SMRIntroductionEssay

HoppingTables–AnIntroductiontotheSMRSpecialIssueonOpenInnovation

JanetBercovitzandHenryChesbrough

SincethepublicationofChesbrough’s2003book,OpenInnovation(OI)has

emergedasaninfluentialconceptwithinthedomainofInnovationStudies.Open

innovation-adistributedprocessbasedonpurposefullymanagedknowledgeflows

-focusesontheneedforanorganizationtotranscenditsboundariesbysearching

fornewbusinessmodelsthatbothsourceandseedknowledgeandtechnology

externally(Chesbrough&Bogers,2014:17).Chesbrough’sOIworkspawnedan

activeconversationinacommunityofscholarsthathasgeneratednumerous

researchpaperswhichhavegarneredsignificantcitations.ArecentGoogleScholar

searchontheterm“openinnovation”yieldedhundredsofthousandsofacademic

citations.NofewerthantwelvereviewarticlesdedicatedtothetopicofOpen

Innovationhavebeenpublishedoverthelastdecade(e.g.,Elmquist,Fredberg,&

Ollila,2009;Dahlander&Gann,2010;VandeVrande,Vanhaverbeke,&Gassmann,

2010;Huizingh,2011;Lichtenthaler,2011;Chesbrough,2012;Remneland-

Wikhamn&Wikhamn,2013;West&Bogers,2014;West,Salter,Vanhaverbeke,&

Chesbrough,2014;Chesbrough&Bogers,2014;Randhawa,Wilden,&Hohberger.

2016;Bogers,etal,2017).Inaddition,since2014,anannualinternational

conference,theWorldOpenInnovationConference(WOIC),bringstogethermore

than200seniorexecutivesandtopacademicsfortwodaysofnetworkingand

conversationcenteredonOpenInnovationthemesandthesharingofbestpractices.

TherealsoisanannualProfessionalDevelopmentWorkshoponopeninnovationat

theAcademyofManagementwhichattractsmorethan100participantseachyear.

Yet,withallofthisactivity,thereremainsaninterestingshortcoming.This

vibrantconversationishappeningmainlywithinastand-alonecommunityof“true

believers”.AcommoncritiqueoftheOpenInnovationliteratureisthatresearchers

donotsufficientlyintegrateexternaltheoreticalperspectivesnoreffectivelylink

theirworktoconversationsinthebroadermanagementfield(Randhawa,Wilden,&

Hohberger,2016).Perhapsasaresult,themajorityofOIarticlestendtoappearina

limitedsetofinnovation-specificjournals,suchasResearchTechnology

Management,ResearchPolicy,R&DManagement,andInternationalJournalof

TechnologyManagement(Randhawa,et.al.,2016).Thisconcentratedfootprint

constrainsthebroaderdisseminationoffindingsandreducestheinfluenceofthis

researchbeyondtheInnovationStudiesarea.Somewhatironically,thestudyof

OpenInnovationseemstosufferfromsomeClosedInnovation,asknowledgeisnot

freelyflowingacrosstheoretical,academicandpracticeboundaries.

Atthesametime,attemptsofOpenInnovationscholarstoengagethe

strategicmanagementscholarcommunityhaveyieldedrelativelylittleinteraction

fromthelatterside.ChesbroughandAppleyard’s(2007)articletitled“Open

InnovationandStrategy”hasbeenwidelycitedintheinnovationdomain.Itisa

clearcallforscholarlyengagementthathasbeenlargelyneglectedbystrategy

scholars.Astheystatedinthearticle:

“Individually,these[open]examplesmightseemtobemerecuriosities.

Takentogether,though,theyimplythatsomethingnewisgoingon;

somethingthatcannotadequatelybeexplainedthroughtheclassic

conceptionsofbusinessstrategy.Itemsthatwereofcentralimportancein

earlierstrategytreatments,suchasownership,entrybarriers,switching

costs,andintra-industryrivalryareofsecondaryimportanceinthegenesis

oftheabovephenomena.Forcesthatwereeitherperipheraltotheearlier

treatmentorignoredentirely,suchasattractingtheparticipationof

individualvolunteers,theroleofcommunityparticipation,theconstruction

ofinnovationnetworks,andthenotionofinnovationecosystemsalllay

beyondtheexplanatorypowerofcurrentnotionsofstrategy.”

TheOpenInnovationconversationisongoing,intenseandbuzzingwithinthe

innovationstudiescommunity.Thisconversationdocumentsanumberof

anomalousphenomenathatchallengetraditionalstrategyperspectives.Onerecent

exampleisIBM’sacquisitionofRedHat.RedHatdistributesaversionoftheLinux

operatingsystem,whichisbuiltonopensourcecode.RedHat’sunderlying

technologyisavailabletoanyone,includingcustomersandcompetitors,forfree.

YetIBMpaid$34billiontoacquirethecompany.Itisdifficulttocomprehendthis

behaviorwithoutemployingconceptsofopenness.1Suchanomaliesshouldbe

integratedintothemainstreamstrategydiscussion.Forthemostpart,however,

mainstreamstrategyscholarsareengagingonlyattheperipheryoftheexchangeof

ideasandphenomenathatarecentraltoOpenInnovation.

1MicrosoftalsorecentlyacquiredGitHub,arepositoryofopensourceprojects,for$7billion.Withoutopenness,thistooisdifficulttounderstand.

TheideaforthisspecialissueoftheStrategicManagementReview(SMR)

emergedagainstthisbackdrop.TheaimofSMR,asstatedbytheeditorialteam,isto

“promoteinsightsoncorequestionsinthestrategicmanagementfieldthrough

impactfulessays”thatintegrateliteraturestobettergrapplewiththefield’s

canonicalproblems.Ofcentralinteresttothefieldofstrategyishowfirmscreate

andcapturevaluethroughtheircompetitiveactionsandresourceallocation

decisions.Choicesoffirmboundaries–whatisdoneinsidethefirmandwhat

activitiesareconductedacrossboundariesthroughalliances,licensing,ormore

arms-lengthcontracts–arealsokey.Additionally,theidentificationandstudyof

strategicdecisions,definedasthosemanagementdecisionsthatareinterdependent

withotherdecisions–acrosscontemporaneousactivities,acrosstime,andacross

economicactors—distinctivelycharacterizethestrategicmanagementfieldand

offeralensforunderstandingthecausesandconsequencesofvariationinfirm

performance(Leiblein,Reuer,andZenger,2018).

Giventhepotential,andlikelyhigh,relevanceofOItothecorestrategic

themesanddecisionsregardinghowtoorganizeandcompeteinthecreationand

captureofvalue,wefeltitwasimminentlylogicaltodedicatethisearlyissueofthe

SMRtotheexplorationandexplicationoftheintersectionbetweenOpenInnovation

andStrategy.Tokick-offandfacilitatethisdialog,weorganizedasmallconference

onthistopic.Theoriginalconferenceinvitationletternoted:

“Theconceptofopeninnovationisoneofthemostimportantnew

managementtopicsthathasemergedoverthelasttwodecades.Whilethe

openinnovationliteraturehasmadeextensiveprogressdescribinghow

knowledgeistransferredacrossorganizations,theroleofnetworksin

facilitatingorhinderinginnovation,andthemannerinwhichinstitutions

codifyideasandpractices,opportunitiesremaintoexaminewhetherand

whyparticularformsofopeninnovationaremoreeffectiveincertain

contextsandhowopeninnovationdecisionsaffectafirm’scompetitive

position.”

Withthisinvitation,wesolicitedparticipationofscholarswiththegoalofbuildinga

betterunderstandingofhowOpenInnovationaffectsafirm’scompetitiveposition.

Theresponsetoourinvitationwasquitepositiveandwewereabletobringmore

than30academicsspanningthesetworesearchcommunitiestogetheratthe

UniversityofCalifornia,BerkeleyfortwodaysinOctoberof2018.Intotal,14

paperscoveringdifferentaspectsoftheOpenInnovation-Strategyintersectionwere

presented(SeeAppendixfortheconferenceprogram).

Whilethepresentationsatthefrontoftheroomwerethoughtprovoking,

equally,ifnotmore,intriguingwasthe“self-organization”ofscholarsintheroom.

Wesaw5main“physical”tablesofthoughtemergeasthepeopleintheroomchose

where,andwithwhom,tosit.AtonetableweretheOpenInnovationstalwarts–

thosescholarswithadeepandfocusedinterestintheOIphenomenon.Atasecond

tablesatthemainstreamstrategyandorganizationscholarsfocusedonboundaryof

thefirm,dynamiccapabilities,andcompetitiveadvantageissues.Athirdgrouping

includedthoseleveragingdisciplinarytoolstostudytheeconomicsof“open”

innovation.ScholarsconsideringOIfromtheecosystemand/orcommunity

perspectivecoalescedaroundafourthtable.Finally,agroupofindividuals

interestedinquestionsaboutbasicresearchandopenscienceinitiatives

congregatedattheremaininground-top.Itwasfascinatingtoobserve

conversationsarisingwithintablesinresponsetothepresentations,spillingacross

tables,andthenengulfingtheentireroom.AsperitsreputationtheBerkeley

cateringwasgreat,buttheconversationgeneratedequally“tasty”foodforthought.

Wehaveassembledthisspecialissuetosharesomeoftheconversations,whichare

nowdistilledin6peer-reviewedpapers.Thisintroductoryessayoffersabrief

overviewofthesepapers,followedbyadiscussionofcommonground,contested

groundandopenquestionsforasharedresearchagendathattheconference

conversationsaswellasthepapersincludedinthisspecialissuegenerated.

Theincludedpapersspanavarietyoftopicsanddifferentlevelsofanalysis.

Fouroftheincludedpapersaresituatedatthefirmlevelofanalysis.Twoofthese

essaysapproachtheOpenInnovationphenomenonfromabaseinthetraditional

strategyliterature.TheothertwoarticlesaremoredeeplygroundedinOpen

Innovationandleveragestrategyconceptsandframeworkstoadvance

understandingofkeyelementsofOIactivities.Theremainingtwoessaysinthis

issueincrementallymovefromafirm-levelperspectivetowardsanecosystem-level

perspective.

OnechallengethathasconstrainedthedevelopmentofresearchonOpen

Innovationhasbeenthelackofasingleaccepteddefinitionoftheconcept.

Chesbroughhasputforwardthreedefinitionsovertime,anchoringhisdefinitionin

theeconomicsofspillovers(Chesbrough,etal,2006;Chesbroughetal,2014).The

mostrecentdefinitionofOpenInnovationinhisworkisthefollowing:

“Openinnovationisadistributedinnovationprocessbasedonpurposivelymanaged

knowledgeflowsacrossorganizationalboundaries,usingpecuniaryandnon-

pecuniarymechanismsinlinewiththeorganization'sbusinessmodel.”

However,otherscholarsworkingininnovationemployotherdefinitions,either

explicitlyorimplicitly.VonHippelandhiscolleaguesviewOpenInnovationasa

synonymforuserinnovation(vonHippel,2005),orfreeinnovation(vonHippel,

2015).OtherscholarsimplicitlydefineOpenInnovationascrowdsourcing,or

outside-inopeninnovation,orusercommunities,orcollaboratingwithstartups,or

collaboratingwithuniversities.Thelackofashareddefinitionhasobviousimpacts

ontheabilitytoexploreandunderstandtheconcept,letaloneconnectittostrategy

research.2Andthisproblempersistsinthisspecialissueaswell.

Intheopeningessayofthisvolume,“OpenInnovation:ATheoryBased

View,”TeppoFelinandToddZengeranchortheconversationaboutthestrategy/OI

intersection,contendingthatopennesswillonlygeneratecompetitiveadvantage

whentheoreticallyguided.Specifically,theyarguethataclearlyarticulatedfirm-

specifictheoryabout“whatthefirmshouldbeopento”isanecessaryconditionfor

opennesstocatalyzevaluecreation.Arelianceontheoryfocusesmanagement’s

attentionallowingthemtoseparatethe“wheatfromthechaff”andidentifykey

kernelsofexternalknowledgethatmaycomplementthefirm’sexistingknowledge

baseallowingforfruitfulanduniquerecombination.Giventhatexternalknowledge

rarelycomesintheformofafreelyavailablepublicgood,afirm-specifictheory

2Onemightobservethatthereisnosingleaccepteddefinitionof“strategy”inthevoluminousliteratureonthatsubjecteither,althoughthefieldiscoalescingaroundafewkeythemes.Soperhapsopeninnovationisnotsouniqueinitsdefinitionalchallenges.

providestheframeworktoevaluatesearch,accessanddevelopmentcostsandto

determinethepotentialforsustainedvaluecapturefromOIactivities.Finally,the

authorsnotethatafirm-specifictheoryalsoinformsthequestionofwhentobeopen

byhighlightingthedifferencesintheunderlyingproblemstobesolvedandthe

gainsfromselectingbetweenopenandclosedinnovationinadiscriminatingway.

Notethatthisarticleimplicitlydefinesopeninnovationfromanexclusivelyoutside-

inperspective.

Similarly,thesecondarticleinthisissuepushestoplaceOIlogicswithin

acceptedstrategy-basedtheoreticalframes.In“HandinGlove:OpenInnovationand

theDynamicsCapabilitiesFramework,”DavidTeecedelvesintothestrategy/OI

intersectiontoexplicatetherelationshipbetweenopeninnovationandthe

dynamicscapabilities(DC)framework.TeecearguesthatOIandDCarestrongly

linkedandmutuallyreinforcing.Hehighlightsthreekeypoints:(1)“Sensingand

seizingactivities”areatthecoreofOpenInnovation,thusOIrequiresdynamic

capabilities;(2)Afirm’sdynamiccapabilitiescanbestrengthenedthroughastute

useofOIprocesses,alearningbydoingeffect,and(3)ComparedwithDC,OIismore

narrowlyfocused,concernedmainlywiththefirm’sR&Dandcommercialization

processes.Thus,whileOIcontributestovaluecreationandvaluecapture,a

dynamiccapabilitiesframeworkisneededtoenactstrategythatbuildsfroma

holisticunderstandingofhowcompetitiveadvantageisdevelopedandsustained.A

casestudyofHaierroundsoutthearticleillustratingthethreekeypoints

articulatedandconnectingthetheoreticaldiscussiontopracticalimplementation.

Inthisarticle,Teecealsoimplicitlyassumesthatopeninnovationisoutside-inopen

innovation.3

ThecontributionfromKeldLaursenandAmmonSalter,“WhoCaptures

ValuefromOpenInnovation–TheFirmoritsEmployees,”spotlightsthe

appropriationrisksandvaluecapturechallengesofOpenInnovationwithaunique

twisttofocusonhowOIgainsaresplitwithinafirmratherthanacrossfirms.

Providingastrategicperspectiveonthemicro-foundationsofOpenInnovation,

LaursenandSalternotethatemployeesfillingin-boundOIrolesareatthenexusof

knowledgeflowsandthusarewellpositionedtoexpropriaterents.Thebargaining

poweroftheseindividualsturn,theysuggest,ontheappropriationregimeandthe

natureoftheknowledge(general/specific)involvedintheOIeffort.TomanageOI

employeeappropriationrisks,firmsfaceachoiceofsafeguardingviaimperfect

contractualandoversightmechanisms(tolimitleakage)orsafeguardingvia

selectionandprioritizingemployeeprobityaboveemployeeOIcompetence.This

essayleveragesestablishedTCEreasoningoftenappliedtostrategicboundaryof

thefirmdecisionstoissuesofinternaltalentorganization.Atrade-offbetween

“optimizing”valuecreationand“maximizing”valuecaptureisoftenatthecoreof

thisstrategicdecision.

HenryChesbroughandChristopherTucci’sarticle,“TheInterplaybetween

OpenInnovationandLeanStartup,or,WhyLargeCompaniesarenotLargeVersions

ofStartups,”explorestherelationshipbetweentheLeanStartupandOpen

3Andnotealsothat“dynamiccapabilities”isanotherconceptwhosedefinitioniscontestedamongleadingscholars(Teece,thisissue;Eisenhardt,2000).

Innovationapproaches.LeanStartupisitselfaphenomenonthatlacksastrong

connectiontoanunderlyingacademicliterature.Notwithstandingthisdeficiency,it

hasmadeanenormousimpactonbothindustrypracticeandacademicinstruction.

ChesbroughandTucciacknowledgethattheadoptionofLeanStartupprinciples

appeartodrivevaluecreationinnew,entrepreneurialventures.However,the

authorsassertthatimplementationofLeanStartup,initscurrentform,isfarmore

problematicinthecontextoflarge,establishedfirms.ChesbroughandTucciargue

thatLeanStartupadvocateserrinapplyingitsprinciplesoutsidethedomainofits

initialapplicationwhentheyapplyitinacorporatecontext.Largefirmswith

establishedbusinessmodelsfaceamarkedlydifferentcontextfromthatofastartup

venture,withnoexistingbusinessmodeltodefend.Manyofthecorporate

processesandcapabilitiesthatlargecompanieshavescaleduptoservetheir

existingbusinessareill-suitedtotheexperimentationandadaptabilityrequiredby

newventures.Allisnotlost,however.Inthecorporatecontext,theauthorsargue,

thesetensionscanbemitigatedbymeldingOpenInnovationwithLeanStartup.The

essayisuniqueinthatitgivesequalattentiontobothoutside-inandinside-outOI,

providingnovelinsightsandpracticaladviceonboundaryofthefirmchoicesthat

canenhanceLeanStartupeffortsinsideincumbentfirms.Inturn,LeanStartupcan

serveasaprocessmodelforimplementingInside-outopeninnovation,something

thatheretoforehasbeenlacking.

Thefinaltwocontributionsmovefromaninternalfocusonthefirmasthe

focalactortoconsideringthefirmincontext,bringingcommunityandecosystem

factorstotheforefrontoftheOpenInnovationdiscussion.Inthisrespect,these

finaltwoessaysmovetoemphasizeinterdependenciesthatariseacrosseconomic

actorsandtheeffectoftheseinterdependenciesonOI-relatedstrategicdecisions.

Intheiressay,“WhyDoUserCommunitiesMatterforStrategy?”SonaliShah

andFrankNagleprovideacomprehensivecharacterizationofusercommunities,a

keyplayerintheopeninnovationecosystem.Definingusercommunitiesalong

threedimensions(knowledgedevelopment&exchange,participation,control&

governance),thearticleproceedstodetailthepotentialinnovation-based

differentiationbenefitsandoutsourcing-basedcostsfirmsmayaccruebyengaging

withusercommunitieswhilesimultaneouslynotingthekeytrade-offsincontrol

andrepresentativeparticipationfirmsfaceintheseinteractions.Fromthis

foundation,theauthorsoffersageadviceforfirmsonhowtoeffectivelyand

productivelymanageOIactivities,highlightingcommonmisstepstobeavoided.

Usercommunitiesareanascentstrategicresourcethatneedsgreaterattentionfrom

thestrategyscholarlycommunity.Theessayclosesbyoutliningaplethoraof

researchopportunitiesattheintersectionofthestrategicmanagementandOpen

Innovationliteraturescenteredonbetterunderstandingtheprocessandimpactof

usercommunitiesandfirminteractions.

Thefinalessayinthisspecialissue,““DearEnemy:TheDynamicsofConflict

andCooperationinOpenInnovationEcosystems,”byGurneetaVasudeva,Aija

Leiponen,andStephenJonesdevelopsatheoreticalframeworktoilluminatethe

varyingstrategicresponsesofecosystemparticipantsgivenunanticipatedchanges

inthevalueofco-createdandsharedtechnologicalresources.Notingthatthegains

fromcooperationcanmaterializeasprivatebenefitsaccruingtoindividualfirms,

clubbenefitssharedbetweenaspecificsubsetoffirmsintheecosystem,orpublic

benefitsthatareavailabletoall,theframeworkdetailsconditionsunderwhich

cooperationcanbemaintainedfollowingincidencesofconflict.Broadly,theauthors

concludethatifunanticipatedchangesinvalueonlyaffectthepublicbenefits,

cooperationiseasilymaintained.However,ifsuchchangesimpingeontheprivate

and/orclubbenefitsavailable,subsequentcooperationactivitymaybesignificantly

altered.Basedontheirconceptualframework,theauthorssubmitthatthedegree

towhichcooperationsuffersorexpandsturnsontheappreciation/depreciationof

thevalueofthefocaltechnologicalresource,thescopeofcomplementaryelements

inthesystem,andthelevelofrelationalinterdependenciesamongparticipating

firms.Further,firmscanmakestrategicchoicesthatreshapeecosystemboundaries

–activatingandenhancingoutsideoptions,invitingentryofnewplayers,and/or

organizingforcollectivepunishmentandexpulsion/ostracismofoverlyaggressive

ecosystemmembers–inresponsetoconflict.Thisessayshowswhatinsightscanbe

achievedwheninnovationstudiesandstrategyresearchareappliedjointlytoa

topic.

Insum,theessaysinthisspecialissuemeetthegoalsoftheStrategic

ManagementReview–catalyzingtheexchangeofideasacrossdifferentresearch

communitiessoastogenerateinsightsoncanonicalproblemsinthefieldof

strategicmanagement.Moreover,thissetofessaysalsooperatestoprovide

valuablecommentarythataddstotheexistingOpenInnovationliterature.There

aremanygainstospecializationwhereconceptsarepropounded,tested,and

exchangedwithinasingleacademiccommunity.Asnotedabove,researchonOpen

InnovationhasdevelopedatanacceleratingratewithintheInnovationStudiesarea.

Buttheseessaysshowthattherecanalsobeconsiderablegainsfromtradeacross

communities,orwhatweobservedas“tablehopping”.Takenasawhole,these

essaysdelineateandhighlightthecommongroundwheretraditionalstrategic

managementconcernsandOpenInnovationactivitiesintersect.Theydraw

attentiontosomecontestedgroundwheretheperspectivesofexpoundedinthese

twocommunitiesofferconflictingviewsandcontraryinterpretations.Weconsider

andamplifyeachofthesepasturesinturn.

CommonGround

TherearemanycommontouchpointsbetweentheOpenInnovationandthe

strategyliteraturesandtheirassociatedscholarlycommunities.Weshareinterest

insubjectsliketheimpactoftechnologyuponfirmperformanceandindustry

evolution.Weshareacommonunderstandingthathowfirmsorganizetorespond

totechnologicalshiftscandeterminesuccessfulorfailedadoptionofthat

innovation.Forexample,whenisverticalintegrationasuperiorapproachto

organizinginnovationvs.adistributedprocessinvolvingmanyoutsideactorsvs.

transactinginthemarket?Theseboundary-of-thefirmquestionsinterestboth

scholarlygroups(thoughthesegroupsmayhavedifferentpriorsontherisksand

benefitsofeachmodeoforganization).Therearealsosimilarlevelsofanalysis

employedinbothresearchcommunities.Thelevelofthefirmisthefocallevelof

analysis,buttherehasbeenagrowingbodyofresearchonthenetworkor

ecosystemorcommunitylevelofanalysis.

Bothgroupsalsoshareaninterestinbusinessmodelsandtheirrolein

influencingtheallocationofresources,inshapingthedevelopmentoftechnology

andinexplainingpersistentdifferencesbetweenfirmsandfirms’competitive

performance.Withintheseresearchdomains,thefunctionsofvaluecreationand

valuecapturearebothsubjectsofconsiderableacademicinquiry(athemethatisa

consistentpresenceinallofthearticlesinthisspecialissue).Further,bothgroups

ofscholarsrecognizethattherecanbetensionsbetweenthesetwodifferent

functions.LaursenandSalter(2014)presenta“paradoxofopenness”,inwhich

actionsthatstimulategreatervaluecreationlimittheabilitytocapturevalue,and

vice-versa.Soastancethatseekstoleveragetheknowledgeofmanydiverse

contributorsmightdiminishtheabilitytoprotectthatknowledge,andcontributors

mightdisputehowmuchofthevaluecreatedshouldbeabletobeappropriatedby

thefocalfirminsteadofthewidercommunity.ShapiroandVarian(1998)

distinguishedbetweenOpenandSponsoredprojects,butheldthatoncemade,these

wereirreversiblechoices.CustomerswouldonlyadoptSponsoredtechnologies

whentherewassufficientvaluecreationtowarrantbeinglockedintothatvendor

lateron.Openprojects,however,crediblycommittednottolockinthecustomer

lateron.However,AppleyardandChesbrough(2017)presentevidencethatthese

choicesofopenandclosedapproachescananddoreverse.Yet,in-linewithrecent

discussionsinstrategy,thisopenvs.closeddecisionisclearlystrategicasitis

generallyhighlyinterdependentwithotherdecisions–acrosscontemporaneous

activities,acrosstime,andacrosseconomicactors.SothequestionofWhetheror

WhentobeOpenisoneofgreatinteresttobothresearchcommunities.

Insum,thecommongroundnotedaboveprovidesafoundationtobuildupon

withclearintenttointegratetheperspectivesfromOIandStrategy.

ContestedGround

Whileagoaloftheconferencewastofindcommonground,wefoundthatthe

OIandStrategyapproacheswerenotalwaysabletofindthatcommonground.For

example,ithasbeenrecentlyarguedthatadecisionisofstrategicimportanceonly

whenitisinterdependentincharacter.But,anopen(andoftcontestedquestion)is

whatsubsetofOIdecisionsaretrulystrategicdecisions?Inparticular,someinside-

outOIactivitiesmay,infact,bestand-alonedecisions.Strategyscholars,thus,would

findthesedecisionslessworthyofstudy.This“contestedground”mighthelp

explainwhyinside-outOIhas,todate,garneredmuchlessresearchattention.Of

course,itisanopenquestionwhetherandwhenthischaracterizationoftheinside-

outpathisaccurate.4

Anotherareawheretheopeninnovationandstrategycommunitiesdifferis

howeachlooksattheconceptofsustainablecompetitiveadvantage.Thecoreidea

ofcompetitiveadvantageisperhapstheNorthStarofthestrategyfield.Michael

4Anotherstudypresentedattheconference,“OpenScienceandtheDarkKinase,”byFeldman,BercovitzandGraddy-ReedusesacasestudyofopenscienceatGlaxoSmithKleintodelveintotheinside-outopeninnovationfindingthatsuchopennesscanindeedbestrategic.TheGSKcasehighlightsthat,evenwhenknowledgeisplacedinthepublicdomainandseeminglyopen,therecanstillbesignificanttransactioncoststhatlimittheabilityofotherstocapitalizeoninside-outknowledgeflows.GSKovercamethesecostsbydoubling-downonopennessandmakingalargesetofkinaseinhibitorcompoundsavailabletoexternalresearchersunderasimplifiedmaterialtransferagreement(MTA).Buildingfromthecase,theessayappliesavaluecreationandvaluecapturelenstodelineatedrivers,costsandreturnstooutbound-focusedopenscienceinitiatives.Thecasehighlightshowthestrategicdecisiononextendedopennesscatalyzesfutureopportunitiesrecognizingthatwhilesomeofthevaluefromopennessmaybecapturedbyotherfirmsintheindustry,thefocalfirmmaystillrealizeapotentialupsiderelativetokeepingtheirscienceclosed

PorterwroteabookentitledCompetitiveAdvantage.DickRumelt(1982;1991)

pointedoutthatcompetitiveadvantagedifferedmorewithinindustriesthan

betweenindustries.TheRBVbranchofstrategysoughttoidentifythefactorsthat

gaverisetotheseintra-industrydifferences(Wernerfelt,1985).Dynamic

capabilitiesisamorerecentconstructthatexplicitlytriestostudythetrajectoryof

competitiveadvantageovertime(Teece,etal,1997).Bycontrast,OIscholarssee

industryboundariesasincreasinglyfluid,andwouldarguethatsustainable

competitiveadvantageisnolongerameaningfulobjectiveinmanyindustries.

Instead,inaVUCA(volatile,uncertain,complex,andambiguous)world,thebestone

candoistobuildaseriesoftemporarycompetitiveadvantages(McGrath,2013).

Moreover,today’scompetitorsmaybecometomorrow’scollaborators,andvice-

versa(Vasudeva,etal,thisissue).Co-opetitionisthenewnormalinmany

ecosystems.Insteadoffocusingonone’s(current)competitors,focusinginsteadon

thebroadersetofstakeholdersandexploitingnewtechnologicalpossibilitiesisa

moresensibleapproachtocreatethesetemporaryadvantages.

OpenQuestionsandaJointResearchAgenda

WhileOIandstrategymaytakedifferentapproaches,eachisinterestedin

similarquestions.Thus,buildingasharedresearchagendamightcomefrom

examiningsituationswheretheobservedbehaviordifferssharplyfromprior

theoreticalexplanations.ThesearewhatThomasKuhntermed“anomalies”(Kuhn,

1972).Anomaliesthatengagebothcommunitiesarepromisingareasforscholarly

inquiry.TheaboveexamplesofRedHatandGitHubbeingacquiredformanybillions

ofdollarsdeservecarefulexamination.Othercanonicalexampleswouldalso

benefitfromcloserscrutinyunderbothOIandstrategylenses.How,forinstance,

doesonedescribethestrategyofacompanylikeAmazon?Itbeganinalargebut

focusednichein1994,andtodayemploysmorepeoplethanalmostanyother

privatecompany.Whatisthecompany’sstrategygoingforward?Evenatitshigh

stockpriceof$1,900asofApril3,2020,thecompanyhasaprice-earningsmultiple

of82.Thismeansthatinvestorsbelievethatthecompanyhastremendousgrowth

prospects,andthatmostofitsvalueliesinfuturebusinesses(Apple,bycontrast,

hasahighstockpriceaswell,butaP/Eratioofonly19).Goingdeeper,Amazon

opensitswebsitetoothers(morethan60%ofsalesonthesitecomefromthird

partymerchants)andsellsaccesstoitsownITinfrastructuretoothers(Amazon

WebServices),providinggreatexamplesofbothoutside-inandinside-outopen

innovation.YetAmazonisrapidlyverticallyintegratingintoitsowndelivery

system,graduallymovingawayfromFedex,UPSandeventhePostOffice.Sois

Amazon’sbehaviorbetterexplainedbyOIorStrategyoraco-imaginationofthe

two?5

5Teslaisanothercanonicalcase.Thecompanywasquiteopeninitsinception,utilizingadesignfromLotusforitsinitialRoadster.ThecompanyattractedinvestmentfromDaimlerandToyotainitsearlydays,andenteredintoaJVwithPanasonicforthecriticalbatterytechnologyitneeded.ItlateropenedupitsIPforitschargingtechnologies.Yetthecompanyhasalsobeenverticallyintegratingkeypartsofitsproductdesignandmanufacturing,mostrecentlybuildingaplantinChina.SoisTeslaopenornot?Andthecompanyalsohasahighstockprice,anddoesnotevenhaveameaningfulPEratioduetoitsoperatinglosses.WhydoinvestorsassignsuchahighvaluetoTesla’sstock?AthirdcanonicalcasemightbeAirbnborUber.Bothstartupsbeganinadifferentbusinessfromtheonetheysubsequentlysucceededin.Airbnbbeganquiteliterallyasaservicewherethehostwouldsupplyanairmattresstoherguest,andofferbreakfasttotheguestinthemorning,hencethe“Air”and“bnb”inthecompanyname.Uberbeganasaservicetohireablackcarlimousine.Thisisactuallyacommonpatternformanysuccessfulstartups,namelythattheiractualsuccessdifferedsubstantiallyfromtheirinitialentrychoices.

Further,itwouldseemafruitfultobuild-outourunderstandingofthe

OI/Strategyintersectionbystartingwithonefootinanareaofcommongroundand

movingforwardtoclarifyissuesinthecontestedground.Thetwocommunities

appeartoagreethat,asLaursenandSalternotedabove(2014),researchneedsto

addressmorefullythevaluecreationandvaluecapturetrade-offsinaworldthat

includesopensourcesoftwareandotheropeninstitutions.Fortunately,exploration

ofthisissueisstartingtogarnersignificantattention.Forexample,Chesbroughet

al(2018)developedasimple2x2typologythatexaminesbothprocessesofvalue

creationandofvaluecaptureintwodomains:valueinexchangeandvalueinuse

(SeeFigure1below).Thevalueinexchangereferstouseofthemarket,whilevalue

inusereferstovalueobtainedfromdirectparticipationanduse.Asisoftenthe

casewitha2x2,themosttheoreticallyinterestingquadrantsareoffofthemain

diagonal.Itisnotsurprisingthevaluecreationisstimulatedbyvalueinuse,and

similarlytheideathatvaluecaptureisenhancedbyvalueinexchangeseems

perhapsobvious.Butthereisvaluecaptureeveninthevalueinusedomain(Value

Partaking),andthereiscertainlyvaluecreationinthedomainofvalueinexchange

(ValueProvisioning).Theseoff-diagonalquadrantsmightbeparticularlyfruitful

areasforresearchexchangegoingforward.

Figure1:FourValueProcesses

Similarly,whilebusinessmodelsthemselvesareasharedtopicofinterest

betweenOIandstrategy,thereremainsanopenquestionastowheredoinnovative

businessmodelscomefrom?Towhatextentdotheseinnovationsarisefrom

intentionalstrategicdecisions(Rumelt,2012;Teece,2010),andtowhatextentdo

theyarisefromeffectuationprocesses(Simon,1995;Sarasvarthy,2008)supported,

inpart,bytheexchangeofideasacrossorganizationalboundaries?Deliberately

approachingthisissuebysimultaneouslyapplyingOIandStrategytheoretical

lensestohighlightkeyissuesofsustainablecompetitiveadvantageversustransitory

competitiveadvantagewouldbevaluable.Strategyscholarswouldseektounpack

thesourcesofsustainablecompetitiveadvantage,whileinnovationscholarsmight

challengethestabilityofanycompetitiveadvantage.Pushingfurther,howdoesthe

organizationexploitacompetitiveadvantagewhenitarises?Shoulditextractas

muchvalueaspossible,orshoulditstrivetodevelopthenextcompetitive

advantage?Oneexampleofthiscomesintelecommunicationsequipment,andthe

moveto5G.Shouldleadersin4Gtechnologymilktheirleadershippositionsforas

longaspossiblebydelaying5Gdeployment,orshouldtheyinvestheavilynowto

deploy5Gtechnologiesearlyintothemarket?

GeneralPurposeTechnologies(GPTs)areanotherareaofmutualinterest.

WhetheritisAI,orblockchain,orIoT,GPTscanofferprospectivevalueinmany

applicationsanduses.Nosinglefirmcanexplorealloftheseontheirown.IsanOI

approachorastrategyapproachbetterabletoexplainorguidefirmsintheir

decisions–orshouldtherebeamix?Areindustryboundariesevenmeaningfulin

thesecases,whenthetechnologyhassomanypotentialwaystobeused?Can

competitorsbeco-optedintojoiningafirm’secosystems?Howdoesafirmuse

GPT’stoengagewithpotentialcustomers?

WeseebenefitinusingbothOIandtraditionalStrategyapproachestojointly

addresscertainquestions.Forexample,whatrole,ifany,doesopennessplayin

competitiveadvantage?Dofirmsthataremoreopendemonstratesuperior

businessperformance?Howdofirmsmanagethetrade-offsbetweenvaluecreation

andvaluecapture?Ajointresearchagendacouldleadtoourbetterunderstanding

offirmbehavior.

Finally,therearenumerousquestionsaswemovefromthefirmlevelof

analysistotheecosystemlevelofanalysis.Whilethestrategyfieldhasincreasingly

consideredissuesofinter-organizationalrelationshipsandmeansforsupporting

repeatedinteractions,thedynamicsofinteractionsbecomeincreasingcomplexas

onemovesbeyonddyadicrelationshipsorportfolioofrelationships,toconsidera

communityorecosystemofinterconnectedties.OIresearchersareincreasingly

focusedonhowtosustaincommunitiesandvibrancyinecosystems,particularly

wherereciprocityismoregeneralizedratherthandirected(AdnerandKapoor,

2010;Cusumano,GawerandYoffie,2019;GawerandCusumano,2014;Parkerand

VanAlstyne,2018).Therearemanypotentialgainstointegratingtraditional

strategyperspectiveswithemergingOIperspective(asexemplifiedbythefinaltwo

essaysinthisvolume),toenhanceourunderstandingoffirm-specificactionsand

ecosystemdynamics.

Conclusion

Duringthetwo-dayconference,weobservedthebehaviorofourcolleagues

tacklingresearchquestionsattheOI/Strategyintersection.Thefirstdaywitnessed

thegatheringofthesescholarsintofivetablesofinquiry,aswenotedabove.Each

tablehadvaluableinsightstooffer,andusefulcritiquesaswell.Bythesecondday,

thesetablesbecamemorediverse,duetothetable-hoppingwherescholarsmixed

morefreelywiththoseoutsidetheirinitialperspectives.Aricherconversation

emergedduringthisseconddayoftheconference,andwehavetriedtosketchsome

ofthepointsofintersectioninthisintroductoryessayaswell.

JournalslikeSMRcanplayausefulroleinsurfacingthesecaseswheretwo

importantfieldsofresearcharenotconnectingwellwitheachother.Byisolating

somecommonresearchquestions,andbyhoppingtoanothertable,scholarscan

starttobridgetheseacademicsiloes,andbuildastrongerbodyofstrategyresearch

asaresult.

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