recognition of the potential role of openness in explaining the firm's innovation performance, our findings suggest that early adopters of open innovation will lock-in a competitive advantage over the later adopters of openness.
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