Book Review: Open Innovation Research, Management and Practice

    By: Paulo S. Figueiredo on Mar 18, 2015

    Tidd, J., ed.  Open Innovation Research, Management and Practice, Series on Technology Management:  Volume 23, Imperial College Press, London (2013).  447 +vii pages.

    Review by Paulo Figueiredo

    book cover.pngThe concept of open innovation (i.e. innovating with partners by sharing risk and sharing reward) has become increasingly popular in the literature on technology and innovation. For example, Tom Malone was one of the first authors to explore this concept (2004).  Terwiesch and Ulrich also addressed the issue (2009). However, despite the large volume of empirical work, many of the solutions and best practices being proposed are fairly general and not specific to particular contexts and contingencies. It can be argued that the proponents of open innovation are generally positive, but there are indicators suggesting that the specific mechanisms and outcomes of open innovation models are very sensitive to context and contingency.  Research has shown that patterns of innovation differ by sector, firm and strategy. Therefore, it is necessary to examine the mechanisms that enable successful open innovation. In Open Innovation:  Research, Management, and Practice, a relatively large group of authors attempt to contribute to a shift in the debate from the potentially misleading general prescriptions, and provide conceptual and empirical insights into the precise mechanisms and potential limitations of open innovation management and research.

    The book is divided into four parts. Each part has a small collection of papers covering a specific theme.  Part I is about taxonomies and modes. The first chapter proposes a theoretical framework for open innovation and uses an empirical study to shows how the framework could be applied. The framework establishes four modes of open innovation in companies:  integrated collaborators, open innovators, closed innovators and specialized collaborators. These modes are put into a quadrangle where they occupy specific positions regarding to two key dimensions: innovation funnel openness and partner variety. For example, open innovators occupy the “high” position in both of these dimensions. The second chapter presents an extensive literature review, establishes theoretical relationships that antecede open innovation adoption and performance, and introduces a typology of four open innovation strategies – namely, innovation seeker (such as P&G or Ely Lilly), innovation provider (such as ICE Power), intermediary (between the two, such as Innocentive or NineSigma), and finally, open innovator (such as Xerox or IBM). Each type has different sources of innovation, attributes, mechanisms, and outputs.  Chapter 3 discusses how to balance open and closed innovation based on case studies. It is argued that both culture and strategy seem to be essential determinants with respect to the design of a firm’s innovation model. It is also argued that firms ought to realize that both an innovation-oriented culture and a firm’s strategic focus correspond to intangible assets that cannot simply be acquired, but have to be developed and formed.

    The second part of the book is comprised of five chapters.The first one looks at the impact of open innovation on new product success and investigates the moderating role of environmental dynamics. It is argued that open innovation strategies help companies navigate through turbulent times.  The authors use data from 103 industrial firms to evaluate the impact of such kind of innovation on performance.  Results show that the impact is positive, meaning that open innovation is a positive influence for these firms that operate in dynamic sectors. The second chapter of Part II examines open innovation at the project level rather than the firm level. A conceptual framework is developed of inbound open innovation at the new product development (NPD) project level to assess factors that help determine the degree of openness across three dimensions. It is found that the appropriate calibration of the three dimensions of inbound open innovation is determined by the type of innovation (discrete versus complex) and the appropriability regime (tight versus weak). The third chapter compares the development of two types of service development projects (conventional or closed, and open) across the dimension “degree of novelty”.  It is found that open innovation is not a universal prescription, but it may be more relevant to the greatest number of novel development projects.  The fourth chapter of Part II studies process innovations, those innovations that are generally organizational in nature.  The authors assess the impact of openness on products, services and processes. They find that openness to external information may, after a time, lead to decreasing marginal returns as measured by innovation performance. The final paper in this part of the book investigates the international dimension of external technology sourcing. It is shown that introducing the geographical perspective on open innovation (R&D in multinational enterprises) turns the open innovation paradigm into a more pragmatic framework for these enterprises.This paper is exploratory in nature and suggests areas for future research.

    The third part of the book is focused on sector and industry studies. The first paper in this section focuses on inter-firm cooperation and information sourcing practices and their effect on performance at the firm level. The authors find that cooperation with and information sourcing from the market reduce innovation expenditures and positively affect innovative sales, reducing time-to-market.  On the other hand, the same practices, when performed with competitors, appear to be more resource-intensive, but also increase innovative sales.  The second paper in Part III reviews open innovation in the mobile phone industry through a comparative study of the iPhone and Android.  The case studies illustrate that both openness and control are important elements to facilitate stakeholder contributions and that innovation initiatives can successfully approach generativity in different ways. The third paper in this part of the book identifies differences in how firms belonging to different industries implement open innovation, comparing organizational and managerial approaches. They find that firms either a) establish exploitative networks characterized by strong ties, with several heterogeneous actors, or b) establish networks for explorative purposes, establishing weak ties with public research centers or universities.

    The final part of the book, and probably the most ambitious one, focuses on limitations and constraints of open innovation. It is comprised of three papers. The first one argues that the proponents of open innovation create a false dichotomy between open and closed approaches, and critiques six principles of open innovation, pointing out that it is misleading to convey that firms today follow these principles.  The second paper develops and tests a contingency model of inbound open innovation in an attempt to explain the disparities in open innovation payoffs that exist between firms. It is found that returns from open innovation are greatest when firms maintain their internal research capacity, employ an incentive system for innovation, and advocate cross-functional integration.  In the final chapter, the authors identify two shortcomings of the practical application of open innovation and develop and illustrate the notion of “generative interaction” which describes a series of mechanisms that produce a self-reinforcing ecology favoring innovation and profitability.  However, the opposite dynamics can occur, when degenerative interaction may produce a cycle of declining innovation and profitability. It is shown that user-centric and open innovation can negatively affect performance.

    In sum, this interesting book illustrates that the simple dichotomy between open and closed approaches for innovation is not realistic, and that there are pitfalls to open innovation. This book can certainly be useful to managers trying to keep up with the fast changing environment and with the current challenges of innovation, but is more useful to academic scholars.    

    References

    Malone, T. (2004):  The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life.  Harvard Business School Press.

    Terwiesch, C. & Ulrich, K. (2009): Innovation Tournaments: Creating and Selecting Exceptional Opportunities. Harvard Business Press.

    Paulo S. Figueiredo

    Senai Cimatec, Brazil

    PauloFig.jpgPaulo Figueiredo is a Brazilian scholar, currently working as Assistant Professor at SENAI-CIMATEC in Bahia-Brazil, in the Mathematical Modeling department. He has a bachelor’s degree in Mechanical Engineering from UNICAMP and a master’s degree in Business Administration from FEA-USP. He has a doctoral degree from Boston University (2010). His doctoral thesis was about the optimization of Product Pipeline Management (PPM) processes in pharmaceutical and biotech  companies.

    Paulo’s research interests include Operations management in general, and more specifically Product Development, Product Pipeline Management and System Dynamics Modeling.

    Paulo_s_figueiredo@hotmail.com


    Released: March 18, 2015, 7:37 am | Updated: March 19, 2015, 11:07 am
    Keywords: PDMA Blog


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