Cooperating for Innovation - lectures
Lecture 1 - Introduction to Cooperating for Innovation 1
Lecture 1 - Additional material 3
Lecture 2 - Partner types & cooperation types 6
Lecture 3 - Management of cooperative innovation activities 10
Lecture 4 - Alliance governance 13
Lecture 5 - Capturing value from cooperation 21
Lecture 6 – Cooperation and performance 26
, CFI lectures
Lecture 1 - Introduction to Cooperating for Innovation
Cooperating for innovation = firms’ activities and efforts to create and manage
innovation-focused strategic alliances with other organizations (e.g. R&D alliances, technology
developmet agreements, etc.)
Strategic alliance = a cooperative agreement in which two or more separate organizations
team up in order to share reciprocal inputs while maintaining their own corporate identities
- ‘’While maintaining their own corporate identities’’ means that the organizations remain
legally independent.
Types of alliances
Alliances goals:
- R&D/innovation vs. marketing, manufacturing
Alliance legal forms → has implications for the success of cooperation. Some structures lead to
more potential opportunistic behavior by one of the partners
- Contractual vs. joint ventures
- Equity vs. non-equity
Type of partner → depends on what type of innovation you want to pursue. E.g. radical
innovation, partner up with university.
- International vs. domestic
- Firm-firm: clients and suppliers, competitors
- Cross-sector: firm-government, firm-university
Number of partners:
- Dyadic = 2 partners
- Multi-partner = 3 or more partners
R&D and innovation alliances:
Opportunities:
- Complementary (knowledge) resources and technologies
- Depending on type of partner, exploration/exploitation
- Sharing the risks and costs of R&D projects
- Legitimacy of innovation
Challenges:
- Technological uncertainty and complexity
- Unexpected technical problems: pressure, conflicts
- Valuable resources have to be shared (proprietary info)
- Close interaction (risk of knowledge leakages)
- Coordination
1
, CFI lectures
Transaction costs
- Prior research on the make-or-buy question has been heavily influenced by transaction
costs economists who emphasize the contracting hazards inherent in any transaction
- Hierarchical governance structures are preferred when opportunism is likely and
transaction costs are high; market exchange should be preferred when transaction costs
are low
- Alliances make sense in more intermediate situations when transaction costs are not
so severe as to equire hierarchical control but are not so low as to enable market based
exchange
- Key limitation: implicit treatment of each transaction as a discerete event. Transactions
are embedded in a history of prior relationships and a broader network of relationships,
which affects the transaction costs involved (paper Gulati, 1995)
Resource-based view
- Resources owned or controlled by the firm have the potential to provide enduring
competitive advantage when they meet the so-called VRIN conditions (valuable,
difficult to imitate and not readily substitutable) (Barney, 1991)
- Value-creating resources (and capabilities) can be outside the boundaries of the firm.
Firms’ networks allow accessing such resources ‘’network resources’’ (Gulati, 1999)
- Together, the firm’s networks, and the resources they allow the firm to tap into, can serve
as a source of sustainable competitive advantage
- Alliance rationale: access to partners’ complementary resources that can lead to
synergy realization (unique combination of resources)
Other theories
Knowledge-based view (Grant, 1996):
- Extension of RBV
- Focus on knowledge as key VRIN resource
- Alliances as knowledge accessing vehicles
Organizational learning theory (March, 1991):
- Exploration vs. exploitation
- Ambidexterity and learning traps
- Alliances as learning vehicles (knowledge search)
2
, CFI lectures
Lecture 1 - Additional material
Differen types of collaboration
Strategic alliance = any agreement to work with another firm longer term than a market
contract, e.g. R&D alliance, marketing alliance, supply alliance, etc.
- Equity or non-equity
- Can be highly formal or informal
Advantages:
- Can be fast, flexible, and reversible
- Can enable partners to pool money, knowledge, and effort
- Can sometimes be inexpensive/free
Disadvantages:
- Partners’ interests may not be aligned
Joint venture = special type of alliance where 2 firms form a new subsidiary together
- Equity is split (e.g. 50:50, 60:40)
- Heavy-duty long term investment
- Share costs, risks, and profits
Advantages:
- Partners may contribute different kinds of assets and share in costs and risks
- Large equity stakes help to align the incentives of partners
- Close and frequent contact enables significant knowledge transfer
Disadvantages:
- Firm has to share control and profit with partner
- Risk of exposing proprietary knowledge to partner that you did not want to share
Licensing agreement = one firm agrees to let other firm use some intellectual property (e.g.
technology, brand, secret process) in exchange for payment
- May have upfront, milestone and royalty payments
- May be exclusive to particular product markets or geographical regions, or non-exclusive
Advantages:
- Fast and inexpensive way to leverage intellectual property
- Firms can use it to enter markets where they lack complementary assets such as
manufacturing capacity, government relationships, market-specific knowledge, etc.
Disadvantages:
- May give up some control in how technology is developed and used
- Only take a slice of the profits
3
Lecture 1 - Introduction to Cooperating for Innovation 1
Lecture 1 - Additional material 3
Lecture 2 - Partner types & cooperation types 6
Lecture 3 - Management of cooperative innovation activities 10
Lecture 4 - Alliance governance 13
Lecture 5 - Capturing value from cooperation 21
Lecture 6 – Cooperation and performance 26
, CFI lectures
Lecture 1 - Introduction to Cooperating for Innovation
Cooperating for innovation = firms’ activities and efforts to create and manage
innovation-focused strategic alliances with other organizations (e.g. R&D alliances, technology
developmet agreements, etc.)
Strategic alliance = a cooperative agreement in which two or more separate organizations
team up in order to share reciprocal inputs while maintaining their own corporate identities
- ‘’While maintaining their own corporate identities’’ means that the organizations remain
legally independent.
Types of alliances
Alliances goals:
- R&D/innovation vs. marketing, manufacturing
Alliance legal forms → has implications for the success of cooperation. Some structures lead to
more potential opportunistic behavior by one of the partners
- Contractual vs. joint ventures
- Equity vs. non-equity
Type of partner → depends on what type of innovation you want to pursue. E.g. radical
innovation, partner up with university.
- International vs. domestic
- Firm-firm: clients and suppliers, competitors
- Cross-sector: firm-government, firm-university
Number of partners:
- Dyadic = 2 partners
- Multi-partner = 3 or more partners
R&D and innovation alliances:
Opportunities:
- Complementary (knowledge) resources and technologies
- Depending on type of partner, exploration/exploitation
- Sharing the risks and costs of R&D projects
- Legitimacy of innovation
Challenges:
- Technological uncertainty and complexity
- Unexpected technical problems: pressure, conflicts
- Valuable resources have to be shared (proprietary info)
- Close interaction (risk of knowledge leakages)
- Coordination
1
, CFI lectures
Transaction costs
- Prior research on the make-or-buy question has been heavily influenced by transaction
costs economists who emphasize the contracting hazards inherent in any transaction
- Hierarchical governance structures are preferred when opportunism is likely and
transaction costs are high; market exchange should be preferred when transaction costs
are low
- Alliances make sense in more intermediate situations when transaction costs are not
so severe as to equire hierarchical control but are not so low as to enable market based
exchange
- Key limitation: implicit treatment of each transaction as a discerete event. Transactions
are embedded in a history of prior relationships and a broader network of relationships,
which affects the transaction costs involved (paper Gulati, 1995)
Resource-based view
- Resources owned or controlled by the firm have the potential to provide enduring
competitive advantage when they meet the so-called VRIN conditions (valuable,
difficult to imitate and not readily substitutable) (Barney, 1991)
- Value-creating resources (and capabilities) can be outside the boundaries of the firm.
Firms’ networks allow accessing such resources ‘’network resources’’ (Gulati, 1999)
- Together, the firm’s networks, and the resources they allow the firm to tap into, can serve
as a source of sustainable competitive advantage
- Alliance rationale: access to partners’ complementary resources that can lead to
synergy realization (unique combination of resources)
Other theories
Knowledge-based view (Grant, 1996):
- Extension of RBV
- Focus on knowledge as key VRIN resource
- Alliances as knowledge accessing vehicles
Organizational learning theory (March, 1991):
- Exploration vs. exploitation
- Ambidexterity and learning traps
- Alliances as learning vehicles (knowledge search)
2
, CFI lectures
Lecture 1 - Additional material
Differen types of collaboration
Strategic alliance = any agreement to work with another firm longer term than a market
contract, e.g. R&D alliance, marketing alliance, supply alliance, etc.
- Equity or non-equity
- Can be highly formal or informal
Advantages:
- Can be fast, flexible, and reversible
- Can enable partners to pool money, knowledge, and effort
- Can sometimes be inexpensive/free
Disadvantages:
- Partners’ interests may not be aligned
Joint venture = special type of alliance where 2 firms form a new subsidiary together
- Equity is split (e.g. 50:50, 60:40)
- Heavy-duty long term investment
- Share costs, risks, and profits
Advantages:
- Partners may contribute different kinds of assets and share in costs and risks
- Large equity stakes help to align the incentives of partners
- Close and frequent contact enables significant knowledge transfer
Disadvantages:
- Firm has to share control and profit with partner
- Risk of exposing proprietary knowledge to partner that you did not want to share
Licensing agreement = one firm agrees to let other firm use some intellectual property (e.g.
technology, brand, secret process) in exchange for payment
- May have upfront, milestone and royalty payments
- May be exclusive to particular product markets or geographical regions, or non-exclusive
Advantages:
- Fast and inexpensive way to leverage intellectual property
- Firms can use it to enter markets where they lack complementary assets such as
manufacturing capacity, government relationships, market-specific knowledge, etc.
Disadvantages:
- May give up some control in how technology is developed and used
- Only take a slice of the profits
3
