Open Innovation moves in SMEs: How European SMEs place their bets?
Introduction
Even though the Open Innovation (OI) literature tends to focus on larger firms, over the last decade, an increasing number of scholars have addressed the unique challenge Small and Medium Enterprises (SMEs) face when opening up their innovation process (Hossain and Kauranen, 2016; Usman et al., 2018; Barrett et al., 2021). As SMEs tend to be more reactive to market changes and have shorter decision-making processes (Torchia and Calabrò, 2019), they can effectively benefit from their openness (Parida et al., 2012; Bjerke and Johansson, 2015; Pustovrh et al., 2017), often more so than large companies (Spithoven et al., 2013). By adopting OI, SMEs can overcome their liability of smallness and lack of resources such as time, money, and skills (Usman et al., 2018; Rahman and Ramos, 2010). By adopting OI they can succeed in shortening time to market, reducing cost, reaching economies of scale and scope, and increasing access to market (Theyel, 2013; Dahlander and Gann, 2010; Edwards et al., 2005; Lee et al., 2010; Rahman and Ramos, 2010; Wynarczyk et al., 2013).
Although OI may be a source of business opportunities for SMEs, it also represents risks (Ullrich and Vladova, 2016). Laursen and Salter (2006) highlight the possible negative effects of openness on innovation performance as the variety of external knowledge sources increases. Du et al. (2014) identify potential problems in cultural and cognitive differences between partners within OI projects, while Di Minin et al. (2016) and Hewitt-Dundas and Roper (2010) recognize the tensions relating to revealing knowledge and the need to retain control over technologies. Both benefits and risks of OI for SMEs are described in the literature, but how SMEs manage the balance between potential benefits and associated risks remains an overlooked topic (Marullo et al., 2020, 2021; Su et al., 2022).
The literature on OI predominantly focuses on the firm (or the business unit) as the level of analysis (Markovic et al., 2021), but there is a growing recognition that more fine-grained levels of analysis should be taken into consideration (Brunswicker and Chesbrough, 2018; Bogers et al., 2017; Du et al., 2014; West et al., 2014; Markovic et al., 2021). Fine-graining the level of analysis is of particular relevance to SMEs, since they can only manage a limited number of OI projects simultaneously (Marullo et al., 2020; Tranekjer and Søndergaard, 2013; Vanhaverbeke 2017).
Responding to the above-mentioned challenge, the ‘Open Innovation move’ concept serves in our research as the unit (level) of analysis. In line with the concepts of ‘strategic move’ (Kim and Mauborgne, 2005) and ‘organizational move’ (Ocasio, 1997), an OI move allows fine-grained level of analysis. We define the concept of the ‘OI move’ as the set of managerial decisions and actions that are executed to reach specific innovation outputs in the framework of a collaboration with a single partner that is conducted as a part of an OI project (Livieratos et al., 2020). In fact, each OI project may comprise several OI moves. Take for instance an SME who is developing an OI project in collaboration first with a university, followed by joint innovation activities with a design office and a key customer. This innovation project includes three OI moves.
An OI move consist of the combination of two building blocks: a) the type of partner chosen to innovate with - ‘who is the SME innovating with’ and b) the exploitation mode - ‘who is exploiting the result’. While in the literature the first building block is a widely explored subject (see for instance Edwards et al., 2005; Batterink, 2009; van de Vrande et al., 2009, Lee et al., 2010; Brunswicker and Vanhaverbeke, 2014; Brunswicker and Van de Vrande, 2014; Hutton et al., 2021), the exploitation side has received less attention (see Bianchi et al., 2010; Saebi and Foss, 2015; Freel and Robson, 2016; Hervas-Oliver et al., 2021, Hervas-Oliver et al., 2021). Recognizing on the one hand that both streams of literature are important and on the other that the questions deriving from each stream (‘who is the SME innovating with’ and ‘who is exploiting the result’) are two parts of one decision, the decision to form an OI collaboration, what is proposed here is the combination of these building blocks in the form of the ‘OI move’ concept.
Using the OI move as the level of the analysis in the current study, we argue that different OI moves have the potential of delivering different benefits, but they also represent different levels of risk. To that end, the aim of our research is to explore how SMEs weigh benefits and risks at the level of OI move. Focusing on the combination of the type of partner and the mode of exploitation that SMEs chose when opening-up their innovation process can deepen our understanding on a topic that is interesting to explore and overlooked in the literature as mentioned by Marullo et al. (2020).
In exploring benefits and risks at the level of OI moves, we focus on the allocation of attention, relying on the attention-based view (ABV) of the firm (Ocasio, 1997, 2011). Attention is the distinct focus of the firm's time and effort over a set of matters -issues, opportunities, and threats- and over a particular set of action alternatives - skills, routines, programs, projects, and procedures (Ocasio, 1997; Ocasio et al., 2018). Organizational attention is a scarce resource for SMEs' managers who need to make arbitrages in their choices (Ocasio, 2011; Laszczuk and Mayer, 2020). Since organizational attention is the one that generates a firm's agenda (Ocasio and Joseph, 2005), the ABV provides a potentially interesting lens through which the innovative processes in general (Li et al., 2013) and OI in particular are executed (Dahlander and Gann, 2010).
On the basis of a unique data set of 106 in-depth case studies of innovation projects carried out by innovative SMEs located in Europe, 500 OI moves were identified. The combination of the type of partner (who is the SME innovating with) and the exploitation mode (who is exploiting the result) form a typology that helped clustering the identified OI moves. This clustering revealed both which OI choices SMEs made and why they made those choices. In other words, the ensuing data deepen our understanding of how SMEs actually decide about OI practices and how they balance benefits and risks when they engage in OI.
There are three main findings deriving from the present study. First, an SME initiates an OI move not only on the basis of the potential economic return. Albeit, it is the ‘attention capital’ required to create and capture value that is the SMEs' starting point in considering an OI partnership. Second, we find a ‘paradox’ which we can summarize as follows: SMEs tend to practice OI because they lack resources, but it is precisely the lack of resources that makes them reluctant to enter into attention-intensive OI partnerships even if return can be substantial. Third, OI moves involving communities and crowds are a ‘new playing field’ for SMEs. They are reluctant to initiate such an OI move because of their novelty even though case-based evidence in our research shows that SMEs using such collaborative forms can lead to successful outcomes.
Section snippets
Open innovation moves for SMEs: the literature
Several contributions have looked into the OI modes used by SMEs and the objectives they try to serve (Edwards et al., 2005; Batterink, 2009; van de Vrande et al., 2009, Lee et al., 2010; Brunswicker and Vanhaverbeke, 2014; Brunswicker and Van de Vrande, 2014; Hutton et al., 2021). These studies focus mainly on the type of partners SMEs are choosing for the OI activities. Another stream of literature, albeit smaller, focuses more on the exploitation side of OI from the perspective of SMEs (
Research methodology
We chose a multiple case study research strategy to gain a rich understanding of the context of research and the processes being enacted (Morris and Wood, 1991; Saunders et al., 2007; Yin, 2003). The investigation of OI in SMEs is a relatively young phenomenon, and therefore case-based research is an appropriate research method (Yin, 2003). Aiming to generalize findings, a multiple case study strategy was chosen. The data collection and data analysis processes were executed to ensure the
Open innovation moves in SMEs: evidence
As discussed earlier, an SME opening up its innovation process may collaborate with R&D service providers, complementary partners, customers, suppliers, the focal firm's non-paying users, competitors, communities, or the crowd. The decision in choosing a partner (who is the SME innovating with) is the first building block of an OI move. In the context of the second building block, i.e., the exploitation mode (who is exploiting the result), an SME may opt for three different options to exploit
Open innovation moves in SMEs: discussion
By examining the OI behavior of SMEs through an attention-based theoretical perspective (March and Olsen, 1976; Ocasio, 1997), the current study leads to a number of implications. Through conceptualizing the attentional process that drives the OI behavior of SMEs, light is shed on how SMEs weigh risks and benefits at the level of the OI move. We also discuss some practical implications of our study.
Conclusion
Our findings respond to research by Spithoven et al. (2013), Vanhaverbeke (2017) and Van de Vrade et al. (2009) by providing new insights into the dynamic OI relationship of SMEs which, to-date, have been underexplored. We also advance the attention-based view of the theory by operationalizing it in the case of OI in SMES. In parallel, we extend the OI literature by introducing the concept of OI moves and in turn an OI typology. This later also constitutes a new coding framework for OI
Acknowledgments
This research is based on data collected by the INSPIRE project (H2020 project under grant agreement No 691440) funded by the European Commission. The authors would like to thank the following people for their collaboration: Alexander Frimout, Arvydas Sutkus, Åsa Lindholm Dahlstrand, Cade Wells, Christine Robinson, Daria Podmetina, Donald McLeon, Efi Bakogianni, Ekaterina Albats, George Apostolakis, Jose Christian, Justyna Dabrowska, Maria Augusta Mancini, Martin Wallin, Matjaz Vidmar, Muhammad
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