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OPEN INNOVATION CAPABILITIES: INSIGHTS FROM A HISTORICAL CASE STUDY

OPEN INNOVATION CAPABILITIES: INSIGHTS FROM A HISTORICAL CASE STUDY

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03/11/2013

 
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OPEN INNOVATION CAPABILITIES: INSIGHTS FROM A HISTORICAL CASESTUDY
Pierre BarbarouxFrench Air Force Academy (EOAA)French Air Force Research Centre (CReA)
 Management of Defence Organisations
Research TeamEOAA/CReABA 701 F-13661 SALON AIRTel: +33 (0)4 90 17 83 30pierre.barbaroux@inet.air.defense.gouv.fr 
Abstract
. This article presents a qualitative research from a historical case which focuses onthe ARPANET project. Re-considering the history of the ARPANET project as a vividexample of OI, the article seeks to identify the capabilities the innovative organisation shouldhold so as to develop open innovation (OI) projects. In particular, it shows that benefitingfrom openness in innovation entails that the innovative organisation is capable to achieve (atleast) the following tasks: to leverage complementarities between internal and externalsources of innovation (selection capability), to codify, capitalise and disseminate knowledgeoutcomes (knowledge management capability) and to design and align product andorganisations (design capability).
Key words
. Open innovation, Capabilities, Design, ARPANET.
1. Introduction
The Open Innovation (OI) paradigm introduced by Henry Chesbrough and his colleaguesoffers practical guidelines and theoretical principles to deal with the various dimensionsattached to the concept of openness in innovation (Chesbrough and Teece, 1996; Chesbrough,2003; Chesbrough and Appleyard, 2007). According to the OI approach, the sources of innovation include not just in-house assets and capabilities, but entail establishing connectionswith external resources which are often distributed and embodied in diverse organisations,technologies and communities.
 
2As Nieto and Santamaria (2006, p. 367) explained, innovation, “may not simplydepend on skills that firms can find and exploit in-house, but on the effectiveness with whichthey can gain access to external sources of technological knowledge and skills”. In thiscontext, the
capabilities
required for opening up innovation and benefiting from externalresources are critical. Although the literature on innovation management and the theory of thefirm have long acknowledged the role played by capabilities in providing the firm withcompetitive advantage (Wernerfelt, 1984; Barney, 1991; Teece, Pisano and Schuen, 1997;Dosi, Faillo and Marengo, 2008), there is a gap in our understanding of 
how
firms manage toreap the full benefits of openness in innovation management, i.e. How does the firm manageto identify internal and external sources of innovation, integrate them effectively, and fosterthe diffusion of innovation outcomes?To address the above question, this article adopts an exploratory methodology andpresents a qualitative research from a historical case. The case focuses on the development of the first computerised communication network by the U.S. Advanced Research ProjectAgency (ARPA) in the late sixties: ARPANET. The ARPANET project involved theparticipation of distinctive communities of scientists, R&D firms and telecommunicationcompanies under the heading of a public establishment: the Information ProcessingTechnology Office (IPTO). By building on a historical case study, this contribution seeks toinvestigate the nature and logics of the capabilities deployed by the IPTO and its partners tocreate ARPANET both as a network and as an organisation.The article begins by reviewing the literature on open approaches to innovation. Theliterature review insists on the knowledge-intensive tasks the innovative firm must be capableto realise so as to develop open innovations.
 
It continues on by presenting the researchmethodology adopted to document the history of the ARPANET project. Next, the case studyfindings are introduced. This section discriminates between two themes. The first themefocuses on how the IPTO designed a collaborative problem-solving organisational form tograpple with a number of technical problems and coordinate a variety of internal and externalresources, communities and organisations. The second theme is concerned with the roleplayed by the Network Working Group (NWG), a multidisciplinary community made up withrepresentatives of users, developers and government agencies, in codifying the core conceptsembedded in the network and facilitating their dissemination and implementation. Finally, themain implications of the findings are drawn and a typology of open innovation capabilities isintroduced and discussed.
 
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2. Conceptual background
To innovate, firms must be capable to manage a variety of resources, including money,technological artefacts, human skills, marketing knowledge and social capital (Dodgson,Gann and Salter, 2008; p. 97). According to open approaches to innovation, these resourcesare not easily accessible to the firm (Pénin, 2008). They are distributed inside and outside itsown financial, technological, organisational and cognitive boundaries. In seeking to accessthese resources, combine them and develop new products and services, the innovativeorganisation must find ways to open up its R&D facilities and integrate external sources of innovation In addition, the OI paradigm suggests that innovation outcomes are likely to becommercialised thanks to a variety of proprietary and non proprietary strategies (Chesbroughand Appleyard, 2007) which enable the firm to profit from innovation either bystrengthening/weakening appropriation regimes or by shaping industry architectures (Pisanoand Teece, 2007). Although it is not directly related to the process of invention itself (Arthur,2007), the appropriation strategy adopted by the innovative firm remains determinative for itsability to profit from its efforts during the commercialisation phase.Basically, the combination of internal and external sources of innovation has beenconstrued by Chesbrough (2003) as a strategic shift from a closed innovation model relyingon internal R&D, vertical integration and control, to an open innovation model which, in fact,can take many different organisational forms and rely on many different strategies (e.g.collaboration, strategic alliances, licensing technology, industrial clusters, innovationnetworks, user integration…). The particular form and strategy adopted by the innovative firmmerely reflect its response regarding the specific demands for innovation it has to deal with.Despite important differences among them, these forms and strategies share a common viewon the virtues attached to the concepts of collaboration, interaction and openness. In anincreasingly interconnected and turbulent economy, innovation requires that the firm is able tointeract and collaborate with others (including users, suppliers, rivals and so on) to create,absorb, combine and integrate a variety of in-sourced and out-sourced knowledge(Chesbrough and Teece, 1996). The foregoing does not lessen the need for nurturing in-houseinnovative assets, but involves that the innovating firm is
capable
to dialogue with externalpartners so as to combine (Kogut and Zander, 1992) and absorb (Cohen and Levinthal, 1990)a collection of internally and externally distributed, often fragmented, pieces of knowledge.How does the firm manage to grapple with these (highly) demanding activities?

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