Cooperating for Innovation
Week 1
Cooperative innovation: An organization’s strategy to create and manage innovation-oriented
activities that are developed in collaboration with other organizations (e.g. R&D alliances,
technology development agreements, etc.)
Strategic alliances = A cooperative agreement in which two or more separate organizations
team up in order to share or co-develop resources and capabilities to achieve joint goals while
maintaining their own corporate identities”
Types of alliances
- Alliance goals: what the partners hope to achieve by working together
> R&D/innovation vs. marketing, manufacturing
- Alliance legal form:
> Contractual vs. Joint ventures; A Joint Venture (JV) involves creating a brand new, legally
independent company owned by the parent firms. A contractual alliance is just a formal
agreement (like a licensing deal) without creating a new entity.
> Equity vs. non-equity; In an equity alliance, partners buy shares in each other or invest in a
shared pool. In a non-equity alliance, they simply sign a contract to work together without
exchanging ownership.
- Type of partner:
> International vs. domestic; Working with a company in your own country versus one abroad
(often used to navigate foreign regulations).
> Firm-firm: clients & suppliers; *Vertical: Clients and suppliers working together to streamline a
supply chain.
> Firm-firm: competitors; Horizontal: Collaborating with competitors (sometimes called
"co-opetition") to set industry standards or tackle massive R&D costs.
> Cross-sector: firm-government; firm-university. Businesses partnering with non-business
entities, such as governments for infrastructure or universities for fundamental scientific
research.
- Number of partners:
> Dyadic (2 partners); easier to manage but limited in resources.
> Multi-partner (3 or more partners) powerful for setting industry standards but are much more
complex to coordinate.
Innovation-oriented alliances:
Ubiquitous(wijdverspreid) - yet alliance failure rates remain high (>50%)
- Opportunities:
> Complementary (knowledge); resources and technologies
> Opportunities for exploration/exploitation
> Sharing the risks and costs of R&D projects
> Legitimacy of innovation
, - Challenges:
> Technological uncertainty & complexity
> Unexpected technical problems: Pressure, conflicts
> Sharing of proprietary knowledge + close interaction: Risk of knowledge leakages
> Coordination & cooperation problems
COLLABORATION IS COMPLEX
Two Key Theoretical Frameworks
- Resource-based view
> Resources owned or controlled by the firm can provide competitive advantage under VRIN
conditions: Valuable, rare, difficult to imitate and non-substitutable) (Barney, 1991)
> Value-creating resources can be outside the firm boundaries (Gulati, 1999).
> Alliance rationale: Access to partners’ complementary resources for synergy realization .
Why form an Alliance? To achieve Synergy. You have Resource A, your partner has Resource
B. Together, you create a combined value that neither could achieve alone.
- TCE: Transaction costs theory
> Firms can organize transactions either internally (full hierarchy) or through markets -
depending on transaction and contracting hazards (Williamson, 1985).
> Alliances offer hybrid governance strategies between hierarchy and markets.
> Hierarchical governance: severe risk of opportunism and great transaction costs; market
exchange: transaction costs are low.
> Alliance rationale: Intermediate situations (transaction costs not so severe to require full
hierarchical control; yet not so low as to enable market-based exchange)
Hierarchy (Make): Doing it internally (High control, but high overhead).
Market (Buy): Buying from a supplier (Low overhead, but high risk of "opportunism" or being
overcharged).
Every business deal has a "cost" (legal fees, time spent negotiating, risk of being cheated).
Firms choose the cheapest way to organize these deals. You use an alliance when the
transaction is too complex to just "buy" on the street, but not important enough to spend billions
buying the entire company.
Partner types:
Collab with universities and research organizations
Horizontal collab with competitors
Vertical collab with suppliers and clients
It is essential to seek collaboration with different types of partners (different types of alliances),
but also to understand their distinct features and manage them accordingly. Why? 2 core
reasons:
Different innovation opportunities; Each partner type offers a different "flavor" of innovation.
Different management challenges; The "headache" you face depends on who you are in bed
with: Trust & IP: Working with a competitor requires strict legal firewalls to prevent them from
stealing your secrets. Cultural Clashes: Working with a university can be slow because their
goals (publishing papers) differ from yours (making a profit). Power Dynamics: Working with a
,massive supplier or a government entity might mean you have less control over the project's
direction.
Resource complementarity (RBV(resource), KBV(knowledge))
Alliances are essentially "learning races" or "knowledge-sharing platforms."
› Partners bring together complementary resources (knowledge), which can lead, when properly
combined, to synergistic value.
Complementary resources = resources that are “different, yet mutually supportive”
› Different types of partners likely possess different types of resources (knowledge).
› Collaboration with different types of partners has different implications for exploration and
exploitation.
Exploration = search, variation, risk taking, experimentation, play, flexibility, discovery. a pursuit
of new knowledge. Research organizations
Exploitation = production, efficiency, selection, implementation, execution”. “the use and
development of things already known”. Suppliers, clients, competitors
Traditional assumption: Alliances within own industry › However, firms increasingly ‘cross the
industry line’. Example: Partnerships between carmakers and technology companies to
accelerate development of AV(EV)
Different types of partners, different types of resources---but also different collaborative
challenges. › Two important but particularly challenging types of alliances - require a
different management approach:
▪ Industry-University (IU) alliances; Different goals (Publish vs. Profit)
▪ Alliances with competitors (co-opetition); Risk of theft/cheating
Science-based partners: lower formalization to foster creativity and Exploration. Universities,
research institutes (focus on "Exploration"). Organic (loose/flexible approach)
Market-based partners: higher formalization to foster efficiency and Exploitation. Suppliers,
customers, and even competitors (focus on "Exploitation"). mech(tight/structured approach)
The study found that both types of partners can lead to higher financial performance, but only if
the management style matches the partner type. This is what academics call "Contingency
Theory"—the best way to lead depends on the situation.
The Single Alliance: Historically, companies might focus on one-to-one (dyadic) relationships.
Alliance portfolio: diverse "basket" of partners simultaneously. The goal is to ensure these
different partnerships don't conflict and, ideally, complement one another.
› Alliance portfolio configuration: How many partners and what type of partners (or alliances) are
included in a firm’s alliance portfolio.
› Requires critical attention: Shapes the implications of alliance portfolios for innovation
performance.
, › Many dimensions (types of alliances and partners, partner industries or technological fields,
etc.)
› Alliance portfolio partner diversity: Number of partner types with whom the firm has alliances
(e.g. clients & suppliers, competitors, universities and research organizations)
Low Diversity: Alliances only with other firms in the same industry (e.g., a carmaker only
partnering with other carmakers). This is safe but can lead to "groupthink."
High Diversity: A mix of clients, suppliers, competitors, and research organizations. This
provides a much broader spectrum of knowledge.
APD(Alliance Portfolio Diversity) is beneficial: As you add more types of partners
(universities, competitors, suppliers), you increase the "breadth of perspective." Recombination:
Innovation often happens by combining ideas from different fields. A diverse portfolio gives you
more "Lego blocks" to build with, leading to more creative thinking and better performance.
But APD may be detrimental too: there is an inverted U shape.
Information Overload: A firm can only process so much new information. If you have too many
different types of partners, the managers become overwhelmed by the sheer volume of data
and ideas.
Impractical Management: As we saw in previous slides, science-based partners need "loose"
management while market-based partners need "tight" management. Trying to run a dozens of
different management styles simultaneously is incredibly difficult and expensive.
The Tipping Point: Eventually, the coordination costs (the time and money spent managing the
mess) become greater than the innovation benefits.
Too much diversity: disadvantages > advantages
› Contingency view on impact of alliance configuration (APD in particular)
› Not all firms are equally equipped to capitalize on APD to achieve greater innovation
performance
› Multiple factors shape firms’ capability to manage and benefit from APD, such as:
▪ Firm-level factors (e.g. management of alliance portfolio, organizational mechanisms, etc.
▪ Industry-level factors
(hagedoorn et al) Individually, Inverted U-shaped: Up to a certain point, adding diverse partners
(like a university or a competitor) helps you sell new products. Beyond that peak, performance
drops because of the management "headache" we discussed.
Together, Detrimental Effects: This is a new insight. It suggests that if you try to maximize every
type of partner diversity at once, the negative effects stack up. You can't just throw everything at
the wall and hope it sticks; you have to be selective.
High Modularity: Parts are independent. Reduces coordination costs; allows for Higher APD.
Broad Knowledge Distribution. Expertise is everywhere. Increases the necessity for Higher
APD to find "pockets" of innovation.
Competitor of Existing Supplier" Problem: partnering with companies that are rivals to your
suppliers
Week 1
Cooperative innovation: An organization’s strategy to create and manage innovation-oriented
activities that are developed in collaboration with other organizations (e.g. R&D alliances,
technology development agreements, etc.)
Strategic alliances = A cooperative agreement in which two or more separate organizations
team up in order to share or co-develop resources and capabilities to achieve joint goals while
maintaining their own corporate identities”
Types of alliances
- Alliance goals: what the partners hope to achieve by working together
> R&D/innovation vs. marketing, manufacturing
- Alliance legal form:
> Contractual vs. Joint ventures; A Joint Venture (JV) involves creating a brand new, legally
independent company owned by the parent firms. A contractual alliance is just a formal
agreement (like a licensing deal) without creating a new entity.
> Equity vs. non-equity; In an equity alliance, partners buy shares in each other or invest in a
shared pool. In a non-equity alliance, they simply sign a contract to work together without
exchanging ownership.
- Type of partner:
> International vs. domestic; Working with a company in your own country versus one abroad
(often used to navigate foreign regulations).
> Firm-firm: clients & suppliers; *Vertical: Clients and suppliers working together to streamline a
supply chain.
> Firm-firm: competitors; Horizontal: Collaborating with competitors (sometimes called
"co-opetition") to set industry standards or tackle massive R&D costs.
> Cross-sector: firm-government; firm-university. Businesses partnering with non-business
entities, such as governments for infrastructure or universities for fundamental scientific
research.
- Number of partners:
> Dyadic (2 partners); easier to manage but limited in resources.
> Multi-partner (3 or more partners) powerful for setting industry standards but are much more
complex to coordinate.
Innovation-oriented alliances:
Ubiquitous(wijdverspreid) - yet alliance failure rates remain high (>50%)
- Opportunities:
> Complementary (knowledge); resources and technologies
> Opportunities for exploration/exploitation
> Sharing the risks and costs of R&D projects
> Legitimacy of innovation
, - Challenges:
> Technological uncertainty & complexity
> Unexpected technical problems: Pressure, conflicts
> Sharing of proprietary knowledge + close interaction: Risk of knowledge leakages
> Coordination & cooperation problems
COLLABORATION IS COMPLEX
Two Key Theoretical Frameworks
- Resource-based view
> Resources owned or controlled by the firm can provide competitive advantage under VRIN
conditions: Valuable, rare, difficult to imitate and non-substitutable) (Barney, 1991)
> Value-creating resources can be outside the firm boundaries (Gulati, 1999).
> Alliance rationale: Access to partners’ complementary resources for synergy realization .
Why form an Alliance? To achieve Synergy. You have Resource A, your partner has Resource
B. Together, you create a combined value that neither could achieve alone.
- TCE: Transaction costs theory
> Firms can organize transactions either internally (full hierarchy) or through markets -
depending on transaction and contracting hazards (Williamson, 1985).
> Alliances offer hybrid governance strategies between hierarchy and markets.
> Hierarchical governance: severe risk of opportunism and great transaction costs; market
exchange: transaction costs are low.
> Alliance rationale: Intermediate situations (transaction costs not so severe to require full
hierarchical control; yet not so low as to enable market-based exchange)
Hierarchy (Make): Doing it internally (High control, but high overhead).
Market (Buy): Buying from a supplier (Low overhead, but high risk of "opportunism" or being
overcharged).
Every business deal has a "cost" (legal fees, time spent negotiating, risk of being cheated).
Firms choose the cheapest way to organize these deals. You use an alliance when the
transaction is too complex to just "buy" on the street, but not important enough to spend billions
buying the entire company.
Partner types:
Collab with universities and research organizations
Horizontal collab with competitors
Vertical collab with suppliers and clients
It is essential to seek collaboration with different types of partners (different types of alliances),
but also to understand their distinct features and manage them accordingly. Why? 2 core
reasons:
Different innovation opportunities; Each partner type offers a different "flavor" of innovation.
Different management challenges; The "headache" you face depends on who you are in bed
with: Trust & IP: Working with a competitor requires strict legal firewalls to prevent them from
stealing your secrets. Cultural Clashes: Working with a university can be slow because their
goals (publishing papers) differ from yours (making a profit). Power Dynamics: Working with a
,massive supplier or a government entity might mean you have less control over the project's
direction.
Resource complementarity (RBV(resource), KBV(knowledge))
Alliances are essentially "learning races" or "knowledge-sharing platforms."
› Partners bring together complementary resources (knowledge), which can lead, when properly
combined, to synergistic value.
Complementary resources = resources that are “different, yet mutually supportive”
› Different types of partners likely possess different types of resources (knowledge).
› Collaboration with different types of partners has different implications for exploration and
exploitation.
Exploration = search, variation, risk taking, experimentation, play, flexibility, discovery. a pursuit
of new knowledge. Research organizations
Exploitation = production, efficiency, selection, implementation, execution”. “the use and
development of things already known”. Suppliers, clients, competitors
Traditional assumption: Alliances within own industry › However, firms increasingly ‘cross the
industry line’. Example: Partnerships between carmakers and technology companies to
accelerate development of AV(EV)
Different types of partners, different types of resources---but also different collaborative
challenges. › Two important but particularly challenging types of alliances - require a
different management approach:
▪ Industry-University (IU) alliances; Different goals (Publish vs. Profit)
▪ Alliances with competitors (co-opetition); Risk of theft/cheating
Science-based partners: lower formalization to foster creativity and Exploration. Universities,
research institutes (focus on "Exploration"). Organic (loose/flexible approach)
Market-based partners: higher formalization to foster efficiency and Exploitation. Suppliers,
customers, and even competitors (focus on "Exploitation"). mech(tight/structured approach)
The study found that both types of partners can lead to higher financial performance, but only if
the management style matches the partner type. This is what academics call "Contingency
Theory"—the best way to lead depends on the situation.
The Single Alliance: Historically, companies might focus on one-to-one (dyadic) relationships.
Alliance portfolio: diverse "basket" of partners simultaneously. The goal is to ensure these
different partnerships don't conflict and, ideally, complement one another.
› Alliance portfolio configuration: How many partners and what type of partners (or alliances) are
included in a firm’s alliance portfolio.
› Requires critical attention: Shapes the implications of alliance portfolios for innovation
performance.
, › Many dimensions (types of alliances and partners, partner industries or technological fields,
etc.)
› Alliance portfolio partner diversity: Number of partner types with whom the firm has alliances
(e.g. clients & suppliers, competitors, universities and research organizations)
Low Diversity: Alliances only with other firms in the same industry (e.g., a carmaker only
partnering with other carmakers). This is safe but can lead to "groupthink."
High Diversity: A mix of clients, suppliers, competitors, and research organizations. This
provides a much broader spectrum of knowledge.
APD(Alliance Portfolio Diversity) is beneficial: As you add more types of partners
(universities, competitors, suppliers), you increase the "breadth of perspective." Recombination:
Innovation often happens by combining ideas from different fields. A diverse portfolio gives you
more "Lego blocks" to build with, leading to more creative thinking and better performance.
But APD may be detrimental too: there is an inverted U shape.
Information Overload: A firm can only process so much new information. If you have too many
different types of partners, the managers become overwhelmed by the sheer volume of data
and ideas.
Impractical Management: As we saw in previous slides, science-based partners need "loose"
management while market-based partners need "tight" management. Trying to run a dozens of
different management styles simultaneously is incredibly difficult and expensive.
The Tipping Point: Eventually, the coordination costs (the time and money spent managing the
mess) become greater than the innovation benefits.
Too much diversity: disadvantages > advantages
› Contingency view on impact of alliance configuration (APD in particular)
› Not all firms are equally equipped to capitalize on APD to achieve greater innovation
performance
› Multiple factors shape firms’ capability to manage and benefit from APD, such as:
▪ Firm-level factors (e.g. management of alliance portfolio, organizational mechanisms, etc.
▪ Industry-level factors
(hagedoorn et al) Individually, Inverted U-shaped: Up to a certain point, adding diverse partners
(like a university or a competitor) helps you sell new products. Beyond that peak, performance
drops because of the management "headache" we discussed.
Together, Detrimental Effects: This is a new insight. It suggests that if you try to maximize every
type of partner diversity at once, the negative effects stack up. You can't just throw everything at
the wall and hope it sticks; you have to be selective.
High Modularity: Parts are independent. Reduces coordination costs; allows for Higher APD.
Broad Knowledge Distribution. Expertise is everywhere. Increases the necessity for Higher
APD to find "pockets" of innovation.
Competitor of Existing Supplier" Problem: partnering with companies that are rivals to your
suppliers
