Abstract
Irrefutable evidence shows that greater openness toward external partners enhances a firm's ability to solve innovation-related problems. To manage open innovation (OI) projects, firms use a variety of governance modes, including market-based contracts, platform intermediaries, and equity and non-equity partnerships. While innovation projects can be very diverse and characterized by various attributes, such as complexity and knowledge hiddenness, only a few conceptual studies have hitherto considered project attributes as drivers of OI governance mode selection. Using a sample of 85 OI projects and a set of illustrative cases, this article explores empirically how project attributes influence OI governance mode selection. This empirical study advances previous conceptual work on OI governance. By accounting for project-level heterogeneity, we explore the microfoundations of OI and provide more stable and fundamental insights into OI governance than previous industry- and firm-level analyses did. In addition, we suggest that effective OI management depends on matching project attributes with the benefits and costs of specific governance modes. Finally, we argue that this study enhances understanding and conceptualization of the relationship between project complexity and decomposability in the context of OI.
Highlights
Open innovation (OI, hereafter) is becoming inescapable in large firms, who are increasing their investments of both financial and managerial resources in open innovation (OI) activities [1,2,3]
Our results show that firms avoid non-equity partnerships for simple problems with a low level of knowledge hiddenness, as the observed frequency (2) is lower than expected (5.588)
We suggest that, when high problem complexity overlaps with high knowledge hiddenness, equity partnerships may be the only feasible alternative, explaining the focal firms’ choice of this OI mode despite its high set-up cost
Summary
Open innovation (OI, hereafter) is becoming inescapable in large firms, who are increasing their investments of both financial and managerial resources in OI activities [1,2,3]. While current evidence suggests that firms are increasingly shifting from closed to open innovation, it does not elucidate which OI mode managers prefer for a particular project [7]. In a recent multiple case study, Brunswicker, et al [12] showed that, even within the same firm, different problems are addressed using different OI modes. These differences in the same firm hint at the importance of considering problem attributes as a key driver in OI mode selection, and call for a downward theoretical shift in the level of analysis from firm- to project-level. West, et al [17, p. 278] argued that “neither the practice of nor the research on open innovation is limited to the level of the firm.”
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