Abstract The concept of open innovation (OI) has been in operation since the early 2000s but tensions still exist between appropriability and open innovation. This chapter establishes the state of the art regarding knowledge of the intricate and complex interplay between appropriability and open innovation. To understand this important strategic relationship, the potential complementarities between open innovation and appropriability are explained. The chapter also examines some key tensions between open innovation and firms’ appropriation efforts, and illuminates what firms can do in their attempt to resolve these tensions. The chapter provides an overview of the prior literature and highlights a range of future research avenues to enrich organizational scholars’ understanding of this relationship.

Drawing on the resource-based view of the firm, we examine the effect of technological competition over a patent on the firm's choice of patenting strategy. We claim that technological competition makes the traditional strategy of protecting focal innovations from imitation less likely and increases the likelihood of a play strategy — i.e. using patents to avoid the risk of hold-up by other patent owners, or as a bargaining chip in litigation and cross-licensing. However, we claim also that technological competition over a target close to the firm's core technology should lead to use of a fence strategy i.e. to blocking the commercial endeavors of rivals and preempting substitute inventions. We find support for our hypotheses using data from a large-scale survey of European patent applications.

We synthesize and provide a critical overview of the set of quantitative papers on open innovation which have had an influence on analyses of open innovation in a corporate strategy context. We categorize the literature into (a) firms’ external search and knowledge sourcing activities, (b) absorptive capacity, and (c) appropriability. We discuss the firm and individual level contributions to each of these literature streams, identifying those contributions specific to knowledge about open innovation and unresolved issues which represent future research opportunities. In addition, we try to draw some lessons in terms of future challenges for open innovation research in relation to the growth and influence of this domain. Specifically, we discuss some specific problems related to the robustness, validity, reliability, and causal identification of open innovation research, and how these might be overcome through a new research approach. We conclude by proposing a checklist for future quantitative empirical studies of open innovation.

Taking the competitive dynamics approach, we study firms’ exit in response to the threat of entry or expansion in the presence of sunk costs. We define firms’ exit when firms abandon ongoing major investment projects. Due to their more limited access to financial, brand-related, technological and managerial resources, we argue that domestic firms are weaker than are foreign firms when facing increased presence by competitors. Specifically, domestic firms will exit faster when facing threats of increased presence by both domestic and foreign firms, while foreign firms only exit faster when facing increased presence by other foreign firms. However, due to the liability of foreignness the increased presence by foreign firms is more likely to lead to faster exit for both foreign and domestic firms when it happens as an extension of existing production capacity as compared to de novo entry. Finally, due to labor market dynamics, we posit that investments by foreign rivals within the same geographical cluster matters only for the speed of exit of domestic firms, not for the time to exit of foreign firms. Using survival model on a panel dataset of 3,325 investments in India from 1995 to 2015, we find overall support for our expectations.

Recent open innovation literature has emphasized external knowledge search and the use of a diverse set of external innovation sources. But firms also have a diverse set of internal innovation sources, and we show that there are distinct patterns across external and internal sources that reflect differences in how firms create and capture value. Our analysis of the innovative activities of 256 large firms from seven countries and across seven industry sectors reveals two distinct innovation search strategies: “tech-focus,” which emphasizes exploration and is associated with more innovative outcomes, and “market-focus,” which emphasizes exploitation and is associated with higher market value. Finally, we show that characterizing innovation sourcing as tech-vs.-market better explains differences in firm performance than traditional measures such as openness.

Based on a competition network perspective and the licensing literature, we argue that who competes directly with whom in downstream markets, and how competitive ties are distributed among firms are critical for firms' upstream R&D strategies and in particular their decisions regarding technology offerings for out-licensing. We focus on industry network centralization or the concentration of competitive ties in many or a few firms. We argue that this aspect is especially relevant for potential licensor firms since it affects the pool of less-threatening exchange partners and the motivations to transfer knowledge to other firms via licensing. High levels of centralization concentrate competitive pressure on a few firms, increase the shared competitive threats within a given industry, and increase the incentives for potential licensor firms to reshape their competitive environments by selective strengthening of other firms through knowledge transfer. We argue also that this effect of industry centralization on the number of technologies offered for out-licensing will be stronger for firms with higher numbers of direct competitors, and that this interaction effect will be particularly strong if competitive threats are non-redundant. We find support for our ideas from an analysis of bio-pharmaceutical industry firms.

Entrepreneurship literature on spin-outs (new ventures by ex-employees of incumbent firms) suggests that increases in either the level of incumbent firms’ technological or market knowledge enhance the likelihood of spin-outs’ entry. Conditional on spawning new ventures, in this paper we examine whether the knowledge structure of incumbent firms would affect the strategic direction of ventures spawned. Analyses of data from the biotech industry supported our hypotheses linking the focus of incumbents’ technological and market portfolio to their spin-outs’ pattern of entry to the same (or different) technological fields or market segments as their parent firms. Our results contribute to the strategy and entrepreneurship literatures by providing a novel perspective on incumbent firms as source of new venture formation and their post-entry strategy.

In studies of firm's innovation performance, regression analysis can involve a significant level of model uncertainty because the ‘true’ model, and therefore the appropriate set of explanatory variables are unknown. Drawing on innovation survey data for France, Germany, and the United Kingdom, we assess the robustness of the literature on inbound open innovation to variable selection choices, using Bayesian model averaging (BMA). We investigate a wide range of innovation determinants proposed in the literature and establish a robust set of findings for the variables related to the introduction of new-to-the-firm and new-to-the-world innovation with the aim of gauging the overall healthiness of the literature. Overall, we find greater robustness for explanations for new-to-the-firm rather than new-to-the-world innovation. We explore how this approach might help to improve our understanding of innovation.

Researchers and practitioners alike have noted the changing landscape of research and development (R&D) in firms over the last several decades, but little consensus has been built around how and why the nature of corporate R&D has changed over time. The three paper presentations in this symposium advance this exciting research agenda by putting forth several explanations of how and why the rate and direction of firm innovation have shifted over time. Through these studies, diverse groups of scholars leverage unique theoretical lenses, novel data sources and methodological advancements to identify important trends in the internal and external environment of a firm and how these trends shape the processes and outcomes of R&D activities. Collectively, we demonstrate that the temporal shifts in the nature of firm R&D are associated with fundamental changes in the flows of capital, knowledge, and talent over time. This symposium will conclude with research commentary by an expert in this area and interactive discussions between audiences and presenters. Missing the Forest for the Tree: Short-termism & Technological Influence of US Firms Presenter: Rafael Corredoira; The Ohio State U. Fisher College of Business Presenter: Brent Goldfarb; U. of Maryland Presenter: Rachelle Sampson; U. of Maryland Presenter: Yuan Shi; Cornell SC Johnson College of Business First Mover Advantage and the Private Value of Public Science Presenter: Ashish Arora; Duke U. Presenter: Sharon Belenzon; Duke U. Presenter: Bernardo Dionisi; Duke U. The Impact of High-skilled Migrant inward Mobility on Firm-level Innovation Performance Presenter: Keld Laursen; Copenhagen Business School Presenter: Bart Leten; KU Leuven Presenter: Ngoc Han Nguyen; Hasselt U. Presenter: Mark Vancauteren; Hasselt U.

Little consensus has been built around how and why the nature of firm R&D has changed. This symposium examines firm R&D and reflects on how and why firm innovation has changed over the last few decades. The four paper presentations and discussion will collectively tackle this question around the changing nature of corporate R&D by leveraging unique theoretical lenses, novel data sources, and methodological advancements. Results capture how specific macro trends manifest in individual firms and impact various metrics of R&D. Short-Termism & Technological Influence of US Firms Presenter: Rafael Corredoira; The Ohio State U. Fisher College of Business Presenter: Rachelle Sampson; U. of Maryland Presenter: Yuan Shi; Cornell SC Johnson College of Business First Mover Advantage and the Private Value of Public Science Presenter: Ashish Arora; Duke U. Presenter: Sharon Belenzon; Duke U. Presenter: Bernardo Dionisi; Duke U. The Impact of High-Skilled Migrant inward Mobility on Firm-level Innovation Performance Presenter: Keld Laursen; Copenhagen Business School Presenter: Bart Leten; KU Leuven Presenter: Ngoc Han Nguyen; Hasselt U. Presenter: Mark Vancauteren; Hasselt U. A New Direction or Lack of Direction? The Story of Innovation with Outsider CEOs Presenter: Leonardo Mayer Kluppel; Ohio State U. Presenter: Trey Cummings; Johns Hopkins Carey Business School

We adopt an organizational learning approach to examine how firms’ recruitment of high-skilled migrants contributes to subsequent firm-level innovation performance. We argue that due to migrants’ often different experience from that of native high-skilled workers, their perspectives on problem-solving and access to non-overlapping knowledge networks will also differ. The implied complementarity between these worker types makes migrant hires a particularly valuable resource in the context of firm-level innovation. We refine our diversity hypothesis further by predicting that migrant hires who add to the firm's cultural diversity should contribute more to firm innovation performance than new high-skilled migrant hires who do not add cultural diversity. Finally, we conjecture that firms with high integration capacity as a function of prior experience of employing high-skilled migrants should derive more innovation-related benefits from migrant hiring than firms with a low integration capacity. We track the inward mobility of high-skilled workers empirically using patents and matched employer-employee data for 16,241 Dutch firms over an 11-year period. We find support for our hypotheses.

Abstract. We apply the bargaining power lens on strategic management to analyze the risk related to potential extraction of value by company employees working on open innovation (OI) in the firm. OI exposes individuals to various opportunities, provides a better awareness of the value of their knowledge in other contexts, and makes them more visible externally. OI activity allows access to critical firm knowledge enabling negotiation and engagement with external parties. All of these factors increase the likelihood that these individuals will exit the firm, taking with them valuable proprietary knowledge, while these attractive exit options endow them with significant bargaining power internally. The firm may try to counter this by the imposition of contractual obligations and intellectual property protection using mechanisms which often are only partly effective. This can result in a trade-off between staffing positions related only to OI tasks with individuals that are the best fit from a value creation point of view, thus giving more weight to value capture. We argue that the choices involved in balancing this trade-off will depend on the specific appropriation regime combined with the generality of the knowledge involved. We posit that that in some cases firms may appoint employees with high levels of probity rather than the greatest OI competences.

The increasing importance of patents to the firm’s strategy goes beyond protecting innovations from imitation – i.e., the traditional patent strategy. Firms are using patents also to generate rents by blocking the commercial endeavors of rivals and by preempting substitute inventions (fence strategy), to avoid the risk of hold-up by other patent owners, or as a bargaining chip in litigation and cross-licensing (play strategy). Using the theoretical lens of the resource-based view of the firm, we propose a theoretical framework that explains the association between technological competition and patent strategy. We take the traditional strategy as our baseline, and suggest that a play strategy is more likely (and a fence strategy less likely) if the firm is aware of competitors addressing the same patentable target. However, we suggest also that competition over a patentable target close to the firm’s core technology will lead to a shift from a play strategy to a fence strategy. We use data from a large-scale survey of European patent applications to test our research hypotheses. We find support for our hypotheses.

Research Summary: We combine the absorptive capacity and social network theory approaches to predict how intrafirm “whole” network characteristics affect the firm's speed of absorption of external knowledge to produce inventions. We start from the widely accepted view that distant, externally‐developed knowledge is difficult to absorb into the focal firm's own knowledge production. We suggest that high levels of intrafirm inventor task network diversity and task network density are essential for a diversity of knowledge inputs and coordinated actions regarding knowledge transfer, which in turn, reduces problems related to the absorption of knowledge—especially in the case of knowledge that is distant from the focal firm. The results of an event history study of 113 pharmaceutical firms that engaged in technology in‐licensing from 1986 to 2003 provide general support for our hypotheses.Managerial Summary: Firms keen to keep up with an uncertain and ever‐changing industry environment, can benefit from the speedy introduction of inventions. We examine how firms absorb licensed‐in technologies to nurture the rapid development of own related inventions. We show that a firm's absorption speed depends on the characteristics of the internal collaboration networks among the firm's inventor employees. More specifically, technologically diverse and well‐connected inventor networks improve the firm's ability to absorb external technologies quickly. This applies especially to externally acquired technologies that are unfamiliar to the firm. Depending on the distance of the acquired technology from the focal firm combined with speed‐inducing inventor network characteristics, our estimates suggest that firms can reduce the time needed for absorption by several months.