In addition to acquiring external technology, firms have started to actively commercialize technological knowledge, which represents the opposite type of technology transactions. The strong interactions with a firm's environment contrast the traditional closed approaches to innovation. Therefore, this new paradigm has been termed open innovation. Prior research into this field has mostly been limited to theoretical considerations and case studies. More general work has usually focused either on external technology acquisition or on external technology exploitation. Accordingly, I take an integrated perspective and regard the two types of technology transactions as the main dimensions of a firm's strategic approach to open innovation. Drawing on these dimensions, I use data from a questionnaire-based study of 154 middle and large companies to identify groups of firms that pursue homogeneous strategies regarding open innovation. Accordingly, this analysis is the first large-scale study that describes the current state of open innovation in practice. Moreover, it is the first work that identifies strategic approaches of firms to technology transactions along the innovation process.

Open Innovation in Practice: An Analysis of Strategic Approaches to Technology Transactions

OVERVIEW:Industrial innovation is becoming more open, requiring changes in how firms manage innovation. External sources of knowledge become more prominent, while external channels to market also offer greater promise. This complicates the evaluation of early-stage technology projects, which often involve significant technical and market uncertainty. In such circumstances, companies need to “play poker” as well as chess. Measurement errors (false positives, false negatives) are likely to arise from judgments about the commercial potential of early-stage projects. Most companies' policies consciously limit “false positives” in assessing a project's commercial potential, but few companies take steps to manage the risk of “false negatives.” New metrics may help a firm focus more upon external sources of innovation to enhance its business model, and enable the firm to salvage value from false negatives that otherwise would be lost.

Managing Open Innovation

Recently, innovation processes towards sustainable development have received increasing attention in academic literature. This research introduces the combination of insights from innovation theory, sustainable development practice and small business characteristics to unlock new knowledge on factors that influence the translation of sustainable innovation within small and medium-sized enterprises (SMEs) into practice. The sustainability themes and activities as described for large companies (i.e. in the sustainability reporting and management literature) were used as starting point in this study. It presents empiric results of the PRIMA Project conducted within the rubber and plastics industry (RPI) on sustainable innovation activities.

It will show that many sustainable innovations are directed at the improvement of technological processes (eco-efficiency) and to lower costs of production. These innovations can be seen as incremental. Companies with sustainability integrated in their orientation and innovation processes show value creation: the development of products new to the market (radical innovations) and cooperation with stakeholders. The PRIMA project shows that more insight in SME innovative characteristics and (e)valuation of sustainable innovation efforts provides opportunities to improve the sustainability performance of SMEs. Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment.

Corporate sustainability and innovation in SMEs: Evidence of themes and activities in practice

Prior research has identified the integration of marketing with research and development (R&D) as a key success factor for new product development (NPD). However, prior work has not distinguished the sales and marketing functions, even though they are distinctive departments within an organization. Therefore, the authors extend prior research and examine the effect of cross-functional cooperation among sales, marketing, and R&D on NPD performance across multiple stages of the NPD process. The authors use multiple-informant data from 424 sales, marketing, and R&D managers as well as project leaders of 106 NPD projects to test several hypotheses. The results show that the cooperation between sales and R&D and between sales and marketing has a significant, positive effect on overall NPD project performance beyond marketing–R&D cooperation. The authors also find that the effect of cross-functional cooperation among sales, marketing, and R&D on overall NPD project performance varies across stages of t...

http://web.nchu.edu.tw/pweb/users/arborfish/lesson/8753.pdf

Sales, Marketing, and Research-and-Development Cooperation Across New Product Development Stages: Implications for Success

This study explores the domain of corporate venturing using a theoretically grounded classification typology as an organizing scheme. The typology is applied in a field study of corporations that a...

Exploring the practice of corporate venturing: Some common forms and their organizational implications

Seeking to commercialize new technologies faster, Lucent Technologies' New Ventures Group steers between the models of venture capital and internal corporate development. OVERVIEW: Interest grows in the use of corporate venture capital as a way of unlocking the hidden potential of technologies which lie inside private central research labs and do not fit with established businesses. The experience of the New Ventures Group within Lucent Technologies illustrates both the challenges and the opportunities Qf using venture capital for these purposes. The challenge is to balance the forces of the venture capital model with those ofan internal corporate development model. The New Ventures Group's experience to date suggests that balancing these forces is difficult but that there are rewards to the organization for doing so. These include the discovery of new sources of growth, the ability to leverage internal technology across multiple businesses, and the ability to stimulate cultural change within the organization. Lucent Technologies began considering the use of corporate venture capital for three reasons. First, Lucent wanted to uncover new vehicles for increasing its growth. Second, it wanted to develop new mechanisms for leveraging its unparalleled technology base across multiple new business opportunities. Third, Lucent determined that it needed to increase the rate at which it commercialized its technologies, and it sought a catalyst to move technology out of the lab and into the market more rapidly. The company began to investigate how it could accomplish these goals in the summer of 1996. It benefited from reviewing its own extensive experience with commercializing earlier technologies out of Bell Labs. It also conducted extensive external benchmarking activities to determine whether and how to utilize corporate money to finance new technology ventures. Some of this benchmarking activity involved discussion with other companies that had experience with this activity, including Intel, 3M, Raychem, ThermoElectron, and Xerox. The planning staff also took the time for numerous discussions with the private venture capital community, including many of the leading VC partnerships, to understand how their approach to venture financing and commercializing new technologies worked. Sahlman provides an accessible overview of some of the key dimensions of the private venture capital model (1). Lucent staff also reviewed the academic literature to learn about earlier attempts to utilize corporate venture structures to commercialize technology and foster the formation of new businesses. This corporate venturing literature illustrates the tension between strategic benefits to the corporation (which pulls a new venture group toward an internally focused, corporate development model) and maximizing the financial return from the new venture (which pulls the new venture group toward an externally focused, private venture capital model). We provide a brief review of this literature on the next page, while a more complete treatment can be found in (2). Lucent concluded from its benchmarking activities that: 1) financing new technology ventures through corporate venture capital is hard; 2) there are more failures than successes; 3) some of the problems that firms encountered were due to structural problems; but 4) some of the problems were the result of how the programs were managed. Armed with this information, Lucent elected to proceed, and created the New Ventures Group AVG) in 1997. We turn now to the structural problems facing the NVG, and shall then discuss how Lucent has chosen to manage its program. Creating the Phantom World Lucent learned early that it needed to craft an operating model to blend the incentives, risk-taking, and speedy decision making of private venture capital with the deep technological resources and culture of Bell Laboratories. In trying to create this blend, it started with a culture that was steeped in technological capability, creativity and inventiveness. …

Creating New Ventures from Bell Labs Technologies

The evolution of Lucent's New Ventures Group into a partnership with private equity capital suppliers offers a new route to corporate innovation. OVERVIEW: Lucent's New Ventures Group launched 35 ventures out of Bell Laboratories technologies. Notwithstanding this success, NVG has been forced to change its funding approach. It has now evolved into a partnership with private equity capital suppliers called New Venture Partners. This partnership addresses some structural limits upon a public corporation's ability to support internal venture creation over the business cycle, and offers a new model for sustaining corporate innovation. In an earlier article, we described an innovative model for creating corporate ventures out of industrial research laboratories at Lucent Technologies (1). Since that article, tremendous changes have occurred in the telecommunications market, within Lucent, and within the venture capital sector overall. These changes have forced this model of creating ventures out of industrial labs to evolve in a somewhat new and different direction. In this article, we briefly review these different forces, detail how they compelled Lucent to spin out its New Ventures Group, and describe the evolution of the model into New Venture Partners. We believe that this evolution carries with it important implications for industrial innovation, and for the concept of Open Innovation (2). Open Innovation advances the claim that, in a world of widely distributed knowledge, a company must access external technologies for use in its business and allow its technologies to be accessed by other firms' businesses. Lucent's New Ventures Group was an example of the latter process, of allowing other firms to access Bell Labs technologies. Notwithstanding this hypothesis, there appear to be limits in the ability of a publicly-traded company to support the creation of internal ventures over the business cycle. While one can conceive of possible financial instruments to address these limits, they have not been tested by companies, and may not soon be attempted in the current post-Enron accounting and governance climate. Teaming with private equity capital suppliers to sustain the creation of these ventures in challenging times, as well as in good times, may serve as an alternative mechanism to deal with these problems. The Spinout of Lucent's NVG Lucent's New Ventures Group (NVG) had achieved considerable success following its formation within Lucent back in 1996. In the subsequent six years, 35 ventures had been created out of Bell Labs research projects. As noted in our previous article, each project was initially reviewed by internal Lucent businesses, which had the right of first refusal for a technology nominated to go into a new venture (1). While this might suggest that NVG would be consigned to the "leftovers" that were rejected by the business units, NVG found that many of these technologies held significant commercial potential. In fact, NVG commercialized opportunities that were both in non-strategic "white spaces" for Lucent, as well as opportunities that represented alternative strategic hedging bets. Lucent's NVG was a financial success. Out of the 35 ventures that NVG launched, there were eight exit events in its portfolio. This rather high success rate translated into a gross internal rate of return for NVG of 46 percent from 1996 through the end of 2001 (based on exits over the period plus the final sale value of the portfolio by Lucent versus every dollar invested both directly in the ventures, as well as in the core team and development of the opportunities). This is a high rate of return, given the communications and IT focus of the portfolio and the significantly negative returns of many venture capital funds during this period. Three of the ventures later were re-acquired by Lucent, reflecting strategic benefits to the corporation realized from the NVG program. …

Stephen Socolof

Papers

Creating New Ventures from Bell Labs Technologies

Sustaining Venture Creation from Industrial Laboratories