UNIVERSITY OF SOUTH AFRICA (UNISA)
College of Economic and Management Sciences
⋄
ASSIGNMENT 3
Semester 1 – 2026
⋄
Module Code: MNE3702
Module Name: Corporate Entrepreneurship
Assignment No.: Assignment 3
Semester: Semester 1, 2026
Submitted in partial fulfilment of the requirements for MNE3702:
Corporate Entrepreneurship at the University of South Africa.
,UNISA | MNE3702 Corporate Entrepreneurship – Assignment 3
Question 1: Open Innovation at J&R Electronics
Open innovation is a strategy through which organisations deliberately draw on both internal
and external flows of knowledge to accelerate their own innovation and to expand the markets
for external use of innovation (Huang and Zhou, 2025). J&R Electronics adopted elements
of this model by reaching beyond its own walls to bring in platform providers, CRM vendors,
and technology partners rather than trying to build every capability from scratch. Under-
standing why the Friedmans took this path requires looking at the pressures the company
faced, the capabilities it lacked, and the opportunities the external market presented.
1.1 Competitive Pressure and the Need for External Knowledge
J&R operated a single-location retail model in an industry being reshaped by big-box chains
such as Wal-Mart, Best Buy, and Circuit City. Going it alone in technology development had
already cost the company badly; when InterWorld, the vendor behind J&R’s first e-commerce
platform, collapsed during the dot-com bust of 2000, Jason Friedman’s team was forced to
stitch together a custom application that could handle 400,000 products but still lacked fea-
tures competitors offered as standard. That experience demonstrated clearly that internal-only
development was too slow, too fragile, and too expensive for a retailer of J&R’s size to sus-
tain.
The open innovation rationale here aligns with what Zhang et al. (2024) found in their meta-
analysis: firms that collaborate with outside partners on innovation consistently outperform
those that attempt to develop every capability internally, particularly when the speed of tech-
nology change outstrips internal R&D capacity. By partnering with Blue Martini and Loyalty
Lab rather than rebuilding from scratch, J&R accessed proven platforms quickly and focused
its own resources on customisation and customer experience rather than reinventing founda-
tional infrastructure.
1.2 Resource Gaps and Strategic Rationale
J&R’s e-commerce team of 50 IT workers was capable, but certain capabilities were simply
not available in-house. The Loyalty Lab CRM package brought a ready-made architecture for
customer account management, incentive redemption, and the elimination of what Loyalty
Lab’s CEO Mark Goldstein called the “Google tax” – the 20 to 30 percent search-referral fee
Page 1 of 17
, UNISA | MNE3702 Corporate Entrepreneurship – Assignment 3
J&R paid whenever a visitor arrived from a comparison engine rather than typing JR.com
directly. Blue Martini, meanwhile, supplied a Guided Selling application that mimicked the
expertise of J&R’s in-store sales staff online. Neither capability existed internally.
According to Huang and Zhou (2025), open innovation works best when technology enables
new market access and when governance mechanisms are clear. Both conditions applied at
J&R. The technology gap was real: J&R’s legacy Endeca search software could not be fully
integrated with its InterWorld site, meaning features like customer review integration and
inventory transparency were unavailable. Open innovation filled precisely those gaps. The
company did not outsource its identity or its customer relationships; it outsourced specific
technical modules while retaining control over how those modules were deployed and branded.
1.3 The Influence of Strategic Context
Several factors specific to J&R’s context shaped the decision. First, the company’s deliberate
choice to stay at a single location meant that scale-based arguments for chain expansion were
off the table. Rachelle Friedman was explicit: remaining on the block preserved control that
chain stores lost. This made e-commerce the primary vehicle for geographic reach, which in
turn made a sophisticated online platform a strategic necessity rather than a convenience. Sec-
ond, Jason Friedman’s background as database manager before becoming VP of e-commerce
meant the company had a leader who understood both the technical and commercial dimen-
sions of the decision. Third, the May 2006 loyalty programme launch reflected a longer-term
strategic goal to shift customer traffic from price-comparison platforms back to JR.com di-
rectly, reducing dependence on external search aggregators.
Key Distinction
Open vs. Closed Innovation at J&R: The company did not open its innovation
completely. Core assets such as its pricing philosophy, product expertise, and customer
relationships remained entirely internal. What it opened was the technology layer,
specifically the platform, CRM, and review infrastructure. This selective openness is
consistent with what Huang and Zhou (2025) describe as governance-bounded open
innovation, where firms control which knowledge flows in and out while benefiting from
partner capabilities.
Page 2 of 17
College of Economic and Management Sciences
⋄
ASSIGNMENT 3
Semester 1 – 2026
⋄
Module Code: MNE3702
Module Name: Corporate Entrepreneurship
Assignment No.: Assignment 3
Semester: Semester 1, 2026
Submitted in partial fulfilment of the requirements for MNE3702:
Corporate Entrepreneurship at the University of South Africa.
,UNISA | MNE3702 Corporate Entrepreneurship – Assignment 3
Question 1: Open Innovation at J&R Electronics
Open innovation is a strategy through which organisations deliberately draw on both internal
and external flows of knowledge to accelerate their own innovation and to expand the markets
for external use of innovation (Huang and Zhou, 2025). J&R Electronics adopted elements
of this model by reaching beyond its own walls to bring in platform providers, CRM vendors,
and technology partners rather than trying to build every capability from scratch. Under-
standing why the Friedmans took this path requires looking at the pressures the company
faced, the capabilities it lacked, and the opportunities the external market presented.
1.1 Competitive Pressure and the Need for External Knowledge
J&R operated a single-location retail model in an industry being reshaped by big-box chains
such as Wal-Mart, Best Buy, and Circuit City. Going it alone in technology development had
already cost the company badly; when InterWorld, the vendor behind J&R’s first e-commerce
platform, collapsed during the dot-com bust of 2000, Jason Friedman’s team was forced to
stitch together a custom application that could handle 400,000 products but still lacked fea-
tures competitors offered as standard. That experience demonstrated clearly that internal-only
development was too slow, too fragile, and too expensive for a retailer of J&R’s size to sus-
tain.
The open innovation rationale here aligns with what Zhang et al. (2024) found in their meta-
analysis: firms that collaborate with outside partners on innovation consistently outperform
those that attempt to develop every capability internally, particularly when the speed of tech-
nology change outstrips internal R&D capacity. By partnering with Blue Martini and Loyalty
Lab rather than rebuilding from scratch, J&R accessed proven platforms quickly and focused
its own resources on customisation and customer experience rather than reinventing founda-
tional infrastructure.
1.2 Resource Gaps and Strategic Rationale
J&R’s e-commerce team of 50 IT workers was capable, but certain capabilities were simply
not available in-house. The Loyalty Lab CRM package brought a ready-made architecture for
customer account management, incentive redemption, and the elimination of what Loyalty
Lab’s CEO Mark Goldstein called the “Google tax” – the 20 to 30 percent search-referral fee
Page 1 of 17
, UNISA | MNE3702 Corporate Entrepreneurship – Assignment 3
J&R paid whenever a visitor arrived from a comparison engine rather than typing JR.com
directly. Blue Martini, meanwhile, supplied a Guided Selling application that mimicked the
expertise of J&R’s in-store sales staff online. Neither capability existed internally.
According to Huang and Zhou (2025), open innovation works best when technology enables
new market access and when governance mechanisms are clear. Both conditions applied at
J&R. The technology gap was real: J&R’s legacy Endeca search software could not be fully
integrated with its InterWorld site, meaning features like customer review integration and
inventory transparency were unavailable. Open innovation filled precisely those gaps. The
company did not outsource its identity or its customer relationships; it outsourced specific
technical modules while retaining control over how those modules were deployed and branded.
1.3 The Influence of Strategic Context
Several factors specific to J&R’s context shaped the decision. First, the company’s deliberate
choice to stay at a single location meant that scale-based arguments for chain expansion were
off the table. Rachelle Friedman was explicit: remaining on the block preserved control that
chain stores lost. This made e-commerce the primary vehicle for geographic reach, which in
turn made a sophisticated online platform a strategic necessity rather than a convenience. Sec-
ond, Jason Friedman’s background as database manager before becoming VP of e-commerce
meant the company had a leader who understood both the technical and commercial dimen-
sions of the decision. Third, the May 2006 loyalty programme launch reflected a longer-term
strategic goal to shift customer traffic from price-comparison platforms back to JR.com di-
rectly, reducing dependence on external search aggregators.
Key Distinction
Open vs. Closed Innovation at J&R: The company did not open its innovation
completely. Core assets such as its pricing philosophy, product expertise, and customer
relationships remained entirely internal. What it opened was the technology layer,
specifically the platform, CRM, and review infrastructure. This selective openness is
consistent with what Huang and Zhou (2025) describe as governance-bounded open
innovation, where firms control which knowledge flows in and out while benefiting from
partner capabilities.
Page 2 of 17
