The Role of Public Research Organizations Within Open Innovation

‘A Review of the State of the Art From an Economic Perspective’

Adrian Kovacs Workshop on Open InnovationBucharest 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 decades which 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)

Closed Innovation

Public Innovation

Private Open Innovation

Open Source Innovation

Innovation Outcome

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Clo

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My Understanding of Open Innovation (4)

From A Theoretical Standpoint...

• Linking OI to existing Strategic Management Theories; TCE, RBV, KBV, RV, RO, DC, etc..

• Exploring the ‘human side’ of OI – linking OI with corporate culture.

• Exploring the ‘social side’ of OI – linking OI with corporate social responsibility.

• Exploring the ‘legal side’ of OI – linking OI with legal frameworks.

• Conducting large-scale quantitative studies covering OI.

From An Empirical Standpoint…

• Exploring OI in the low-tech settings.

• Exploring the management of OI in SMEs.

• 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.

PROs and the Literature on Open Innovation (1)

PROs and the Literature on Open Innovation (2)

PROs and the Literature on Open Innovation (3)

PROs and the Literature on Open Innovation (4)

PROs and the Literature on Open Innovation (5)

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.

PROs and the Literature on Open Innovation (6)

• Linkages between science and industry existed long before the term ‘Open Innovation’ has been coined.

Open Innovation & Science-Industry Linkages (1)

• Science-industry linkages comprise all types of interactions between the science and industry sectors that involve the exchange of knowledge and technology (Debackere & Veugelers, 2005).

• Formal science-industry linkages are based on a formal agreement or contract and typically involve; (1) entrepreneurial academic spin-off organizations, (2) contract research, (3) collaborative research arrangements and (4) the licensing of IPRs owned by scientific actors.

• Informal science-industry linkages on the other hand relate to all sorts of informal personal contact between individual scientists and their industrial counterparts and human capital flows that facilitate the knowledge between public research organizations and industrial firms.

Open Innovation & Science-Industry Linkages (2)

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).

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100015002000250030003500

Number of Patents Co-Owned By Scientific and Industrial Actors Across Time

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00.0010.0020.0030.0040.0050.0060.0070.0080.009

Normalized Number of Patents Co-Owned By Scien-tific and Industrial Actors Across Time

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Number of Citations From Industry Patents to Scientific Patents Across Time

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0

0.005

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Normalized Number of Citations From Industry Patents to Scientific Actors Across Time

Intensifying Science-Industry Linkages (2)

References to Scientific Contributions in Patent Documents

Intensifying Science-Industry Linkages (3)

There is an increased ‘industrial/societal’ demand for scientific knowledge.

• New and upcoming technology sectors are increasingly knowledge-intensive (e.g. Biotechnology, Nanotechnology, ICT, etc.).

• PROs are essentially ‘knowledge factories’ and as such linkages with them have become an important knowledge sourcing strategy for industrial firms in knowlegde-intensive industries (Rosenberg, 1990; Zucker et. al., 1998).

• As PROs advance the frontier of technology and often operate in multiple technological fields, they enable industrial firms to broaden their search for new knowledge recombinations (Rosenkopf & Nerkar, 2001; Fleming, 2001).

• These new knowledge recombinations often lie at the heart of innovations with the highest economical impact – radical/breakthrough innovations (Fleming, 2001).

Explanations for the Intensification of ISLs (1)

There is an increased number of public policy initiatives aimed at stimulating and facilitating science-industry linkages.

• There is an increased realization that the fruits of investments in public research can only be fully grasped when its results are relevant for the private sector as well (Debackere & Veugelers, 2005).

• Due to an increased budgetary stringency of public funding, PROs can no longer justify their existence solely by their epistemological purpose. They are increasingly forced to initiate contacts with industry as a means of securing additional funding for their research (Debackere & Veugelers, 2005).

Explanations for the Intensification of ISLs (2)

Why Are Industrial Firms Relevant For PROs?

By becoming better connected with the industry, public research organizations are able to…

• Access additional sources for securing funds for research projects and activities.

• Share the risk of developing costly technologies which have a market potential.

• Provide additional labour market opportunities for graduates.

• Get new impulses for research and education.

Why Are PROs Relevant From the Industry POV? (1)

By becoming better connected with the scientific community, firms are better able to…

• Access complementary assets that they need to create innovations (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 ISLs complementary assets may refer to PROs’ capability to develop knowledge, technology, infrastructure and facilities.

• Obviously knowledge is the most important complementary asset and is carried in patents, publications and most importantly people (knowhow).

Linkages with PROs can help firms to improve the productivity of applied research and ultimately their innovative performance…

• PROs are able to identify the most promising technological opportunities at an earlier stage than industrial firms.

• Therefore linking up with PROs can prevent industrial firms from engaging in costly and wasteful experimentation.

• Although the basic scientific knowledge developped by PROs is often project-specific at first, it has the potential to ‘fertilize’ multiple projects, which enables industrial firms to achieve synergy effects.

Why Are PROs Relevant From the Industry POV? (2)

Empirical studies confirm the importance of science for industry…

• At least 15% of new products and 11% of new processes in a sample of major firms in the US would not have come to existence 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).

• Linkages with public research organizations (as measured by co-authorships between industrial employees and academics) have a positive effect on the research productivity of pharmaceutical firms (Henderson & Cockburn, 1998).

• Recruiting scientists, especially ‘star scientists’, has a positive effect on the research productivity of firms in biotechnology and nanotechnology (Zucker et. al., 1998:2005).

Why Are PROs Relevant From the Industry POV? (3)

Empirical studies confirm that…

• Size matters; larger firms are more likely to engage in science-industry linkages than small and medium sized entreprises.

• Collaborating with public research organizations is complementary to collaborations with other partners (e.g. suppliers and customers/users). Therefore firms that collaborate more in general are also more likely to collaborate with PROs.

• Collaborating with public research organizations is complementary to internal innovation activities. Therefore more R&D-intensive companies are more likely to partner with PROs. These companies tend to operate in industries like pharmaceuticals and chemicals.

Which Firms Are Likely To Link Up With PROs?

An Interesting Perspective; Procurement & OI (1)

PROs procurement activity is certainly a mechanism that facilitates knowledge flows between PROs and industry (Autio et. al., 2003).

The magnitude of these knowledge flows is determined by…

• Absorptive Capacity; the ability of industrial actors (suppliers) to acquire and capture knowledge from PROs.

• Social Capital; the ability of industrial actors (suppliers) to identify relevant knowledge.

The amount of social capital that is built into relationships between PROs and industry is determined by…

• The willingness of both parties to provide each other access to their contact networks. This determines the amount and diversity of the knowledge that is potentially available to both parties.

• The level of trust between both parties. This determines the amount of knowledge that will be disclosed by parties.

• The degree of complementarities (knowledge overlaps, goal overlaps) between both parties. This determines the efficience of knowledge flows.

An Interesting Perspective; Procurement & OI (2)

The results of a 2003 survey on CERN procurement clearly highlights the positive effects of procurement on knowledge flows;

• 528 new industrial products and services, developed by 38% of supplier firms can be attributed to CERN procurement.

• 44% of supplier firms indicated that CERN procurement induced technological learning on their part.

• 36% of supplier firms indicated that CERN procurement induced market learning on their part.

An Interesting Perspective; Procurement & OI (3)

The results also show that knowledge flows are facilitated by;

• The frequency of interactions between CERN and the supplier firm in question.

• Relational social capital; the total amount of trust, respect, personal contacts and reciprocity built into a given supplier relationship with CERN.

• Structural social capital; the ability of CERN to link its supplier company with its internal and external networks and resources.

• The supplier firms’ investment in its CERN relationship.

An Interesting Perspective; Procurement & OI (4)

Conclusion: The Role of PROs in OI (1)

Conclusion: The Role of PROs in OI (2)

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 & Collaborative Innovation

• http://www.exnovate.org

My Contact Details

Adrian Kovacs

 

FWO Research Fellow / PhD-Candidate in Applied Economics

Katholieke Universiteit 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

Thank you for your attention.