Vigilant Innovation by Bill Russell

Author:Bill Russell
Language: eng
Format: epub
Publisher: De Gruyter
Published: 2020-08-07T16:34:13.161000+00:00

Investing in, acquiring, and collaborating with external organizations

The importance of networks to innovation search was foreseen by Rothwell’s pioneering work, which saw a transition from organizations managing a linear R&D push or demand pull process to a situation of growing inter-activity. Some of the first moves that organizations make are to establish cross-functional teams, and increase collaboration with suppliers. These initiatives are then typically developed towards connections with external actors. Rothwell’s vision in the 1990s of a “fifth generation” of innovation with deep and far reaching connections supported by IT supported communication envisaged the context within which innovation takes place today (Gardiner & Rothwell, 1985; Rothwell, 1977, 1992).

The importance of networks to business growth is now well established, with Adner highlighting the crucial role of innovation ecosystems. Importantly, he identifies the role of major and supporting complementors to lead firms, with the attendant innovation risk inherent in innovation eco-systems as they get more complex (Adner, 2006, 2013; Adner & Feiler, 2019).

Visible relationships with high-profile and respected organizations lead to more positive perceptions of the company’s innovation by other key actors in the organization’s network (Podolny & Stuart, 1995; Stuart & Podolny, 1996), which then leads to more high-status partners joining the network of relationships (or ecosystem) surrounding the company. Consistent with this view, the involvement of multiple low status partners can reduce the attractiveness of an innovation if they suggest low quality to the rest of the ecosystem (McGrath & Kim, 2014).

While strategy scholars have typically looked at the comparative performance of particular companies, innovation scholars have long understood that breakthroughs are usually supported by networks (Adner, 2013; Hargadon, 2003). Successful innovation typically draws on a mix of companies, investors, universities, corporate and government research labs, suppliers and customers. In an era of fast moving digital platforms and transient advantage, the network of actors outside the boundaries of the organization has become even more important to the understanding of innovation and strategic performance. Contributors to innovation are not restricted to for-profit companies, with the bio-technology sector showing how universities and public research organizations are also essential for success (Powell, White, Koput, & Owen-Smith, 2005).

Networks have a major effect on the adoption and diffusion of innovation. A network can influence the actions of its members in two ways (Gulati, 1998). Firstly, through the flow and sharing of information within the network. Secondly, through the differences in the position of actors in the network, which cause control and power imbalances. The position an organization occupies in a network is of great strategic performance, and reflects their relative power and influence in the network. Sources of power include technology, trust, expertise, economic strength, and legitimacy (Garud & Kumaraswamy, 1993). Networks are useful where the benefits of co-specialisation, sharing of standards and joint infrastructure, and other network externalities outweigh the costs of maintaining and providing governance to the network. Where there are high transaction costs connected with buying technology, network approaches can be more appropriate than market models. Where there is uncertainty, a network approach can be superior to acquisition or full integration (Tidd, 2010).

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