The Role of Public Research OrganizationsWithin Open Innovation ‘A Review of the State of the Art FromanEconomicPerspective’ Adrian Kovacs Workshop on Open Innovation Bucharest 07-10-2013
My Profile Function • Research Fellow of the Flanders Research Foundation (FWO). • Ph.D-candidate at the Department for Managerial Economics, Strategy and Innovation (KU Leuven, Belgium). • Affiliated Researcher Department of Business Administration (University of Twente, the Netherlands). • Close collaboration with the Centre for Intellectual Property Rights (Leuven, Belgium). Research Focus • Open Innovation/Markets for Technology; focus on developing new patent-based and bibliometrics-based indicators of open innovation on the firm-level. • The Role of IPRs in Science-Industry Linkages; focus on identifying best practices for the management of IPRs in science-industry settings. • Radical/Breakthrough Innovation; focus on developing indicators for identifying radical inventions ex ante and ex post.
My Understanding of Open Innovation (1) The Open Innovation paradigm does not suggest that openness in R&D is a new phenomenon Instead… Open Innovation captures the trend towards an increased reliance of firms upon external sources of innovation in recent decadeswhich is mainly attributable to the increasingly wide diffusion of useful knowledge. Thereby… The contribution of the Open Innovation concept does not so much come from it describing the observed trend, but from it addressing the consequences of the observed trend.
My Understanding of Open Innovation (2) The Logic of Open Innovation • Good ideas are widely distributed; no single individual/institution has a monopoly. • Being the first to discover something is neither sufficient nor necessary for commercial success. • A superior business model beats a superior technology. • IP is a perishable asset; customers and markets don’t wait.
My Understanding of Open Innovation (3) Innovation Outcome Closed Open Closed Innovation Public Innovation Closed Innovation Process Private Open Innovation Open Source Innovation Open
My Understanding of Open Innovation (4) From A Theoretical Standpoint... From An Empirical Standpoint… • Linking OI to existing Strategic Management Theories; TCE, RBV, KBV, RV, RO, DC, etc.. • Conducting large-scale quantitative studies covering OI. • Exploring the ‘human side’ of OI – linking OI with corporate culture. • Exploring OI in the low-tech settings. • Exploring the management of OI in SMEs. • Exploring the ‘social side’ of OI – linking OI with corporate social responsibility. • Exploring the ‘legal side’ of OI – linking OI with legal frameworks. • Exploring OI in a ‘systemic’ setting.
My Definition of PROs A Public Research Organization (PRO) is an organization that performs research activities as part of its mission and receives at least some public funding to support these activities (EC’s Expert Group on Knowledge Transfer Metrics, 2009). As such the label PRO includes; • Universities. • Higher Education Institutions. • Non-Profit Research Organizations. • Research Hospitals.
PROs and the Literature of Open Innovation (1) Key Question; To what extent do academic contributions on Open Innovation refer (explicitly) to PROs? Approach; • Identify academic contributions on Open Innovation in Thomson Reuters’ Web of Science Database by entering the keywords ‘open’ and ‘innovation’ in topic field. • Filtering out contributions that actually use the combination term ‘open innovation’ by applying a simple machine learning algorithm. • Extracting combinations terms from ‘title’, ‘topic’ and ‘keyword’ sections of remaining contributions. • Mapping a network terms based on co-occurences of combination terms.
PROsand the Literature on Open Innovation (6) Open Innovation builds on existing economic/management theories… • Transaction Cost Economics. • Resource Based View of the Firm / Knowledge Based View of the Firm. • Relational View of the Firm. • Real-Options Theory.
Open Innovation & Science-IndustryLinkages (1) • Linkagesbetweenscienceandindustryexisted long before the term ‘Open Innovation’ has been coined.
Open Innovation & Science-IndustryLinkages (2) • Science-industrylinkagescompriseall types of interactionsbetween the scienceandindustry sectors thatinvolve the exchange of knowledgeandtechnology (Debackere & Veugelers, 2005). • Formalscience-industrylinkagesare based on a formal agreement or contract andtypicallyinvolve; (1) entrepreneurialacademic spin-off organizations, (2) contract research, (3) collaborative research arrangementsand (4) the licensing of IPRsownedbyscientific actors. • Informalscience-industrylinkageson the other hand relatetoallsorts of informal personal contact betweenindividualscientistsandtheirindustrialcounterpartsand human capitalflowsthatfacilitate the knowledgebetween public research organizationsandindustrialfirms.
Intensifying Science-Industry Linkages (1) However, several indicators of science-industry linkages show a positive trend towards the intensification of these linkages in terms of scale and scope in the past decade(s). Commonly used indicators of industry-science links include; • Science-originated patents (e.g. co-assignments of scientific and industrial actors on patent documents, company citations to scientific patents, references to scientific publications in company patents, company licensing of ‘scientific patents’, company acquisitions of ‘scientific patents’). • Cooperative agreements between public research organizations and industrial actors (relates to all kinds of contract-based agreements). • Labour mobility (migration of graduates/researchers from public research organizations to industry and visa versa) • Science-originated entrepreneurship (relates mostly to spin-offs).
Intensifying Science-Industry Linkages (3) ReferencestoScientificContributions in Patent Documents
Explanations for the Intensification of ISLs (1) There is anincreased ‘industrial/societal’ demandforscientificknowledge. • New andupcomingtechnology sectors are increasinglyknowledge-intensive (e.g. Biotechnology, Nanotechnology, ICT, etc.). • PROs are essentially ‘knowledgefactories’ and as suchlinkageswiththemhave becomean important knowledgesourcingstrategyforindustrialfirms in knowlegde-intensive industries (Rosenberg, 1990; Zucker et. al., 1998). • As PROs advance the frontier of technologyandoftenoperate in multiple technologicalfields, theyenableindustrialfirmstobroadentheir search for new knowledgerecombinations(Rosenkopf & Nerkar, 2001; Fleming, 2001). • These new knowledgerecombinationsoftenlie at the heart of innovationswith the highesteconomical impact – radical/breakthroughinnovations(Fleming, 2001).
Explanations for the Intensification of ISLs (2) There is anincreasednumber of public policy initiativesaimed at stimulatingandfacilitatingscience-industrylinkages. • There is anincreasedrealizationthat the fruits of investments in public research canonlybefullygraspedwhenitsresults are relevant for the private sector as well (Debackere & Veugelers, 2005). • Duetoanincreasedbudgetarystringency of public funding, PROscan no longerjustifytheirexistencesolelybytheirepistemologicalpurpose. They are increasinglyforcedtoinitiatecontactswithindustry as a means of securingadditionalfundingfortheir research (Debackere & Veugelers, 2005).
Why Are Industrial Firms Relevant For PROs? Bybecomingbetterconnectedwith the industry, public research organizations are ableto… • Access additional sources forsecuring funds for research projectsandactivities. • Share the risk of developingcostlytechnologieswhich have a market potential. • Provideadditionallabour market opportunitiesforgraduates. • Get new impulsesfor research andeducation.
Why Are PROs Relevant From the Industry POV? (1) Bybecomingbetterconnectedwith the scientific community, firms are betterableto… • Access complementaryassetsthattheyneedtocreateinnovations (Cockburn & Henderson, 1998; Gittelman & Kogut, 2003). • Traditionally complementary assets are defined as assets, infrastructure or capabilities needed to support the successful commercialization and marketing of a technological innovation, other than those assets fundamentally associated with that innovation (Teece, 1986). • As such, within the frame of ISLscomplementaryassetsmayrefertoPROs’ capabilitytodevelopknowledge, technology, infrastructureandfacilities. • Obviouslyknowledge is the most important complementaryassetand is carried in patents, publicationsand most importantlypeople(knowhow).
Why Are PROs Relevant From the Industry POV? (2) LinkageswithPROscan help firmstoimprove the productivity of applied research andultimatelytheirinnovative performance… • PROs are abletoidentify the most promisingtechnologicalopportunities at anearlier stage thanindustrialfirms. • Thereforelinking up withPROscanpreventindustrialfirmsfromengaging in costlyandwastefulexperimentation. • Although the basic scientificknowledgedeveloppedbyPROs is often project-specific at first, it has the potentialto ‘fertilize’ multiple projects, whichenablesindustrialfirmstoachievesynergyeffects.
Why Are PROs Relevant From the Industry POV? (3) Empirical studies confirm the importance of scienceforindustry… • At least 15% of new productsand 11% of new processes in a sample of major firms in the US wouldnot have cometoexistence without input from the scientific community (Mansfield, 1998). • Collaborating with public research organizations has a positive effect on the share of new-to-the-market innovations(Monjon & Waelbroeck, 2003). • Linkageswith public research organizations (as measuredby co-authorshipsbetweenindustrial employees andacademics) have a positive effect on the research productivity of pharmaceuticalfirms(Henderson & Cockburn, 1998). • Recruitingscientists, especially ‘star scientists’, has a positive effect on the research productivity of firmsin biotechnologyandnanotechnology (Zucker et. al., 1998:2005).
Which Firms Are Likely To Link Up With PROs? Empirical studies confirmthat… • Sizematters; largerfirms are more likelytoengage in science-industrylinkagesthan small and medium sizedentreprises. • Collaborating with public research organizations is complementarytocollaborationswithother partners (e.g. suppliersandcustomers/users). Thereforefirmsthatcollaborate more in general are also more likelytocollaboratewithPROs. • Collaborating with public research organizations is complementarytointernalinnovationactivities. Therefore more R&D-intensive companies are more likelyto partner withPROs. These companies tendtooperate in industrieslikepharmaceuticalsandchemicals.
An Interesting Perspective; Procurement & OI (1) PROsprocurementactivity is certainly a mechanismthatfacilitatesknowledgeflowsbetweenPROsandindustry(Autio et. al., 2003). The magnitude of these knowledgeflows is determinedby… • AbsorptiveCapacity; the ability of industrial actors (suppliers) toacquireandcaptureknowledgefromPROs. • SocialCapital; the ability of industrial actors (suppliers) toidentify relevant knowledge.
An Interesting Perspective; Procurement & OI (2) The amount of socialcapitalthat is built intorelationshipsbetweenPROsandindustry is determinedby… • The willingness of bothpartiestoprovideeachother access totheir contact networks. Thisdetermines the amountanddiversity of the knowledgethat is potentiallyavailabletobothparties. • The level of trust betweenbothparties. Thisdetermines the amount of knowledgethatwillbedisclosedbyparties. • The degree of complementarities (knowledgeoverlaps, goal overlaps) betweenbothparties. Thisdetermines the efficience of knowledgeflows.
An Interesting Perspective; Procurement & OI (3) The results of a 2003 survey on CERN procurementclearlyhighlights the positiveeffects of procurement on knowledgeflows; • 528 new industrialproductsand services, developedby 38% of supplierfirmscanbeattributedto CERN procurement. • 44% of supplierfirmsindicatedthat CERN procurementinducedtechnologicallearning on their part. • 36% of supplierfirmsindicatedthat CERN procurementinduced market learning on their part.
An Interesting Perspective; Procurement & OI (4) The resultsalso show thatknowledgeflows are facilitatedby; • The frequency of interactionsbetween CERN and the supplierfirm in question. • Relationalsocialcapital; the totalamount of trust, respect, personal contactsandreciprocity built into a givensupplierrelationshipwith CERN. • Structuralsocialcapital; the ability of CERN to link itssuppliercompany withitsinternalandexternalnetworksand resources. • The supplierfirms’ investment in its CERN relationship.
For More Information on OI Open Innovation Community • http://www.openinnovation.net • https://www.facebook.com/groups/open.innovation.community/ The Network of Excellence on Open & CollaborativeInnovation • http://www.exnovate.org
My Contact Details Adrian Kovacs FWO Research Fellow / PhD-Candidate in Applied Economics KatholiekeUniversiteit Leuven, Faculty of Business and Economics (FEB) Department of Managerial Economics, Strategy and Innovation (MSI) Hogenheuvelcollege, Room 03.107 Naamsestraat 69, P.O. Box 3535 3000 Leuven, Belgium T: +32 16 32 68 62 M: +32 4 91 36 29 37 E: Adrian.Kovacs@econ.kuleuven.be W: http://www.econ.kuleuven.be/eng/fetew/medewerker/userpage.aspx?PID=1820