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Technological, Managerial and Organizational Core Competencies:
Dynamic Innovation and Sustainable Development
Farley Simon Nobre Federal University of Parana, Brazil David Walker The University of Birmingham Business School, UK Robert Harris The University of Wolverhampton Business School, UK

Senior Editorial Director: Director of Book Publications: Editorial Director: Acquisitions Editor: Development Editor: Production Editor: Typesetters: Print Coordinator: Cover Design:

Kristin Klinger Julia Mosemann Lindsay Johnston Erika Carter Joel Gamon Sean Woznicki Adrienne Freeland and Christopher Shearer Jamie Snavely Nick Newcomer

Published in the United States of America by Business Science Reference (an imprint of IGI Global) 701 E. Chocolate Avenue Hershey PA 17033 Tel: 717-533-8845 Fax: 717-533-8661 E-mail: Web site: Copyright © 2012 by IGI Global. All rights reserved. No part of this publication may be reproduced, stored or distributed in any form or by any means, electronic or mechanical, including photocopying, without written permission from the publisher. Product or company names used in this set are for identification purposes only. Inclusion of the names of the products or companies does not indicate a claim of ownership by IGI Global of the trademark or registered trademark. Library of Congress Cataloging-in-Publication Data

Technological, managerial and organizational core competencies: dynamic innovation and sustainable development / Farley Simon Nobre, David Walker and Robert Harris, editors. p. cm. Includes bibliographical references and index. Summary: “This book investigates the impact of knowledge management, information systems, finance, organizational networks, internationalization, strategic management, marketing, entrepreneurship, and sustainability on an organization that pursues dynamic innovation and sustainable advantage”--Provided by publisher. ISBN 978-1-61350-165-8 (hardcover) -- ISBN 978-1-61350-166-5 (ebook) -- ISBN 978-1-61350-167-2 (print & perpetual access) 1. Knowledge management. 2. Organizational learning. I. Nobre, Farley Simon, 1971- II. Walker, David, 1947 Sept. 1- III. Harris, Robert, 1961 Apr. 21HD30.2.T4235 2011 658.4’038--dc23 2011027029

British Cataloguing in Publication Data A Cataloguing in Publication record for this book is available from the British Library. All work contributed to this book is new, previously-unpublished material. The views expressed in this book are those of the authors, but not necessarily of the publisher.

In memory of my Father (1938-2010), who I love and miss dearly, for his constant family support, warm heart, happiness, and brilliant mind, and to my Mother who struggled to educate me, and to Carolina, for her kindness, patience, and love. Farley S. Nobre

Editorial Advisory Board
Neil Anderson, Brunel University, UK Thomas Andersson, Jönköping University, Sweden & the Research Council, Sultanate of Oman Glauco Arbix, University of Sao Paulo, Brazil Michael Brown, Birmingham City University, UK Elias G. Carayannis, George Washington University, USA Steven Cavaleri, Central Connecticut State University, USA Erik G. Hansen, Leuphana University Lüneburg, Germany Colette Henry, University of London, UK Yuya Kajikawa, The University of Tokyo, Japan Valentina Lazzarotti, LIUC University, Italy Enrique Leff, Universidad Nacional Autónoma de México, Mexico Caroline Mothe, Université de Savoie, France David L. Rainey, Rensselaer Polytechnic Institute, USA Pedro López Sáez, Universidad Complutense de Madrid, Spain Joanne L. Scillitoe, New York Institute of Technology, USA William H. Starbuck, University of Oregon & New York University, USA Eric Viardot, EADA Business School, Spain

List of Reviewers
Oihana Valmaseda Andia, Universidad del País Vasco, Spain Glauco Arbix, University of Sao Paulo, Brazil Theodora Asimakou, London Metropolitan University, UK Andrea Bikfalvi, Universitat de Girona, Spain Adriana Bin, University of Campinas, Brazil Michael Brown, Birmingham City University, UK Luiz Caseiro, University of Sao Paulo, Brazil María Catalina Ramírez Cajiao, Universidad de los Andes, Colombia Milton de Abreu Campanario, University of Sao Paulo, Brazil Gregorio Martín de Castro, Universidad Complutense de Madrid, Spain Jason G. Caudill, Carson-Newman College, USA Steven Cavaleri, Central Connecticut State University, USA Claudio Cruz Cázares, Autonomous University of Barcelona, Spain

Alok K. Chakrabarti, Thapar University, India Javier Alejandro Carvajal Díaz, Universidad de los Andes, Colombia Pilar Fernández Ferrín, Universidad del País Vasco, Spain Diana A. Filipescu, Autonomous University of Barcelona, Spain Sergio Salles Filho, University of Campinas, Brazil Jonas Gabrielsson, Lund University, Sweden Jorge Cruz González, Universidad Complutense de Madrid, Spain Amir Grinstein, Ben-Gurion University of the Negev, Israel Jerald Hage, University of Maryland, USA Erik G. Hansen, Leuphana University Lüneburg, Germany Robert Harris, University of Wolverhampton, UK Colette Henry, University of London, UK Gretchen Jordan, Sandia National Laboratories, USA Milton de Freitas Chagas Junior, Instituto Tecnológico de Aeronáutica, Brazil Yuya Kajikawa, The University of Tokyo, Japan Jose Carlos Korelo, Federal University of Parana, Brazil Valentina Lazzarotti, LIUC University, Italy José Emilio Navas López, Universidad Complutense de Madrid, Spain Patrizia de Luca, University of Trieste, Italy Caroline Mothe, Université de Savoie, France Jonathon Mote, Southern Illinois University, USA M. Elena Aramendia Muneta, Universidad Pública de Navarra, Spain Hiroko Nakamura, The University of Tokyo, Japan Farley Simon Nobre, Federal University of Parana, Brazil José Tiberio Hernández Peñaloza, Universidad de los Andes, Colombia Diamanto Politis, Halmstad University, Sweden Andrew Pollard, University of Wolverhampton, UK, & Caparo Innovation Centre, UK Paulo Henrique Muller Prado, Federal University of Parana, Brazil David L. Rainey, Rensselaer Polytechnic Institute, USA Renata Lèbre La Rovere, Federal University of Rio de Janeiro, Brazil Pedro López Sáez, Universidad Complutense de Madrid, Spain Horst-Hendrik Scholz, The University of Birmingham, UK Javier Amores Salvadó, Universidad Complutense de Madrid, Spain Joanne L. Scillitoe, New York Institute of Technology, USA Danielle Mantovani Lucena da Silva, Federal University of Parana, Brazil Marcello Muniz da Silva, University of Sao Paulo, Brazil Gavin Smeilus, University of Wolverhampton, UK, & Caparo Innovation Centre, UK William H. Starbuck, University of Oregon & New York University, USA Shinji Suzuki, The University of Tokyo, Japan Adriana Roseli Wunsch Takahashi, Federal University of Parana, Brazil Miriam Delgado Verde, Universidad Complutense de Madrid, Spain Eric Viardot, EADA Business School, Spain Valter A. Vieira, Federal University of Parana, Brazil Belén Bande Vilela, Universidad de Santiago de Compostela, Spain David S. Walker, The University of Birmingham, UK

Table of Contents

Foreword by Alan D. Meyer and William H. Starbuck................................................................... xii Foreword by Colette Henry................................................................................................................ xv Preface. ...............................................................................................................................................xvii Acknowledgment. .......................................................................................................................... xxxvii Section 1 Sustainability and Innovation Chapter 1 Environmental Rationality: Innovation in Thinking for Sustainability................................................... 1 Enrique Leff, Universidad Nacional Autónoma de México, Mexico Chapter 2 A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation....................................................................................................................................... 18 David L. Rainey, Rensselaer Polytechnic Institute, USA Chapter 3 Product-Service Systems as Enabler for Sustainability-Oriented Innovation: The Case of Osram’s Off-Grid Lighting................................................................................................ 40 Friedrich Grosse-Dunker, Dark Horse GmbH, Germany Erik G. Hansen, Leupana University Lüneburg, Germany Chapter 4 ............................................ 55 Innovation for Sustainability in Aviation: World Challenges and Visions. Hiroko Nakamura, The University of Tokyo, Japan Yuya Kajikawa, The University of Tokyo, Japan Shinji Suzuki, The University of Tokyo, Japan Chapter 5 Diffusion and Adoption of Innovations for Sustainability..................................................................... 73 Helen E. Muga, University of Mount Union, USA Ken D. Thomas, Auburn University, USA

Chapter 6 Social Innovation, Environmental Innovation, and Their Effect on Competitive Advantage and Firm Performance......................................................................................................... 89 Javier Amores Salvadó, Universidad Complutense de Madrid, Spain José Emilio Navas López, Universidad Complutense de Madrid, Spain Gregorio Martín de Castro, Universidad Complutense de Madrid, Spain Chapter 7 Observe, Conceive, Design, Implement and Operate: Innovation for Sustainability.......................... 105 Javier Alejandro Carvajal Díaz, Universidad de los Andes, Colombia María Catalina Ramírez Cajiao, Universidad de los Andes, Colombia José Tiberio Hernández Peñaloza, Universidad de los Andes, Colombia Section 2 Organizational Networks and Innovation Chapter 8 The Integration of Independent Inventors in Open Innovation........................................................... 131 Gavin Smeilus, University of Wolverhampton, UK & Caparo Innovation Centre, UK Robert Harris, University of Wolverhampton, UK Andrew Pollard, University of Wolverhampton, UK & Caparo Innovation Centre, UK Chapter 9 An Examination of Independent Inventor Integration in Open Innovation......................................... 146 Gavin Smeilus, University of Wolverhampton, UK & Caparo Innovation Centre, UK Robert Harris, University of Wolverhampton, UK Andrew Pollard, University of Wolverhampton, UK & Caparo Innovation Centre, UK Chapter 10 Firm-Specific Factors and the Degree of Innovation Openness.......................................................... 167 Valentina Lazzarotti, Carlo Cattaneo University, Italy Raffaella Manzini, Carlo Cattaneo University, Italy Luisa Pellegrini, University of Pisa, Italy Chapter 11 Effects of Product Development Phases on Innovation Network Relationships................................. 191 Christina Öberg, Lund University, Sweden Chapter 12 Maturity in Innovation Network Management.................................................................................... 203 Caspar Van Rijnbach, TerraForum Consulting, Brazil Gustavo de Boer Endo, TerraForum Consulting, Brazil Suzana Monteiro Leonardi, TerraForum Consulting, Brazil

Chapter 13 Science Parks and their Role in the Innovation Process: A Literature Review for the Analysis of Science Parks as Catalysts of Organizational Networks.................................................. 230 Renata Lèbre La Rovere, Federal University of Rio de Janeiro, Brazil Leonardo de Jesus Melo, Federal University of Rio de Janeiro, Brazil Section 3 Entrepreneurship and Innovation Chapter 14 Entrepreneurial Learning and Innovation: Building Entrepreneurial Knowledge from Career Experience for the Creation of New Ventures..................................................................................... 245 Jonas Gabrielsson, Lund University, Sweden Diamanto Politis, Halmstad University, Sweden Chapter 15 Innovation and Corporate Reputation: Britain’s Most Admired Company Surveys 1990-2009......... 264 Michael Brown, Birmingham City University, UK Paul Turner, Anglia Ruskin University, UK Chapter 16 Natural Resource Dependency and Innovation in the GCC Countries................................................ 278 Thomas Andersson, Jönköping University, Sweden, & The Research Council, Sultanate of Oman Chapter 17 Innovation in Scenario Building: Methodological Advancements and a Foresight Study of the Automotive Industry in Brazil................................................................................................... 302 Ariane Hinça Schneider, Industry Federation of Parana, Brazil Laila Del Bem Seleme, Industry Federation of Parana, Brazil Felipe Fontes Rodrigues, Federal University of Parana, Brazil Marilia de Souza, Industry Federation of Paraná, Brazil Helio Gomes de Carvalho, Federal Technological University of Parana, Brazil Section 4 Knowledge Management and Innovation Chapter 18 Toward a More Pragmatic Knowledge Management: Toyota’s Experiences in Advancing Innovation...................................................................................................................... 327 Steven Cavaleri, Central Connecticut State University, USA Chapter 19 Knowledge and the Politics of Innovation: Insights from a R&D Company...................................... 347 Theodora Asimakou, London Metropolitan University, UK

Chapter 20 Innovation and Knowledge Management for Sustainability: Theoretical Perspectives...................... 365 René J. Jorna, Frisian Academy (KNAW), The Netherlands & University of Groningen, The Netherlands Niels R. Faber, Frisian Academy (KNAW), The Netherlands & University of Groningen, The Netherlands Chapter 21 ......................................... 384 Dynamic Capabilities and Innovation Radicalness: Review and Analysis. Jorge Cruz-González, Universidad Complutense de Madrid, Spain José Emilio Navas-López, Universidad Complutense de Madrid, Spain Pedro López-Sáez, Universidad Complutense de Madrid, Spain Miriam Delgado-Verde, Universidad Complutense de Madrid, Spain Section 5 R&D&T Management and Innovation Chapter 22 Research Profiles: Prolegomena to a New Perspective on Innovation Management.......................... 408 Gretchen Jordan, Sandia National Laboratories, USA Jonathon Mote, Southern Illinois University, USA Jerald Hage, University of Maryland, USA Chapter 23 Determinants and Consequences of R&D Strategy Selection............................................................. 428 Diana A. Filipescu, Autonomous University of Barcelona, Spain Claudio Cruz Cázares, Autonomous University of Barcelona, Spain Chapter 24 Institutional Innovation Practices in Technopoles: An Example in France......................................... 450 Anne Berthinier-Poncet, Université de Savoie, France Rachel Bocquet, Université de Savoie, France Sébastien Brion, Université de Savoie, France Caroline Mothe, Université de Savoie, France Chapter 25 Choosing Locations for Technology and Innovation Support Centers: Methodological Proposal and Brazilian Studies.................................................................................. 474 Mário Otávio Batalha, Federal University of São Carlos, Brazil Daniela Tatiane dos Santos, Federal University of São Carlos, Brazil Nelson Guedes de Alcântara, Federal University of São Carlos, Brazil Sérgio Ronaldo Granemann, University of Brasília, Brazil

Section 6 Marketing and Innovation Chapter 26 Taxonomy of Marketing Core Competencies for Innovation.............................................................. 491 Eric Viardot, EADA Business School, Spain Chapter 27 Self Regulation on Innovative Products Choice.................................................................................. 508 Paulo Henrique Muller Prado, Federal University of Parana, Brazil Danielle Mantovani Lucena da Silva, Federal University of Parana, Brazil Jose Carlos Korelo, Federal University of Parana, Brazil Chapter 28 The New Product Development Process as a Communication Web Part I: Introduction, Concepts and Spanish Context....................................................................................... 526 Pilar Fernández Ferrín, Universidad del País Vasco, Spain José Antonio Varela González, University of Santiago de Compostela, Spain Belén Bande Vilela, University of Santiago de Compostela, Spain Oihana Valmaseda Andia, Universidad del País Vasco, Spain Chapter 29 The New Product Development Process as a Communication Web Part II: Analysis of Spanish Firms................................................................................................................... 540 Pilar Fernández Ferrín, Universidad del País Vasco, Spain José Antonio Varela González, University of Santiago de Compostela, Spain Belén Bande Vilela, University of Santiago de Compostela, Spain Oihana Valmaseda Andia, Universidad del País Vasco, Spain Section 7 Finance and Innovation Chapter 30 Innovations and Financing of SMEs Part I: SME Financing and Credit Rationing: .................................................................................................................... 555 The Availability of Funds. David S. Walker, The University of Birmingham, UK Horst-Hendrik Scholz, The University of Birmingham, UK Chapter 31 Innovations and Financing of SMEs Part II: Case Study of German SMEs in 2010.......................... 574 David S. Walker, The University of Birmingham, UK Horst-Hendrik Scholz, The University of Birmingham, UK

Section 8 Internationalization and Innovation Chapter 32 The Recent Internationalization of Brazilian Companies.................................................................... 590 Glauco Arbix, University of Sao Paulo, Brazil Luiz Caseiro, University of Sao Paulo, Brazil Chapter 33 R&D Internationalization as Mechanism of Innovation in Global Enterprises: A Brazilian Case Study........................................................................................................................ 619 Simone Vasconcelos Ribeiro Galina, University of Sao Paulo, Brazil Section 9 Information Systems and Innovation Chapter 34 Tools That Drive Innovation: The Role of Information Systems in Innovative Organizations........... 640 Jason G. Caudill, Carson-Newman College, USA Chapter 35 The Roles of Cognitive Machines in Customer-Centric Organizations: Towards Innovations in ...................................................................... 653 Computational Organizational Management Networks. Farley Simon Nobre, Federal University of Parana, Brazil About the Contributors..................................................................................................................... 675 Index. .................................................................................................................................................. 688



The editors have assembled this book around the topic of innovation, which they define very broadly. As a happy result of this broad definition, the book comingles the themes of technological innovation, entrepreneurship, and organizing. Usually, scholars have discussed these themes separately, and this separation has probably concealed opportunities for fruitful interdependence among the themes. These are vital themes in economies and in societies more generally, and the themes intertwine. Technological innovation fosters the emergence of new ways of organizing. Advances in Information Technology, for instance, have transformed hierarchical, co-located business organizations into geographically distributed virtual networks. Yesterday’s organizations are turning into “dense spots in networks of contracts between sovereign individuals” (Davis & Marquis, 2005). People can break supply chains apart and distribute work to the most efficient producers wherever they are, and can assemble components wherever customers happen to be located today. The three themes of technological innovation, entrepreneurship, and organizing share a concern with the emergence of new things – new concepts, new forms, new viewpoints. Emergence remains one of the persistent mysteries of science. An irony of Darwinian evolutionary theory is that despite the title of his book, Darwin did not attempt to explain “the origin of species.” His analyses began with established populations, and examined how differential survival led to gradual adaptation within these populations. Contemporary scientists – physicists, chemists, biologists, and social scientists alike – have generally followed Darwin’s example. Scientists avoid studying or even thinking about emergent processes, consigning them to the realms of philosophy and spirituality along with other phenomena evoking faith and magic. However, innovation, entrepreneurship, and organizing are inherently emergent, so scholars who study these topics find it hard to ignore emergence and the interactions that foster emergence. The book itself emerged through an evolutionary process that broke through national and disciplinary boundaries, and drew energy from entrepreneurial editorial activities that extended around the world. The editors and reviewers subjected manuscripts to careful selection processes and the successful manuscripts reflect repeated revisions that improved their clarity and relevance. The editors’ efforts to enlist diverse authors enhance the book’s usefulness. The authors come from many countries. People in different parts of the world see different issues and participate in different discussions, so distinct research topics and findings emerge all around the globe. A book that embraces a wide range of societies and perceptions helps readers to distinguish between observations that are more general and those that are more idiosyncratic. New technologies and organizational forms develop differently, and with experimental adventures over time, so their characteristics are disorderly. Efforts to understand very new technologies and organizational forms have to confront both the heterogeneity of the systems themselves and the researchers’ lack of effective filters for distinguishing important stimuli.


Observations that are more general are possible because some social trends have been widespread. For instance, throughout the 20th century, the so-called developed countries evolved from agriculture and manufacture toward services, and the latter part of the 20th century brought mounting emphasis on services requiring higher education. A large amount of global dispersion of expert services has been occurring. Companies have not only placed call centers for technical support around the world, they have located research laboratories and engineering design centers around the world. Knowledge-based activities have been at least as mobile as physical work. In the short run, this geographic dispersion increases the relative advantage of social skills over technical expertise. In the longer run, such dispersion undercuts the competitive advantage of knowledge-based activities by making expertise less esoteric. In addition to intermingling technological innovation, entrepreneurship, and organizing, Professors Nobre, Walker and Harris have introduced another more contemporary theme – sustainability. In the book’s Preface, Nobre makes an important distinction between “competitive advantage” and “sustainable development”. “Competitive advantage” is a concept based in economic theories about competitive markets; it stresses the value to individual business firms of distinguishing themselves from their competitors by offering valuable and unusual products or services. However, economists and business scholars have defined competitive advantages solely in terms of the benefits to individual business firms and without concern for effects on consumers, communities, nations, societies, or humanity in general. Nobre introduces the term “sustainable development” to describe a kind of business development that maintains a balance between economic and societal goals and between short-run and long-run goals. This is a timely distinction, since the modern global corporation, a brilliant social innovation that extended benefits of commerce around the globe, has become the world’s dominant social institution – and is helping to drive every living system on the earth into decline. We live in a time when humans are at the very peak of our technological power. We are making changes in the earth that will echo through the centuries. Sustainable development would seek to benefit not only individual firms but also their societies and the future of humanity. Alan D. Meyer University of Oregon, USA William H. Starbuck University of Oregon, USA

Davis, G. F., & Marquis, C. (2005). Prospects for organization theory in the early 21st century: institutional fields and mechanisms. Organization Science, 16(4), 332–343.

Alan Meyer is the Charles H. Lundquist Professor of Entrepreneurial Management at the University of Oregon. Using organizational theory and sociology as theoretical frames, he studies industry emergence, corporate venturing, and technology entrepreneurship. He is a field researcher who triangulates between archival data and primary data gathered through interviews and naturalistic observation. Alan has been a continuous National Science Foundation grantee since 1999. He is a Fellow of

forecasting. perception. he served as the founding chair of the Managerial and Organizational Cognition Division. His latest book. and he chaired the Organization and Management Theory Division. He was also Senior Research Fellow at the International Institute of Management in Berlin.xiv the Academy of Management. sociology. computer programming. business strategy. William H. Cornell University. decision making. organizational design. He has published over 150 articles on accounting. Norway. and was President of the Academy of Management. Johns Hopkins University. computer simulation. human-computer interaction. New Zealand. the Academy of Management Journal. or management at Purdue University. and Strategic Management Journal. reflects on lessons from his own academic journey and on the challenges associated with management and social science research. scientific methods. . Alan has served as Consulting Editor for AMJ and as Associate Editor-in-Chief for Organization Science. Starbuck is Professor-in-Residence at University of Oregon and professor emeritus at New York University. He has held faculty positions in economics. and on the editorial boards of Administrative Science Quarterly. and the United States. as well as visiting positions in England. Sweden. bargaining. and social revolutions. chaired the screening committee for Fulbright awards in business management. and New York University. organizational growth and development. The Production of Knowledge. He has also authored two books and edited 17 books. He edited Administrative Science Quarterly. directed the doctoral program in business administration at New York University. France. learning. University of Wisconsin-Milwaukee.

Information Systems and internationalization across a range of geographical contexts and organizational settings. Colette Henry University of London. there remains a gap in the literature with regard to the study of innovation in the context of organizational competence building and the identification of key creative areas that can create and drive sustainable innovation processes. 2008. 1997). the editors combine empirically and theoretically based research contributions from leading commentators around the globe. Strategically organized in nine sections. 2002. fuelling productivity and growth. R&D managers and those working within the general innovation support system. sustainability. transform or even disappear (Christensen. UK . It is innovation that essentially underpins successful entrepreneurship. However. as discussed in Foss and Henry. particularly as it relates to dynamic organizational processes. While earlier literatures depict innovation as ‘creative destruction’ that erodes existing markets and industries (Schumpeter. networks. its link to human resource management and how innovation relates to organizational structures (Scott and Bruce. reminding us that innovation is dynamic in nature and highly creative in its origins. 2010). more recent commentators refer to innovation in the form of ‘disruptive. the unique contribution of the book undoubtedly lies in its identification of key creative and typically untapped areas within an organization that can build competencies towards dynamic innovation and sustainable development. The contributions will also be of interest to innovation educators. that the topic of innovation continues to attract increased attention from academics and politicians alike. this book enhances current understanding of the innovation process and platforms its importance as a driver of 21st century entrepreneurship.xv Foreword It is now widely acknowledged that innovation drives the knowledge economy. radical technologies’ that allow entire markets and industries to emerge. Research has also been growing with regard to innovation in the workplace. marketing. R&D. However. The diversity of authors providing insights on innovation in different economies highlights the strong international dimension of the book. Essentially. et el. Managerial and Organizational Core Competencies. Walker and Harris discuss knowledge management. In this book the editors have brought together a range of important topics under the heading of Technological. West. 1934). The book will be of value to those studying and researching the broad field of innovation. Nobre. It is not surprising therefore. This timely edited text offers a multidisciplinary perspective on innovation. creates jobs and contributes to the sustainable development of economies around the globe.

PhD. Manufactures & Commerce (RSA). A. edited collections and articles in a range of leading academic journals. Academy of Management. Schumpeter. A. paper presented at the Gender Work and Organization (GWO) Conference. & Bruce.. Her publications include books. A. C. Boston. She also holds visiting professorships at the Universities of Tromsø (Norway) and Birmingham City (UK). Sparkling fountains or stagnant ponds? An integrative model of innovation implementation groups. Colette is also the former President of the Institute for Small Business & Entrepreneurship (ISBE). Colette is also the editor of the International Journal of Gender & Entrepreneurship (IJGE). She has been published widely on the topics of entrepreneurship education & training. University of London. L. J. Keele University. MA: Harvard University Press. ‘The innovator’s dilemma: When new technologies cause great firms to fail. 37(3). Colette Henry (BA. The theory of economic development. 51 (p. MBA. and was recently awarded a fellowship in recognition of her work. Applied Psychology: An International Review. (2008). (1997).xvi REFERENCES Christensen. (1934). & Henry. Her more recent research focuses on entrepreneurship education and women in veterinary medicine. FRSA. Cambridge. A Fellow of the Royal Society for the encouragement of Arts. R. MA: Harvard Business School Press. 3). (2002). 20-23 June. ‘Determinants of innovative behavior: A path model of individual innovation in the workplace . programme evaluation. 580–607. G. Scott.. FISBE) is the Norbrook Professor of Business & Enterprise at the Royal Veterinary College (RVC). ‘Gender and innovation: Exploring the hegemonic voice’. . (2010). women’s entrepreneurship and the creative industries. Foss. C. S. West. M.

xvii Preface THE ROLE OF ORGANIZATIONAL CREATIVE AREAS (OCA) IN DYNAMIC INNOVATION: FROM COMPETITIVE ADVANTAGE OF INDIVIDUAL RATIONAL ECONOMICS TOWARDS DEVELOPMENT OF COLLECTIVE SUSTAINABILITY Genesis and Overview: The Organization as Mediator between Entrepreneurs and Innovations This book represents the culmination of an international project to compile multi and inter-disciplinary research that most contributes to innovation. and the Renaissance supported development of the Industrial Revolution in Europe. 1987).000 B. They matured after the Industrial Revolution began in Europe in the 18th century and later spread to the United States of America in the 19th century. whereas industrial development denotes a more predictable sequence of planned modernization (Richter. exploration and science. 2001). Evolution characterizes processes of organizing in ancient and the Middle Ages civilizations. Overseas expansion of Europe between the 15th and 18th centuries strengthened the confrontation and integration of cultures on different continents and gave birth to Mercantilism. The gradual transition from a non-industrial to an industrial society has marked the frontiers between periods of evolution and industrial development of organizations. The Renaissance brought a new focus on reason. the term evolution assumes that changes in society are relatively unpredictable. social. economies and societies were essentially static. This preface presents a brief overview of developments concerning the organization and innovation. later extending to the tribe. there was increasing need and call for practices that could bring ethics to individual liberty and to markets. giving genesis to the Renaissance (Delouche. . The organization mediates between entrepreneurs and innovations. After the fall of the Roman Empire and the emergence of Feudalism in Europe.C). and political values involved unilateral decisions by central authorities. 1982). together with religious. Crises in Europe during the 14th and 16th centuries brought a revolution in thinking and culture.C. An increasing record of writings about organizing characterized the Middle Ages. Additionally. These conditions were unfavorable for developing an industrialized society. Many modern principles of organizing emerged during ancient civilizations (5. discovery. Political philosophers . Organizations have gradually grown in importance throughout human history. Here. science was only a philosophical rather than a technological concern. new principles of organizing evolved as solutions to economic and political crises. and finally reaching formalized political units (Wren. Globalization and a worldwide economy evoked new technologies and more complex principles of organizing. The book’s unifying constructs are innovation and the organization. It is probable that organizing processes began in the family. economic and political strife. management practices were still largely antihuman. Nevertheless.500 A.

Wals. Organization theorists have advanced in knowledge through the 20th century (Grusky & Miller. 1990. economic. .xviii began to disseminate new ideas about equality. Pugh. The transition created new social. only as synonymous with economic growth is to overlook its broad significance for humanity. and became most associated with his economic development and innovation theory.i This Marxist process has been called Creative Destruction (Reinert & Reinert. are core elements that can disturb the equilibrium of any social-economic system and that accelerate economic growth (Schumpeter. 1995). destroyed environmental resources and eroded the values and social conditions of humanity (Nobre. Later. giving origin to new kinds of organizations. individualism. 2000. He said destruction. 2004. innovation and technology can also have negative results. Marx and Engels supported the idea that capitalism inevitably produces internal tensions that lead to its collapse or destruction. 2010). 2009). historians. Principles of organization and management had to be improved and extended to a new and increasingly dynamic environment. Therefore. 2006: Chapter 4). 1939). 1965. and especially technological innovation. to think about innovation. These have. energy and information. 2006. Marxism was the most revolutionary political ideology. Tidd. 2009. Wiarda. political economists and sociologists proposed opposing ideologies and models of political. The transition from pre to post-industrial organizations was gradual. In his Wealth of Nations. 1997). economic and social thought. 2000. Socialism and Democracy (1942/1950). In the 18th century. the concept of Creative Destruction was revisited and popularized by Joseph Schumpeter (McCraw. March. especially in electricity. 2009: 236-289. made possible large combinations of humans and machines. Continuous advances in science and technology. 2007). 1996). Lourenço & Fagundes. Despite being sympathetic to Marxian Doctrines. Theories of organizations have developed systematically since the beginning of the 20th century. However. Education and innovation stand out as processes that should be changing human behavior to develop a sustainable future (Dunne & Martin. With advances in capitalism and liberal economics. 2009). March & Simon. Bessant & Pavitt. Perhaps. transformation. society has entered the 21st century with the strongest desires for capital accumulation ever seen in history. 2006. 2005). reason. particularly from his books The theory of economic development: An inquiry into profits. and innovations. credit. and a political and economic model of maximization of production and consumption is generating cultural alienation and intense materialism.ii Innovation and technology affect political power (Kipnis. technological and political conditions and brought new societal challenges. 1993) and by the hegemonic power of 20th century neo-Corporatism (Hagger. and renewal of a social-economic system are rooted in entrepreneurs’ decisions and actions that introduce innovations. new economic theories challenged Mercantilism and the controlling power of the landed aristocracy and initiated the Industrial Revolution. and the business cycle (1912/1934) and Capitalism. Schumpeter placed entrepreneurship and innovation at the center of his economic development theory. 1998. While innovation and technology can benefit humans with artifacts that raise living standards (Easterlin. philosophers. justice. 1981. interest. governance by consent of the people. and decentralized of political power. 1992) and power-holders of innovation and technology can control resources and decisions (Suarez-Villa. Tobias & Walker. Adam Smith (1723-1790) established the classical school of liberal economics and he proposed that only markets and competition should be the regulators of economic activity. in turn. Johnson. capital. Simon. entrepreneurs. 1997. and consumerism characterize contemporary society. 1958. Egocentrism. Scarbrough & Corbett. Suarez-Villa. the rights of citizens. Scott. Nobre. Strongly influenced by the Corporation (Drucker. Tidd. These desires have accelerated environmental degradation and the destruction of natural resources (Leff.

2003. clusters. and nations and it is a key source of customer benefits and sustainable development. The uniqueness of this book lies in the participants’ efforts to identify Organizations’ Creative Areas (OCA) that can provide core competencies for the organization in pursuit of dynamic innovation and sustainable development. The book contemplates economic. It speaks to professionals and researchers who want to improve their understanding of dynamic innovation and sustainable development. These new models will have to reconcile environmental. social and environmental wealth through sustainable development. At the firm and industry levels of analysis. Development and Technology) Management in (for) Innovation? What are the roles (and contributions) of Marketing in (for) Innovation? What are the roles (and contributions) of Finance in (for) Innovation? What are the roles (and contributions) of Internationalization in (for) Innovation? What are the roles (and contributions) of Information Systems in (for) Innovation? Key Concepts of the Book In this book. Therefore. this book is about innovation in firms. One day. political. innovation can provide humanity with economic. social. 2006). processes. innovation involves processes. Tobias & Walker. organizational elements (or resourcesiii). Objectives: What the Book is About Chapters in this book address many recent theories and practices on innovation. Nidumolu. . technologies and products. social and economic demands (Gladwin. Chapters contribute answers to questions on: • • • • • • • • • What are the roles (and contributions) of Sustainability in (for) Innovation? What are the roles (and contributions) of Organizational Networks in (for) Innovation? What are the roles (and contributions) of Entrepreneurship in (for) Innovation? What are the roles (and contributions) of Knowledge Management in (for) Innovation? What are the roles (and contributions) of R&D&T (Research. 2010:391). will have to create dynamic innovation and competitive advantages without disrupting the balance needed for survival of the human species (Nobre. At the collective and societal levels of analysis. especially entrepreneurs. Korten. More specifically. nations and executives may be able to perceive and act based on models grounded in systemic sustainability. industries. innovation is a dynamic system and it is contingent upon a set of core competencies that couple to each other. innovation can provide organizations with strengths relative to other firms. Kennelly & Krause.the “three pillars” of sustainability defined by The United Nations General Assembly during the World Summit Outcome. organizations. changing of even one competence can affect the organization’s ability to innovate. nations and society. In this perspective. 1995. educational and environmental facets of innovation through technological. in 2005. structures. goods and services. Organizations and their participants. Rainey. 2009. and Organizational Abilities (OA)iv that support the production and transformation of knowledge into new knowledge. managerial and organizational perspectives. 2006) . Prahalad & Rangaswami.xix and innovation offers a key to sustainability by contributing new alternatives (Hart & Milstein.

whereas truly sustainable development occupies the opposite extreme. Improvements in strategic resources as well as in core competencies can feed back and provide improvements in the Organization’s Creative Areas (OCA) and Organizational Abilities (OA). and secure manner” (Gladwin.). In this Figure.). Core competencies are valuable and unique from a customer’s point of view. consequently. Internationalization. 1998).v Most chapters of this book fall between these extremes. adapted from (Nobre & Walker. Finance (Fin). Nobre & Walker. and also inimitable and non-substitutable from a competitor’s point of view (Prahalad & Hamel. learning and knowledge management. Internationalization (Int. and. equitable. R&D&T (Research. creation. that concept makes assumptions about economic supremacy that separate humanity from ecological and social developments. but also the whole society and the future of humanity through sustainability. Marketing (Mar. Therefore. the Organization’s Creative Areas [OCA-(1…9)] include Sustainability (Sus. Entrepreneurship (Ent. the organization evolves and improves its own abilities of cognition. consequently. Knowledge Management (KM). Organizational Networks (ON). processing. autonomy. Figure 2. 1995). distribution and employment of resources. exchange. 1996). Kennelly & Krause. connected. Hitt & Bettis. the organization interacts with the environment through its Organization’s Creative Areas (OCA) and Organizational Abilities (OA) for acquisition. 2011). The term dynamic refers to capacity of the organization to create new competencies and to adapt to the changing business environment (Teece. this Preface avoids the term competitive advantage and adopts a more fruitful perspective of sustainable development–“the process of achieving human development … in an inclusive. Although some chapters in this book support this economic concept of competitive advantage.). renewal. Knowledge Management. Development and Technology) Management. Organizational Networks. and Information Systems. Finance. This model’s functional processes can be summarized as follows: • First. intelligence.). develop the organization’s core competencies. Entrepreneurship. 1990). storage. 2010. and Information Systems (IS). The organization can sustain competitive advantage by developing strategic resources and core competencies (Lei. 2011). prudent. the Organization’s Creative Areas (OCA) and Organizational Abilities (OA) manage strategic resources. Marketing. The concept of competitive advantage refers both to the position that a firm occupies in its competitive environment and the firm’s ability to create superior value for its customers and superior profits for itself (Porter. Tobias & Walker. changes in ODISD activate the • • . Second. The Dynamic Model Figure 1 portrays innovation as interacting with the Organization’s Creative Areas (OCA). 2007). By these processes. portrays the organization in pursuit of dynamic innovation and sustainable development. An inclusive perspective sees traditional competitive advantage as occupying one extreme. internal and external stimuli can affect the Organization’s Dynamic Innovation and Sustainable Development (ODISD).xx Core competencies develop within Organizations’ Creative Areas (OCA) that include Sustainability. Sustainable development must benefit not only the organization and its customers. Core competencies can represent collective knowledge that develops through learning and that provide strengths relative to other organizations (Nobre. Third. Development and Technology (R&D&T) Management. Research. and.

Processes (1) to (3) repeat continuously to reduce environmental uncertainty and to improve the Organization’s Creative Areas (OCA). Organizational Abilities (OA).xxi Figure 1. . Dynamic Innovation Model Organization’s Creative Areas (OCA) and Organizational Abilities (OA). strategic resources. Organization’s Creative Areas (OCA) Figure 2. thus starting new cycles of sustainable development. core competencies and the Organization’s Dynamic Innovation and Sustainable Development (ODISD).

and Information Systems. depends on new economic. Sustainable development. R&D&T (Research. Finance. The technological. Sociology. 2010) that demand new processes of organizing. Tobias & Walker. Courses on: Innovation. managerial and organizational background addressed in this book can be applied in different levels of academic and industrial research. the editors are suggesting some schools and courses where the book can be useful. However. Philosophy. Marketing. Lectures of undergraduate and post-graduate courses. including: • • • Research programs of undergraduate and post-graduate levels. Participants in this book hope to provide readers with very exciting insights about how innovation can create a better future. Knowledge Management. Organizations of today confront increasing levels of environmental complexity and uncertainty (Nobre. Strategic Management. challenges readers to explore new frontiers between innovation and Sustainability. Organizational Networks. Information Systems. Knowledge Management. The book offers readers a multidisciplinary perspective on dynamic innovation. the world is changing. Marketing. Organizational Theory. Internationalization. Organization Theory. . Organizational Learning. the Editors have selected and assembled chapters that illustrate multidisciplinary theoretical perspectives and empiric results on innovation and the roles of Sustainability. new processes of organizing are continuously emerging. Information Systems. The subject of dynamic innovation raises new challenges for researchers. and methods that proved successful in the past may not provide the right tools for addressing problems of the future. at the firm. Book Structure and Chapters Synopsis The Editors’ goal is to foster cross-pollination among researchers. and Engineering. Organizational Networks. Organizational Networks. Education. managerial and organizational perspectives that identify core competencies of future organizations. Due to the multidisciplinary scope of this book. Management. This book contributes by presenting theoretical and empirical findings for mastering. Development and Technology) Management. Marketing. Managerial and Technological Innovation. Organizational. analyzing and integrating technological. Finance. industry. Knowledge Management.xxii Target Audience This book is most relevant to researchers. R&D&T (Research. Entrepreneurship. nation and societal levels. Technology. These are: • • Schools of: Business Administration. Entrepreneurship. students and executives interested in future organizations that pursue dynamic innovation and sustainable development. social and environmental analyses. and most importantly. To this aim. Internationalization. Industrial and business research projects of firms of any size. Economics. Social Sciences. Entrepreneurship. Finance. Development and Technology) Management. managerial and technological principles of the past and present have contributed successful applications in many areas of organizations and society. and Sustainability. Organizational. R&D and Technology Management.

The problem to be approached is that of understanding the unsustainability of the established. Humanity needs to think about the possibilities of deconstructing this dominant rationality. strategies. Leff proposes perspectives and concepts for a model of environmental rationality for the construction of a sustainable society. . technological. The book’s structure involves these major sections: • • • • • • • • • Section 1: Sustainability and Innovation Section 2: Organizational Networks and Innovation Section 3: Entrepreneurship and Innovation Section 4: Knowledge Management and Innovation Section 5: R&D&T Management and Innovation Section 6: Marketing and Innovation Section 7: Finance and Innovation Section 8: Internationalization and Innovation Section 9: Information Systems and Innovation Section 1 on Sustainability and Innovation Subsumes Seven Chapters In Chapter 1. constructing and putting into social action a new social order: a new agreement with nature based on environmental rationality”. and they go through a case study on off-grid lighting in Kenya and analyze the sustainability effects on the product and Product-Service System (PSS) level. He argues that “rationality of modernity has limited capacities to reestablish the ecological balance of the planet. “Environmental Rationality: Innovation in Thinking for Sustainability”. a politics of difference and an ethic of otherness. Rainey presents the foundations of a conceptual model for connecting the key elements necessary for corporations to adopt sustainability in the context of the global economy and strategic innovation. Große-Dunker and Hansen start by presenting an exploratory research strategy to further investigate the links between Sustainability-Oriented Innovation (SOI) and Product-Service System (PSS). the chapter focuses on how global corporations employ strategic innovations in response to the driving forces in the global economy and how they can improve their level of management sophistication in a turbulent business environment”. Leff concludes that innovation in thinking is a need. actions. economic. “A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation”. In Chapter 3.xxiii Internationalization. and Information Systems in the organization that pursues dynamic innovation and sustainable development. if not a must. while environmental rationality opens new perspectives to sustainability: the construction of a new economic paradigm based on neguentropic productivity. In this prominent treatise. and management constructs. Große-Dunker and Hansen emphasize the role of innovation for addressing sustainability as well as the role of sustainability as a source for innovation. He explains “while sustainability involves many perspectives. for sustainability. dominant and hegemonic ways of constructing the world we live in: that of economic. “Product-Service Systems as Enabler for Sustainability-Oriented Innovation: The Case of Osram’s Off-Grid Lighting”. environmental and ethical forces. One of the Rainey’s conclusions is that the model provides a framework for creating win-win outcomes that are balanced in terms of the social. scientific and technological rationality which organizes the actual world order. In Chapter 2. whereas they propose that Product-Service System (PSS) represents an important approach for both perspectives. political.

Life Cycle Cost Analysis (LCCA). Environmental Innovation. Muga and Thomas primarily investigate theory and concepts of sustainability and why they are important to innovation and vice-versa. The authors explain “the integrated sustainability methods of LCA and LCCA enable a business to assess alternative products or processes at the planning and design stages. they suggest future research directions. The authors start their chapter by reviewing curricula and learning activities in some world-class universities in order to understand the contribution of state-of-the-art education models for the creation of competences for innovation. Salvadó. Carvajal Díaz.xxiv In Chapter 4. allowing the company to choose from innovative strategies (based on pollution prevention) or more conservative strategies (emissions control). and they had the aim of discussing technological innovation. and economic measures that could contribute to mitigate the global aviation impact to climate change. Design. and Hernández Peñaloza present a learning model that can be applied by academics and professionals in the development of innovations. In Chapter 5. Design. they introduce the Observe. Moreover. “Observe. Conceive. In Chapter 7. They discuss in detail some key reductionist approaches to assessing sustainability such as Life Cycle Assessment (LCA). Implement and Operate: Innovation for Sustainability”. Ramírez Cajiao. Nakamura. They argue that the inclusion of environmental criteria into business activities can promote the creation of new core competencies. such as the adoption of low-carbon technologies. and Castro provide special emphasis on the relationship between businesses and natural environment. the authors analyze the existence of a direct relationship between Environmental Innovation and Firm Performance and the existence of an indirect relationship between the two. 3) and they conclude that Environmental Innovation is related to business performance. Conceive. “Diffusion and Adoption of Innovations for Sustainability”. Kajikawa. and North America. and mental models of individuals in the diffusion and adoption of innovations. Conceive. Finally. Afterwards. offering a creative and innovative perspective to the organization that can lead to the achievement of competitive advantages. In such a . and sustainability indicators and they also apply these approaches to an engineering infrastructure scenario. The chapter also contributes by explaining the roles of management. “Innovation for Sustainability in Aviation: World Challenges and Visions”. In Chapter 6. Navas-López. since it directly influence the choice of the type of environmental strategy. These methods may also be used during the production stages to assess whether a business needs to use a different raw material to make their products”. Among the chapter’s main findings: 1) the authors explain the nature of Environmental Innovation through the Social Innovation perspective and therefore they contribute by considering some key aspects of administrative and technological innovations that have not been taken into account in the academic literature. and Their Effect on Competitive Advantage and Firm Performance”. Europe. which highlights the mediating role of the kind of competitive advantage generated. The talks in the international meetings were led by experts and researchers from Japan. policies. Implement and Operate (OCDIO) model and explain that sustainability comes from following the OCDIO cycle continuously. they explain that the practical implications of this previous relation are of great importance. The model draws upon the engineering education cycle of Observe. In this investigation. Implement and Operate (OCDIO). social network analysis. 2) they analyze the different types of environmental innovations in order to understand and describe the strategic options in the environmental field. which makes it very difficult to suppress the impact of aviation on climate change. and Suzuki collect and analyze the latest experts’ talks from four international meetings on Aviation and the Environment in the period between September 2009 and May 2010. “Social Innovation. Design. The authors explain that only 1% of the world population has flown yet and that there will be a great increasing rate of this percentage in the next years.

Based on a literature review of Resource Dependence Theory (RDT) and four case studies. Findings include: (i) the specific needs and resource dependence by the innovative firm during different PDPs affect the status of the firm’s INRs. Harris. product development has frequently been associated with four distinct phases: introduction. “The Integration of Independent Inventors in Open Innovation”. sector of activity. driven by current academic literature. The authors present a series of preliminary Critical Success Factors. In Chapter 9. The chapter also provides the necessary introduction and background to the understanding of the next chapter. Smeilus. the authors use the OCDIO framework to analyze innovations in Colombia as well as case studies in the Universidad de los Andes. with the intention that adherence to such factors may have a positive influence on the effectiveness of open innovation. R&D intensity. growth. to whether and how INRs are affected by these Product Development Phases (PDPs)”. that are intended to contribute to independent inventors becoming more successful suppliers of new product ideas to businesses. these are not the only two possible models. Manzini. the authors argue that the OCDIO model contributes for the sustainability of the innovation. social and environmental sustainability. (ii) during product development. By means of a survey conducted among Italian manufacturing companies. company organization) and the specific open innovation model adopted by a company. Lazzarotti. and Pollard take the preliminary critical success factors proposed in the previous chapter and utilize them as priori constructs as evidence is sought through case study for their presence or nonpresence in a practical context. a source of innovative new products. within Open Innovation has proven challenging”. whereas. and Pollard explain that “whilst current academic literature points to the growing importance of Open Innovation as a means of companies capturing new products from sources other than internal R&D facilities. this chapter sheds light on the many different ways in which companies open their innovation processes. A case study on the Caparo RightFuel. Section 2 on Organizational Networks and Innovation Subsumes Six Chapters In Chapter 8. In Chapter 11. “Firm-Specific Factors and the Degree of Innovation Openness”. whereas new relationships are built and old ones are finished. the OCDIO model as well as other leaning cycles such as Problem-Based Learning (PBL) can be followed to reach innovations which attend such sustainability triple-constraints. While these phases have been related to and used for the study of product life cycle. Four main models emerge from the empirical study and they are investigated in depth in order to understand the relationship between a set of firm-specific factors (such as size. the integration of independent inventors. Öberg starts by explaining that “in the research literature. market strategies and competition. an automotive device originating from an independent inventor and commercialized through an Open Innovation model. but not specifically for the creation of solutions and promotion of innovations that subsume the three pillars of economic. and Pellegrini investigate the topic of how open innovation is actually implemented by companies. Smeilus. forms the basis of the chapter. the INRs become increasingly complex where network parties become negative resources . “An Examination of Independent Inventor Integration in Open Innovation”. and decline. less or no attention has been given to the subject of Innovation Network Relationships (INRs). according to a conceptual approach in which open and closed models of innovation represent the two extremes of a continuum of different openness degrees. Nevertheless. Harris. Furthermore. this chapter contributes by discussing how various INRs are affected by PDPs of an innovative firm. maturity. In Chapter 10. and more specifically.xxv proposal. “Effects of Product Development Phases on Innovation Network Relationships”.

xxvi of the innovative firm through increased uncertainty being introduced into previous relationships. They start by reviewing the concept of network management and by explaining the principal attributes that impact the formation and optimization of innovation networks. based on the network’s objectives. Gabrielsson and Politis explain that the relation between entrepreneurial learning and innovation has been poorly understood. In this study. They concluded that. they provide novel insights into how and why entrepreneurs differ in their experientially acquired abilities in different phases of the new venture creation process. Section 3 on Entrepreneurship and Innovation Subsumes Four Chapters In Chapter 14. but various parties’ relationships with one another need to be considered. they interviewed executives at 24 leading companies known as innovators in their industry. The chapter is based on literature review of scientific papers and theses on SPs and their contributions to innovation. although some practices partly depend on the company’s industry or Research. Brown and Turner explain that The Britain’s Most Admired Company surveys into cor- . Findings by the authors showed that some common good practices exist among companies when it comes to open innovation management. In Chapter 13. relational. Development and Innovation (R&D&I) investment levels. “Science Parks and their Role in the Innovation Process: A Literature Review for the Analysis of Science Parks as Catalysts of Organizational Networks”. which are included in indexed databases. In particular. especially with respect to how entrepreneurs build up their capability to create new ventures. and (ii) cope with liabilities of newness. de Boer Endo. The authors consider that ONs are elements of knowledge production and can contribute to the development of core competencies to pursue dynamic innovation and competitive advantage. Preliminary analysis of the literature shows that SPs have been mostly studied as part of innovation systems. based on four dimensions: strategic. “Innovation and Corporate Reputation: Britain’s Most Admired Company surveys 1990-2009”. the authors employ arguments from theories of experiential learning to examine the extent to which entrepreneurs’ prior career experience is associated with entrepreneurial knowledge that can be productively used in the new venture creation process. “Entrepreneurial Learning and Innovation: Building Entrepreneurial Knowledge from Career Experience for the Creation of New Ventures”. La Rovere and Melo investigate the contributions of Science Parks (SPs) to innovation. and that less attention has been given to the role of ONs and SPs in the processes of technological learning and innovation. support and organization. Van Rijnbach. the combination of the characteristics of the network’s participants as well as the network’s organizational format to attract and maintain the partnership. They relate entrepreneurial knowledge to two distinct learning outcomes: the ability to (i) recognize new venture opportunities. In Chapter 12. To reach the chapter’s aim. many practices are common and their use depends on the company’s level of maturity regarding open innovation networks. the authors discuss whether the literature on innovation and SPs considers the fact that SPs can be catalysts of Organizational Networks (ONs). Based on analysis of data from 291 Swedish entrepreneurs. In this chapter. and Leonardi aim to contribute to a better understanding of how innovation networks work and how to develop them. the authors present the results of a benchmark study undertaken in Brazil. and (iii) the development of INRs cannot be captured on a dyadic level. the United States of America and Europe between March and June 2009. “Maturity in Innovation Network Management”. In Chapter 15. As a result of their investigation. the authors derive and propose a maturity model for open innovation.

stakeholders and entrepreneurs with a clearer managerial view of the industry’s future and also suggested that the proposed methodology can be applied to other industries in future studies. document analysis. Results of the study provided the players. The chapter’s core argument is that in a knowledge-based company. rather than a curse. Information and Communication Technology (ICT).g. one of these is a company’s capacity to innovate. where a company has a reputation for innovation and is able to manage other characteristics. and specifically. and broadly in the economy. she examines how knowledge in organizations affects the creation of new knowledge and what the implications are for innovation management. e. “Innovation in Scenario Building: Methodological Advancements and a Foresight Study of the Automotive Industry in Brazil”. which plays a major role in the local and national economy. The chapter also contributes by identifying key attributes of companies that combine a reputation for innovation. To support such an argument. on the grounds of which struggles are inevitably enacted over its control.. Whereas strengths are recorded in some respects. In Chapter 19. direct observation. and de Carvalho extend and apply a prospective scenario building methodology over a long-range forecasting (up to 2020) for the analysis of market and innovation potentials of the automotive industry of the Metropolitan Region of Curitiba (MRC). “Knowledge and the Politics of Innovation: Insights from a R&D Company”. Schneider. They also explain that. knowledge. education and some conditions for start-up activity. nor does a reputation for innovation lead to business success. Andersson’s chapter synthesizes new evidence on the conditions for innovation in these economies. The sources of data in the study include literature review. products or services through effective implementation”. Andersson explains that. However. whereas the MRC is located in the state of Paraná in southern Brazil and is home to an automotive sector. “Toward a More Pragmatic Knowledge Management: Toyota’s Experiences in Advancing Innovation”. In Chapter 17. becomes a precious resource. The chapter ends with recommendations what further action is required to enable better conditions for innovation both in the natural resource sector itself. semi-structured interviews and two rounds of questionnaires. Section 4 on Knowledge Management and Innovation Subsumes Four Chapters In Chapter 18. and then the requirements for that”. including through examination of innovative performances at firm level. with a good corporate reputation overall and business success. the chapter . “surveys between 1990 and 2009 show that a good reputation for innovation does not guarantee a good overall reputation. challenges remain in others. “Natural Resource Dependency and Innovation in the GCC Countries”. “whether the current strong performance displayed by the Gulf Cooperation Council (GCC) countries proves sustainable for the long term will cast new light on the extent to which natural resource abundance can be turned into a blessing. In Chapter 16. Central to this conclusion is converting innovation into enhanced processes. de Souza.xxvii porate reputation includes nine characteristics. collected through the first Community Innovation Survey (CIS) carried out in the GCC countries. Seleme. Asimakou discusses the relationship between knowledge management and innovation. there is a better chance that this company will develop its innovation capability into long-term competitive advantage and profitability. including with regard to governance. where competition is assessed at the edge of rare expertise and the development of innovations. which is always interwoven with power. Rodrigues. The chapter concludes by explaining why the pragmatic approach delivers superior performance at lower cost than conventional knowledge management methods. Cavaleri contributes by examining how pragmatic principles used by Toyota can achieve superior innovation results.

xxviii discusses two innovation mechanisms in two business groups of a major oil company. The authors conclude the chapter by introducing concepts on Knowledge of Sustainability (KoS) and Sustainability of Knowledge (SoK). “Innovation and Knowledge Management for Sustainability: Theoretical Perspectives”. they also suggest that external knowledge acquisition and internal knowledge combination are key components of dynamic capabilities. “Dynamic Capabilities and Innovation Radicalness: Review and Analysis”. Navas-López. With economic profit as its driving force. By deepening on this exploratory learning argument. CruzGonzález. The authors start by reviewing the many literature facets and concepts of dynamic capabilities. innovation and sustainability. From the results. documentary analysis) and a sample of 41 employees that represent the groups participating in the innovation game (manager. Section 5 on R&D&T (Research. Mote. applied. namely the existence of a sustainable future. Jordan. it is about knowledge creation. they argue that dynamic capabilities (or second order capabilities) arise from the firm’s orientation or ability for knowledge exploration that can result in the creation of new organizational capabilities (first order capabilities). group and organizational level impacted upon the innovation processes to the extent that the latter became passive technical solutions. manufacturing. feeding the question whether innovation really can be applied to ecological and social systems. Jorna and Faber explain that “innovation is a special case of knowledge management. the authors offer preliminary discussions for a new perspective about alternative styles of management for different types of research. (iii) and by offering a perspective to define the relationship between knowledge. are not adequately captured in current theories of either project or organizational innovation”. the author concludes that two mainstream innovation management approaches (the rational planning and the cultural approach) have shaped the understanding and actions of the Business Groups in setting up the innovation mechanisms. the chapter proposes a framework for a new perspec- . Based on these discussions. (ii) by explaining that innovation should be a means and not a goal. and Delgado-Verde provide theoretical analyses on the determinants of firm’s innovation radicalness (the degree of novelty incorporated in an innovation) from a dynamic capabilities-based view of competitive advantage. innovation becomes an instrument that benefits society at large”. Development and Technology) Management and Innovation Subsumes Four Chapters In Chapter 22. quality control or marketing. In this chapter. and they set the outline of a framework for sustainable innovation. and Hage explain that “despite the increasing importance of the management of research for innovation. the authors contribute along three lines of thinking: (i) by demonstrating that innovation is knowledge creation at an individual and collective level. power struggles at the individual. administration staff and students). López-Sáez. Based on these perspectives and literature review. participant observation. In Chapter 21. innovation is mostly short term and commercial. scientists. assistant scientists. In Chapter 20. the authors propose the study of a combination of Knowledge Management (KM) and innovation concepts with sustainability and they argue that as long as the emphasis in innovation is on ‘profit’ and not on ‘people’ and ‘planet’ (the three P’s of sustainability) there is no guiding mechanism for innovation. however. the range of differences among types of research. whether basic. “Research Profiles: Prolegomena to a New Perspective on Innovation Management”. The problem concerns the goal of innovation: what does it suppose to realize?” From such constraints. They also explain that “in a sustainable perspective. From such a review. product development. The study uses a set of qualitative techniques for data collection (in-depth interview. as well as projects and programs.

The authors emphasize that “these results suggest that governance has a decisive role in the creation of communication and interaction structures between firms. in the French Rhône-Alpes region. called Research Profiles. “Choosing Locations for Technology and Innovation Support Centers: Methodological Proposal and Brazilian Studies”. In matching the research objectives and tasks. Multi-criteria analysis is applied to the choice of geographic locations for Brazilian Technology Centers. “Determinants and Consequences of R&D Strategy Selection”. Batalha. it was found that territorial anchoring combined with the roles played by governance in terms of ‘matchmaking’ and support for technology transfer significantly increased the number of innovation projects. . Additionally. the authors see that all RDS types have positive effects on firm innovative performance but these effects are not straightforward and simple since they vary depending on firm’s type and on the radicalness of the innovation. but also more generally in clusters”. In Chapter 24. In Chapter 23. the authors contribute to the knowledge on firm innovating behavior by: (i) analyzing the determinants of the selection of the “Research and Development (R&D) Strategy” (all abbreviated by RDS). With the objective to gain new insights into institutional practices and to evaluate their effects on firms’ innovation performance. Bocquet. the authors performed an empirical research that was based on a representative sample of 88 firms implanted within the Savoie Technolac technopole. and Granemann discuss problem-solving issues of location of Technology and Innovation Support Centers (TISC) through multi-criteria analyses in order to identify demand and supply factors of these services. this analysis contributes to identify the most suitable or preferable regions for the creation of technology centers as well as to reveal particular characteristics of the dynamics of such services in the regions in question. influence the selection of the strategy. “Institutional Innovation Practices in Technopoles: An Example in France”. not only in technopoles. jointly with the information sources. Brion. considering the make. Results show that commercial and organizational resources. The results suggest that. which is derived from a literature review and extensive field research. Santos. For such a purpose.xxix tive of innovation management. As for the second part of the analysis. The authors use quantitative and qualitative methods to establish a sequence of steps that include a variety of aspects ranging from criteria preferences to global valuation of the model. the authors address a dimension that has received little attention until recently. This new perspective delineates four research profiles on the basis of two dimensions of research objectives and two dimensions of research tasks. “this research may have important implications for governance modes. and that. They explain that by identifying how geographical and organizational (cognitive and relational) proximity interrelate in the analysis of cluster forms. the authors identify inherent dilemmas that managers must address and this developing perspective suggests appropriate some research management approaches. In Chapter 25. which are essential for firm innovation”. even though local governance contributes to territorial anchoring. only the local labor market has a direct significant impact on the firms’ innovation performance. obliging firms to access external knowledge”. Alcântara. which is named the local governance structures of technopoles. In this chapter. BerthinierPoncet. (ii) and also analyzing the consequences that each of the RDS types has on firm innovativeness. buy and make-buy as the three RDS types. and Mothe contribute by filling a void in the literature on the question on whether organizational proximity can be fostered within clusters. the chapter seeks to contribute to the burgeoning literature on the different types of proximity. Filipescu and Cázares explain that “nowadays firms are not able to achieve all innovation in-house due to the specific set of technologies required by most products and processes.


Section 6 on Marketing and Innovation Subsumes Four Chapters
In Chapter 26, “Taxonomy of Marketing Core Competencies for Innovation”, Viardot argues “there is a lack of taxonomy of the various marketing capabilities that are necessary to achieve the market success of innovation”. Therefore, the author tries to fill this gap by proposing a model that subsumes two classes of Marketing Core Competencies (MCC) for successful innovative companies. The first category of core competencies is related to a superior ability of the firm to identify and to connect the actual market needs with the innovation during the preparation of the new product launching phase. Once the innovation is on the market, a second group of core competencies is associated with the capacity of the firm to ease the customers’ tensions in order to facilitate the acceptance of the innovation and turn it into a market success through adoption and diffusion. In conclusion, the chapter underlines the importance of the place of these two categories of Marketing Core Competencies (MCC) in innovative firms. In Chapter 27, “Self Regulation on Innovative Products Choice”, Prado, Lucena da Silva, and Korelo explore how choice goals influence consumers’ innovativeness in a product category domain. They explain that “intentions to adopt new products are guided by promotion and prevention self-regulation systems”. Therefore, in the investigation of the chapter, two of the choice goals were classified as promotion goals – justifiability and choice confidence – and two were classified as prevention goals – anticipated regret and evaluation costs. Two groups emerged from the analysis: one named “most innovative” and another called “less innovative”. The authors explain that “when comparing the groups, the results show that the most innovative cluster demonstrated higher choice confidence, higher justifiability and was more capable of avoiding a possible choice regret. The differences found in the group analysis highlight the need of understanding in further detail how consumers behave during the choice process of innovative products. Therefore, the Regulatory Focus Theory has been shown to be very important for understanding the choice process, especially for the innovation adoption”. In Chapter 28, “The New Product Development Process as a Communication Web – Part I: Introduction, Concepts and Spanish Context”, Fernández, Varela, Bande and Valmaseda contribute with the existing literature by analyzing the innovation activities of Spanish companies and by proposing New Product Development (NPD) as a communication Web. Based on literature reviews, the authors propose a model that relates the external communication of cross-functional teams to the performance of NPD programs. The composition of NPD teams and the external communication activities form the core competencies for companies and they can provide them with major competitive advantages. The chapter also provides the necessary introduction and background to the understanding of next chapter. In Chapter 29, “The New Product Development Process as a Communication Web – Part II: Analysis of Spanish Firms”, Fernández, Varela, Bande and Valmaseda extend the investigation in the previous chapter by applying structural equations analysis in order to compare the model to a sample of 136 managers from different functional areas at 121 innovative Spanish firms. The authors explain that “the results indicate that the impact of explanatory variables on new product programme performance differs according to the measure of performance considered. The cross-functional nature of NPD teams, the presence of product champions in NPD teams and the gathering of information by all NPD team members were all shown to positively influence new product performance. Firms should be aware of the importance of the aforementioned variables”.


Section 7 on Finance and Innovation Subsumes Two Chapters
In Chapter 30, “Innovations and Financing of SMEs - Part I: SME Financing and Credit Rationing [The Availability of Funds]”, Walker and Scholz describe various financing options and give rationales for the credit rating process and credit conditions building the base for financing decisions. Furthermore, by discussing the topic of ‘Credit Rationing’, the authors demonstrate the impact of credit conditions on management decisions in order to justify the rationing of credits. This chapter also provides the necessary introduction and background to the understanding of next chapter. In Chapter 31, “Innovations and Financing of SMEs - Part II: Case Study of German SMEs in 2010”, Walker and Scholz describe traditional and non-traditional financing opportunities for SMEs in Germany by focusing on its applicability. They explain that “the disclosure of financial business information and giving a say to an equity financier is a difficult topic for owners of Small and Medium-sized Enterprises (SMEs), because these companies are often run as a ‘one-man-show’ (by a single manager) and this person identifies itself with the company. The request for external funds is in that perspective still regarded as a disability of a business to be self-financed. A comparison of the organizational structure of a SME and that of a Large Scale Enterprise (LSE) reveals the structural weaknesses in terms of research and development (R&D) activities. While LSE have an extra department, budget and procedures to develop product and process innovations similarly to a knowledge push, in SMEs, innovations are often originated from customers - similarly to a need pull process. Furthermore, CEOs and customer contribute to a great extend to innovations in SMEs (BDI, 2010). The results of an online-based survey presented in the BDI-Mittelstandspanel 2010, show that less than 13% of innovations are originated by external scientists, R&D organizations and consultants. This proves that external R&D sources (to compensate missing internal resources and structures) are rarely employed; impeding or slowing down the development of innovations”.

Section 8 on Internationalization and Innovation Subsumes Two Chapters
In Chapter 32, “The Recent Internationalization of Brazilian Companies”, Arbix and Caseiro explain that “the recent wave of internationalization among Brazilian companies differs from past experiences, in terms of volume, reach, destination and quality. Brazilian multinationals are not restricting their activities solely to regional markets, nor are their first steps entirely directed towards South America. In amount of investment and number of subsidiaries there are signs they prefer assets and activities in advanced markets – including Europe and North America - where they compete on an equal footing with major conglomerates for a share of these markets. Some Brazilian companies have previous internationalization experience, and a significant portion had been prepared and initiated outward growth in the 1990s, after the economy opened up. However, the boom of internationalization that began in 2004 took place in such unusual conditions as to deserve highlight and special analysis”. The authors contribute by discussing the recent expansion of Brazilian multinationals as a result of: (i) the functioning of a more responsive and targeted system of financing, (ii) transformation of the Brazilian productive structure, which led to the emergence of a group of companies seeking internationalization as a strategy, (iii) preference for seeking more advanced economies as a means to expand access to new markets and suppliers, as well as to absorb innovations and technology, (iv) the State’s performance in several dimensions, especially in financing the implementation of policies that support the creation of large national groups with a presence in the globalized market.


In Chapter 33, “R&D Internationalization as Mechanism of Innovation in Global Enterprises: A Brazilian Case Study”, Galina explains that “internationalization of Research and Development (R&D) allows transnational companies (TNC) to access different and important resources overseas, which may lead to the improvement of their technological innovation. The literature in this field was mostly created from studies of TNCs coming from developed countries”. In this chapter, Galina contributes by presenting some of the main topics the literature addresses on R&D internationalization, and which are used to explore and to verify how companies in developing countries internationalize their R&D activities. In order to do so, the author conducted a bibliographic review about strategies of internationalization of TNC operations, as well as motivating factors and management of R&D internationalization. The chapter finishes presenting a case study about international R&D conducted in a Brazilian TNC. The results enabled to evidence that, like developed countries TNCs, developing coutries companies also seem to perform internationalization of R&D activities with very similar characteristics.

Section 9 on Information Systems and Innovation Subsumes Two Chapters
In Chapter 34, “Tools That Drive Innovation: The Role of Information Systems in Innovative Organizations”, Caudill examines computer technology as a tool to support innovation and innovative processes. The author explains that the primary problem addressed in the chapter is the multitude of widely held misconceptions that seem to exist regarding technology and innovation; whereas technology is not innovative in and of itself. The chapter contributes by examining how technology is being successfully integrated into innovative processes in industry through literature review and case study methods. Specifically, this chapter focuses on the role of technology in communication and creativity, two of the many activities found in an innovative process. Findings indicate that while directly connecting technology use to innovation is difficult, technology can play a substantial role in facilitating the innovative process. Thus, the author concludes that “technology is a qualifier for many innovative processes, a resource that is necessary for the work of innovation to take place”. In Chapter 35, “The Roles of Cognitive Machines in Customer-Centric Organizations: Towards Innovations in Computational Organizational Management Networks”, Nobre proposes innovative features of future industrial organizations in order to provide them with the capabilities to manage high levels of environmental complexity in the 21st century. For such a purpose the author introduces the concept of Computational Organization Management Networks (COMN), which represents new organizations whose principles of operation are based on the concepts of Hierarchic Cognitive Systems (HCS) along with those of Telecommunications Management Networks (TMN). Structured with functional layers and cognitive roles that range from technical and managerial to institutional levels of analysis, and also equipped with operational, managerial and strategic processes, the concept of Computational Organization Management Networks (COMN) plays an important part in the developments of future organizations where cognitive machines and Cognitive Information Systems (CIS) are prominent actors of governance, automation and control of the whole enterprise. It is in such a context that the new organization COMN will provide customers and the whole environment with innovations such as immersiveness for the production of services and goods that are most customer-centric.


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Just as capitalism replaced feudalism, Marx and Engels believed socialism would, in its turn, replace capitalism, and lead to a stateless, classless society called pure communism (Baird, 2010). Consider for instance the expansion of Europe between the 15th and 18th centuries, which was empowered by the dominance of the colonizers in navigation and army technologies. Their overseas discoveries and actions brought about a revolution in the history of humanity, resulting in good, but also negative and controversial results of political, economic, religious, and social facets for the new world (Delouche, 2001; Ribeiro, 1970, 2000). Resources can be associated with tangible and intangible assets that contribute to the production system in the organization (Hitt, Ireland & Hoskisson, 2008). This book expands this definition to the perspective that resources are organizational elements that involve social structure, goals, technology and participants (Scott, 1998: 17-22). These resources can be employed at the technical, managerial, institutional and worldwide levels (Nobre, Tobias & Walker, 2009: 47-49) by the organization through the use of the organizational abilities for the development of the core competencies, and, consequently, for the creation of dynamic innovation and sustenance of the




organization’s development. In such a perspective, the organization manages its resources with basis on its strategy. Moreover, the organization interacts with the environment for the acquisition, processing, creation, distribution, employment and management of new strategic resources. Cognition, intelligence, autonomy, learning and knowledge management represent the set of organizational abilities (Nobre, Tobias & Walker, 2010). These abilities have an important role in the deployment and management of the organization’s strategic resources and they also represent sources of development of the organization’s core competencies (Nobre & Walker, 2011); whereas this perspective is based on the strategic context of the resource-based view (Wernerfelt, 1995) along with dynamic capabilities of the firm (Teece, 2007; Teece, Pisano & Shuen, 1997). Sustainability means the ability to meet the needs of the present without compromising the ability of future generations to meet their needs (WCED, 1987).



In the role of Editors (Farley S. Nobre, David S. Walker, and Robert J. Harris), we would like to thank all the participants in this international book. The process of invitation and selection of the participants started in January of 2010 and finished in February of 2011, resulting 35 accepted chapters. We could account about five hundred invitations approximately! We sent Calls for Proposals and Full Chapters directly to Professors and Graduate Students of well-known worldwide Universities, Firms and Institutions as well as to researchers who are the authors of recent published papers by well-known international journals on the subjects of the book. The selection process of chapters was characterized as vast and strictly competitive since it was based on a system of blind-reviews and technical criteria of evaluation. Therefore, we are very pleased to thank the Authors, the Editorial Advisory Board (EAB) Members, the Reviewers, and the Publisher for their interest, diligent work and contribution in this international project. In particular, we are indebted to Professor William H. Starbuck (University of Oregon and New York University, USA), Alan Meyer (University of Oregon, USA), and Colette Henry (The Royal Veterinary College, University of London, UK) due to their contribution in the writing of the Forewords. We also express an inestimable gratitude for Professor William H. Starbuck who supported Farley S. Nobre in the constructive discussion and writing of Preface. We are pleased to acknowledge the authors and EAB members of the book, and in particular to whom has served this book with distinguished blind-reviews and important recommendations which most contributed to improve the overall quality of the project. We also would not forget to acknowledge all the IGI Global staff due to their attention and services provided in this publication, and specially, we are very grateful to Mr. Joel Gamon who continuously supported our questions and advised on this publication. Finally, we are grateful to our affiliation institutions: Federal University of Parana (Brazil), The University of Birmingham (UK), and The University of Wolverhampton (UK). Farley Simon Nobre Federal University of Parana, Brazil David Walker The University of Birmingham Business School, UK Robert Harris The University of Wolverhampton Business School, UK

Sustainability and Innovation

Section 1


Innovation in Thinking for Sustainability
Enrique Leff Universidad Nacional Autónoma de México, Mexico

Environmental Rationality:

Chapter 1

Renovating our thinking as humankind (rethinking nature, culture and development) is an imperative to approach the challenges of environmental crisis and to orient the social construction of a sustainable world. If environmental crisis is a predicament of knowledge, beyond the task of reinventing science, innovating technology and managing information, we must face the challenge of inventing new ways of thinking, organizing and acting in the world; of reorienting our ethical principles, modes of production and social practices for the construction of a sustainable civilization. Innovation for sustainability is drawn by alternative rationalities. I will argue that rationality of modernity has limited capacities to reestablish the ecological balance of the planet, while environmental rationality opens new perspectives to sustainability: the construction of a new economic paradigm based on neguentropic productivity, a politics of difference and an ethic of otherness. Paramount to this purpose is the contribution of Latin American Environmental Thinking.

Since Antiquity, the cosmic, natural, biological and social order, have been conceived as an ongoing process of “emergence”. Thus, metaphysics thought ontology as the “generativity of physis”
DOI: 10.4018/978-1-61350-165-8.ch001

and Darwinian biology thought nature as the evolution of life forms. Innovation became the core concept of such emergence in the modern social order, as a result of the Enlightenment of Reason that intended to brighten the darkness of the Middle Ages, to bring transparency to reality through true knowledge, to make conscious the unconscious and to enlighten the human soul. In-

Copyright © 2012, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited.

Environmental Rationality

novation is in the heart and at the roots of modern rationality; it is what mobilizes progress as a self-contained process within the rationality that produced it. Thus, innovation became a mecanism inbuilt in economic rationality for the continuous renovation of the conditions of production and the unlimited expansion of the economy with the purpose of granting to humanity the well being promissed by modernity. Modernity is thus defined as the era of progress, of development, of novelty that ages and is renewed in unprescedented forms, in an infinite process that demands unendless creativity and that gears the rationalization of social organization towards its ends through unlimited growth. Thus unquestionned, innovation was inscribed and institutionalized in economic rationality; it was embodied in our mode of thinking and imbedded in our mode of production, until it reached the limits of nature and of human life. The environmental crisis unveiled the unsustainable trends of the economic process: the entropic death of the planet, the erosion of living forms, the degradation of life supporting ecosystems and the fading out of the meaning of life. Can this crisis of modernity be solved by the “reflexion of modernity” over its theoretical and scientific foundations, over its technological and instrumental means: by revolutions of science and management of positive knowledge; by innovations in technology and developments in social organization? Is ecological and complex thinking an emergence that can innovate and ecologysze a new world order? Is environmental rationality a new conception of human life on Earth that can guide the social construction of a sustainable future? The purpose of this chapter is to reflect on the key importance of innovating in the ways of thinking our place as human beings in our living planet (our thinking on nature, culture and development) to be able to face the challenges of environmental crisis and to orient the social construction of a sustainable world. If environmental crisis is at its origins and its basis a crisis of knowledge, we

should not only promote innovations in science, knowledge management, technological change and behavioural shifts, but we must derive new ways of thinking the world, new ethical principles and new forms of knowing to orient new modes of production and social practices for the construction of a sustainable civilization. That is what environmental rationality intends to offer to the world in crisis (Leff, 2001, 2006). Innovation of knowledge has been established in the economic world order and in the social system as an already in-set mechanism that produces novelties triggered by a mode of thinking that is “developed” in the way that science is finalized by technology as the maturing of its theoretical principles leading to their technical applications for the solution of socio-economic problems (Böhme et al., 1976); or the wy in which Bachelard thought of the new rationalism as the incorporation of the conditions of the application of a concept in the sense of the concept itself (Bachelard, 1949). Thus the real economy is the expression of economic rationality: a world system revolving in its same axis and closed in itself. If knowledge is thus geared and oriented by its internal motives and the inertia of its trends towards the growth of the economic system, then, to what extent can scientific revolutions and technological innovation readapt to the ecological conditions imposed by the laws of nature and cultural meanings to open civilization to a truly sustainable world order? This impasse in the self-reflection of modernity over its own matrix of rationality leads us to inquire if a change of rationality is needed and if such a novelty in human history is possible. We should ask ourselves if a sustainable future can be contained in the dialectical trascendance of the present world already inscribed in in the becoming of Being drawn by the destiny of the techno-economic rationality that organizes the present world order challenged by environmental crisis and unsustainanbility, or if new thinking can bring about and open new paths towards the construction of a sustainable world order.

Environmental Rationality

The problem to be approached is that of understanding the unsustainability of the established, dominant and hegemonic ways of constructing the world we live in: that of economic, scientific and technological rationality that organizes the actual world order; to think the possibilities of deconstructing this dominant rationality and of thinking, putting into social action and constructing a new social order: a new agreement with nature based on environmental rationality.

The transition to sustainability is a social challenge demanding “innovative thinking”. However, tackling innovation for sustainability implies a clarification of concepts. Sustainability has irrupted as an unexpected emergence in our consciousness, our discoursiveness and our ethics; our social organization and dayly practices. Sustainability has become an imperative for survival –for the reconstruction of the relations of nature with culture– and as a search of new meanings for life. But, how is innovation embedded in rationality? We may define rationality as the complex order of social procceses, as a system of rules of thought and behaviour established within economic, political and ideological structures that legitimize and orient social actions and give meaning to society as a whole. These rules and structures guide social practices and processes towards certain ends, through socially constructed means, which in turn reflect in moral norms, cultural beliefs, institutional arrangements and modes of production. Rationality is thus organized in 3 main orders of rationality: 1. Formal and theoretical rationality that organizes the conscious control of reality through the construction of abstract concepts that constitute rational orders and cosmo-

visions that rule the modes of production and juridical rules that rationalize de World lives of the people. 2. Instrumental and practical rationality (zweckrationalität), that organizes the methodical pursue of certain practical and predetermined ends through the precise calculation of efficient means. 3. Substantive rationality, that organizes social actions based on value principles, which vary in their internal content, comprehensiveness and consistence; these values are irreducible to a scheme of relations between ends and efficient means. Substantive rationality internalizes cultural diversity, axiological relativity and social conflict in the face of different values and interests (Weber, 1978). The challenges of sustainability call for many different areas of innovation: innovation in theory and science from where new paradigms are emerging: environmental and ecological economics, the science of climate change, systems theories, energy saving systems and clean production technologies, etc. Dematerialization of production calls for innovation in production processes through eco-efficiency to optimize the amount of matter that enters the productive process and is degraded in its “throughput”; to minimize the entropic degradation of energy in the extraction, industrial transformation, agricultural production, recycling of waste, and in the consumption processes involved in the overall metabolism of nature. Thus, new areas of innovation are emerging within the prevailing rationality of modernity, in what mainstream sociology denominates “reflective modernity” (Beck, Giddens & Lash, 1997). Reflective modernity calls for a reorganization of the social system in order to ensure its stability and sustainability: that is for the ecological reestructuring and refunctioning. However, a difference must be established between the various theoretical and practical areas of innovation activated by “reflective modernity” for the transi-


Environmental Rationality

tion towards sustainability. Here different forms of creativity are involved, from novelty in live forms emerging from the technological intervention in biological organization and anthropogenically induced environmental changes, to creativity in the realm of thought: from scientific paradigm shifts and methodological innovations to cultural changes and social reorganization. Reflective modernity intends to activate and make use of different philosophical sources and scientific and technological resources to solve the socio-environmental problems generated by modernity, by the cultural imprint and the ecological footprint generated by the application of knowledge within its prevalent rationality. This “reflective” process certainly has generated an enormous outburst of innovations: for conservation ecology, energy saving technologies, green production systems, economic instruments for environmental management. These innovations are currently inscribed in a new geopolitics of sustainable development (Kyoto Protocol, Clean Development Mechanism, economic valuation of environmental goods and services, including carbon sinks). In the academic litterature, the term innovation has arisen from the entrepreneural and managerial world, as the creative application of knowledge to production. Novelties in thinking (schools of thought or philosophical traditions) are seldom conceived as “innovations”. In the field of science, changes of paradigms are refered to as scientific revolutions, rather than innovations in knowledge (Kuhn, 1962). It would seem even more awkward to refer to cultural changes as innovations –even those induced by the technoeconomic intervention on nature, such as cultural changes from forced adaptations to climate change; the emergence of new entities (cyborgs), hibrids of organic, technological and symbolic orders in the “reinvention of nature” (Haraway, 1991); or the reinvention of identities resulting from cultural strategies to readapt to the processes of globalization.

Innovation most clearly refers to the application of knowledge to new ways of reorganizing an already objectified and rationalized world, from the application of its scientific principles and technological developments, to process management and product design, rather than to the breakthrough of ideas of new modes of thinking, of understanding the creativeness of nature and the reinvention of cultural identities. Innovation can be defined as the purposeful organization of knowledge for the production of new means for the efficient management of processes, guided by the principles of instrumental rationality. Thus, sustainable development, as an emergent social goal, has triggered a broad array of innovative processes in science and technology. Innovation is by essence and definition technological, managerial and organizational novelties brought about by applying knowledge through creative thinking to new problem-solving areas, to make processes more efficient, to use new materials, to apply new methods. In this sense, sustainable development is a global goal that involves and activates changes in scientific and technological paradigms, in patterns of production and consumption behaviours. Knowledge has become a tradable good and as such, subject to innovation drawn by economic purposes and not by a pure epistemophilic drive. Innovation of knowledge became the objective of managing the optimal harmonization of the productive factors, of guiding entrepreneurship for financing and marketing tradable goods where knowledge and information systems have become strategic means of production. Thus, the management of knowledge has become the “basis of the technological, managerial and organizational core competencies of the organization in the pursuit of dynamic innovation and sustainable competitive advantage.” Innovation is the creative processes involved in producing something new, especially something useful and with economic value. Innovation brings emergent and even radical and revolutionary


Environmental Rationality

changes in production organization: a new good, a new technology, new production systems and commercialization methods. However, following Schumpeter (1934), the scholarly literature on innovation distinguishes between invention –an idea made manifest– and innovation –ideas applied successfully in practice. Innovation in the field of economics implies the production of new organizing methods and technologies that increase economic value. Innovation leading to increased productivity, through research and development, is the fundamental source of wealth in an economy. Invention is the embodiment of a new idea. It is the outcome of research or practical inventiveness that can be embodied in a paradigm shift that reorganizes knowledge, or a new prototype or design that is patentable. Inventions become innovations when they are “developed” and put to use effectively in a new social, economic or commercial reorganization. Innovation involves creativity, but not all outputs of human creativity are innovations. Innovation involves acting on the creative ideas to make some specific and tangible difference in the objectified reality, resulting in new or altered processes within the economic organization, or changes in the products and services provided. Through these varieties of viewpoints, creativity is seen as the basis for innovation, and innovation as the successful implementation of creative ideas within an organization. An innovation can be distinguished from an invention or a scientific discovery by the fact that an innovation is defined by an applicative perspective. The scientific enterprise intends to discover the internal workings of reality; theory uncovers the organization of the real. Through theoretical models and empiric experimentation, science constructs the laws that rule the functioning of the world: reality. Innovation in the economy and in technology is not an act of discovery, but of application and reordering of available knowledge of the World to generate a novelty. From the generativity of matter, to epigenesis in the evolution of nature, to ordering from chaos (Prigogine

& Stengers, 1984), the novelties emerging from Nature can be distinguished from the discoveries of science and the inventiveness of culture; from the creativeness of art, the productiveness of economy, the innovations of technology and the originality of design. Innovations are productions that because of their novelty can be registered as property rights. Although creative thinking is claimed to be universal knowledge, with the progress of technoscientific knowledge and its application to the workings of the economy, these innovations have become patented and tradable knowledge, thus distinguishable from scientific and philosophical knowledge, as well as other forms of knowledge and wisdom which have a more intrinsic value. However, with the over-economization of the modern world these traditional or non-marketable forms of knowledge are becoming targets of an extended ecological global economy. Thus the emergence of tradable knowledge over environmental goods and services, or the appropriation of indigenous knowledge by ethno-bio-prospecting carried out by biotechnological enterprises (Bellmann, Dutfield & Meléndez-Ortiz, 2003).

Undoubtedly, the main driving force that orients innovation processes towards sustainability goals, is the geopolitics of economic globalizaton and sustainable development that has been set-up since the UN World Conference on the Human Environment in 1972, to the Johanesbourg Summit on Environment and Sustainable Development in 2002, through the Eco-Rio Conference in 1992 and all their outcomes (Agenda 21, MEAs, Conventions on Biodiversity and Climate Change, Kyoto protocol, Clean Development Mechanism, etc.) that configure today the dominant vision, strategy that rules the World and national environmental policies.


but only mending and reshaping the established wealth machine.8 has. set in motion by the Wuppertal Institute in 1993. (c) “if too much environmentally dangerous material escapes at the back-end of an economy. by 2050. a campaign for eco-innovation was launched1. how could they doubt their capacities to trigger the innovations necessary to reach the desired sustainable economy? Thus. The basic assumptions and imperatives upon which this intended dematerialization was based on were no other than the wishful thinking principles of some of the first and main proponents of ecological economics: (a) The human economy must be constrained to function within the limits of the environment and its resources and in such a way that it works with the grain of. There is no hint at deconstructing. Ernst Ulrich von Weizsäcker (1997) published his idea of dematerializing by a Factor 4. then the next step has been to call for de-growth and de-coupling the economy from nature. and that “the present price situation allows only rather limited dematerialization moves under profitable conditions”. the Factor 10 project intends to reduce material flows and increase resource productivity in a service oriented economy. one should curb the input streams of natural resources at the front end of the wealth machine. total yearly material flows (TAPS) and cost per unit service or utility (COPS). If the advanced economies are the societies of knowledge of our times. he recognizes that “lifesustaining services of the environment cannot be generated by technology at any cost”. These sustainable economic conditions could only be reached by increasing the resource productivity of the industrialized countries (Schmidt-Bleek. who proposed a tenfold dematerialization of western technologies on average as a conditio sine qua non for approaching economic sustainability. dematerialization implied the calculation of the limited materials that the Earth can offer and the overdose of nature that enters and is consumed by the economic machine. This idea was challenged and further developed by Friedrich Smidt-Bleek. then the industrialized countries had to make the extra effort to dematerialize by a factor of 10. Measured as Material Input per Service rendered at the micro level (MIPS). but up to 8 million people had to “grow” in order to satisfy their basic needs intended by the market economy in place. within the prevalent rationality. a step back again to the false pretention of having an economy working delinked 6 . To achieve that goal. In practice.Environmental Rationality Within that scope. If the worldwide consumption of nature had to be reduced by a factor of 2. p.” (Schmidt-Bleek. a per capita ecological footprint of 1. Yet he affirms that “Sustainability is won on the market or not at all. and with the intent of reestablishing the ecological balance in the economy.3). the worldwide average per capita consumption shall not exceed 8 tons of material per year. that it will not reach by consciousness and planning a steady state that would allow for ecological balance. one major project that has set in motion more specific actions towards technoeconomic and managerial innovations has been the one to dematerialize production. And the work to do was delivered to faith in the workings of the market economy and technological innovation. rather than against. (b) We must adjust our wealth and prosperity-generating machine to operate within the guardrails of the laws of nature. From the fact that the economy will not listen and adjust to the imperatives of nature. natural laws and processes. a per capita consumption of 5-6 yearly tons of non-renewable material resources and an emission of CO2 not exceeding 2 tons per year per person.” Schmidt-Bleek thinks it is “the rucksack of finished products rather than the process of manufacturing what determines the overall resource intensity of the economy”. 2008). advocating a resource strategy founded on reducing resource use by means of what he called “efficiency revolution”. and followed by the Factor 10 Institute founded in 1997 followed by the International Factor 10 Innovation Network in 1998.

does not lead to sustainable development. it remains a fatuous will if it is not based on a new productive paradigm. the creation of new needs and the management of the productive forces. And with more arrogance than critical spirit and openness to other thinking. From the standpoint of environmental rationality and the perspectives to sustainability conceived in the South. The construction of such environmental rationality implies new thinking and a shift in scientific theories.) As we will see in what follows. eco-innovation appears more as a will to de-grow the economy than to refurnish and remodel it with ecological balances and energy flow calculations. thinking. In this context. Benton. 2006. experiences and practices.Environmental Rationality away from nature. But innovation within the rationality that has cradled and triggered its potency. Thus. In economics. beyond viewing sustainability as a new objective towards which dynamic innovation should be oriented to reconstruct an ecologized world order subject to the constraints of the dominant economic order. with ecological footprints and economic valuation instruments. 2009a.” (Ibid. SUSTAINABILITY AND INNOVATION: ENVIRONMENTAL RATIONALITY AND REVOLUTION OF KNOWLEDGE Innovation is the inbuilt mechanism that mobilizes processes within a structured system and drives it towards its prescribed and embodied ends. which reorients innovation as an end prescribed in the tendencies and possibilities of the workings of modern rationality. the design of new products. 1996). As in order to de-grow. innovation occurs as a technological change or reorganization of processes that renews the productive capacities of the system and expands them for the use of new materials. have sprung from its history. both shameful and brilliant. as a way of dialectical transcendence in the reflexivity of modernity. those that were set at the insept of its driving mechanism towards unsustainable growth. but on the innovation of new production processes and consumption patterns (Latouche. By ignoring and neglecting the ecological limits and the environmental conditions for a sustainable economic process. it should be viewed as a new condition of human life that reorients innovation toward the purposes and goals of a sustainable social order founded in a new environmental rationality. the implementation of new instruments. and of an environmental rationality based on a culture of diversity. It is not sustainability. he pontificates with Eurocentric pride that “Europe may be the only region in the world where the necessary experiences. And this implies the deconstruction of the established economic rationality in the global world order and the construction and legitimization of a new sustainable paradigm of production based on the negentropic productivity of ecosystem local economies. Thus. The proposal to de-grow the economy is based not only on an increase of resources productivity. and where the human and technical genius exists to lead humankind toward a more sustainable future. 2008). as an emergent objective. the economy has to deactivate the inbuilt mechanism that triggers growth. a politics of difference and an ethic of otherness (Leff. efficiency of “throughput” and recycling and restriction in consumption. the innovation of productive forces under the prevalent economic rationality has driven an environmental crisis (Leff. 1995. sustainability 7 . the question of the contribution of sustainability to innovation or innovation for sustainability should be inquired in its twofold relationships but in a new perspective. experiences and practices from other corners and latitudes of the planet that are opening new perspectives for the social construction of sustainability. there is something more to expect of alternative knowledge. 2009). Notwithstanding this broad program of de-growing.

1991). In similar ways as the development of knowledge in social sciences in modern times led to structuralism (Foucault. of new hybrid and interdisciplinary domains of scientific research and new horizons of philosophical inquiry. ecological economics has emerged as a new interdisciplinary paradigm that intends to subsume economics as a subsystem in a more embracing ecological system.. hybridization of traditional paradigms while being “ecologized” and problematized by an emergent environmental knowledge (Leff. Gaia Theory –life as a self-regulatory systems in equilibrium with its environment– (Lovelock. These inquiries have led to new paradigms of complex thinking on the interrelatedness of ontological and epistemological orders and the creation of new ecological and environmental disciplines: human ecology. this is not only the rearrangement of already existing disciplines. 1999). 1972). complex thinking (Morin. deep ecology. Nicholas Georgescu-Roegen (1971) intended to innovate a new economic paradigm –that of bioeconomics–. The emergence of the ecological era in our times carries with it and is rooted in a new episteme. In a more critical approach. environmental law. a shift to renewable sources of energy and the recycling of waste (Hinterberger & Seifert. The configuration of environmental knowledge has lead to the development of new scientific fields and environmental branches within the established scientific paradigms. 2002). where population processes. 1994). These scientific disciplines. today reflected as the threat of global warming and climate change. 1986. 1994). the differentiation of concepts referred to as “novelties in thinking” is becom- 8 . 1993). These efforts have brought about novelties in the management and application of available knowledge and induced innovations in research methodologies as those of complex environmental systems (García. From the limits of biospheric resources and the ineluctability of the law of entropy. In this process. environmental economics has evolved as a new branch of mainstream economics for the crematistic valuation of nature. the application of new interdisciplinary methods to complex socioenvironmental problems and the elaboration of new interscientific objects of science. 1970). Pearce. discourses and bodies of philosophical thinking involve novelties arising from the convergence. Thus. a revolution in knowledge or the invention of a new rationality by reflective thinking. political ecology. post-structural knowledge is being codified and reordered by an ecological understanding of the world order. articulation. Thus.Environmental Rationality has become the main attractor in the emergence of interdsiciplinary paradigms of environmental sciences. an imperative of technological innovation has triggered new efforts towards ecoefficiency. ecological and environmental anthropology. 1980. 1995). These innovations in knowledge imply new methods of complex thinking. extending its arms to embrace environmental goods and services (Fisher. etc. This emergent ecological episteme influenced the new approaches to the Ecology of the Mind (Bateson. as well as the articulation and hibridization of different disciplines and areas of knowledge. the Web of Life (Capra. ecological economics. technological innovation and changes in human behaviour merge in the remodeling of economics (Costanza et al. establishing the intrinsic link between the law of entropy and the economic process. 2001). and autopoiesis governing selforganizing processes (Maturana & Varela. the increase in resource productivity. environmental sociology. 1979). but the eruption of a novelty in philosophy. But seldom do they imply a shift in scientific paradigms. we have seen a display of novel approaches to problem- solving knowledge that imply the articulation of a variety of theoretical paradigms and practical forms of knowledge. Thus. sustainability has reflected as an imperative to lessen the amount of matter and energy entering the global economic system and its metabolic “throughput” along the transformation of nature and its entropic degradation. methodology and science that can be conceived as a breakthrough in knowledge and in human thinking. 1918.

creativity and intervention on nature have become increasingly intertwined. From George Canguilhem and Jacques Derrida. instrumental and practical. an epistemological inquiry unfolded that was particularly fruitful in forging the epistemological basis of environmental rationality. geophysical. where nature and culture are increasingly being intervened by technological and economic rationality. an epistemological inquiry led to the positing of the environment not only as a factual territory inhabited by living beings. change their meaning and priorities. creativity in nature through natural evolution has yielded to biotechnology. where new forms of biological artifacts are being produced by scientific-technological innovations drawn by the global market economy. the economy confessed its fundamental flaw in building the economic process in a divorce from the natural. an initial idea of the environment emerged as an epistemological space for the reencountering between society and nature. REENCOUNTERING NATURE AND CULTURE: THE ENVIRONMENTAL EPISTEMOLOGICAL CHALLENGE Environmental rationality opens new perspectives for the social construction of sustainability. has fueled the economic system towards unsustainable growth. substantive. Thus. 9 . by ignoring its conditions of sustainability. of the real and the symbolic. culture. 2003) has emerged from the intervention of knowledge in nature. cultural and scientific rationality have been subordinated to the imperatives of formal logic. Sustainability emerges in the crossroads of different forms of rationality. in the hibridization of nature. and thermodynamic order within which it operates. In this way. Environmental complexity (Leff. economy and technology.Environmental Rationality ing somewhat blurred. organized in its main orders of rationality –formal and theoretical rationality. the economy responded by asserting that the environment is an externality of the economic system. as a process of rationalization based on the axis of modern rationality that. Thus. Following the perspectives of French critical rationalism –from Gaston Bachelard to Louis Althusser and Michel Foucault–. economic value and instrumental rationality that project the potentialities of the Real and the creativeness of the Symbolic towards the objectification of the World and an unsustainable techno-economic process of unsustainable growth. environmental degradation and the entropic death of the planet. Here is where environmental rationality emerges planting its roots in new life territories and viewing new horizons to guide social creativity towards the construction of a sustainable future. sustainability demands new thinking and the reorientation of the innovation processes. In modern rationality. thinking. ecological. In its selfjustifying eagerness. it changes gears for the innovation process towards other purposes that depart from the inertial tendencies of modernity. that is to say. once innovations in the different areas of human being. substantive and cultural–. but actually as the epistemic space bordering and surrounding the logocentric spaces of science. back in the late 60s. Rationality. to solve the disjunction between the object and the subject of knowledge and the split between natural and social sciences. Environmental rationality is constructed from critical theory and ethical principles that reorient the civilization process towards sustainability. This outcome of modern civilization is not the result of the evolution of nature towards an ecologyzed and complex world order. When environmental problems emerged and economic growth and the World economic order were questioned for their impact on environmental degradation. by ignoring and externalizing nature from the social system. A more careful investigation of the constitution of the sciences as conceptual structures built around a nucleus-object of knowledge led us to understand the exclusion of the environment in the universe of the “centred formations” of modern sciences.

the environment was defined as otherness to dominant scientific rationality. interdisciplinarity is thought. emerging environmental savoir problematizes the “normal” paradigms of science and promotes their transformation in order to generate environmental branches of knowledge. environmental epistemology goes beyond those proposals that pretend to integrate natural and social disciplines to generate the much desired environmental sciences. 1980. The environment was formed as a field of externality to the logocentrism of science. global warming–. the construction of new objects of knowledge was proposed. In this way. the environment was defined as the lack of knowledge of existing sciences. Morin. hibridization and blending of existing paradigms (that carry within themselves their own epistemological obstacles).Environmental Rationality Thus. The response to this fact in the history of science. The environment was not. In this sense. the junction of fragmented disciplines. but as the conjunction of different ontological orders and disciplines in the construction of a new scientific object. beyond the holistic perspectives that were shaping theoretical systems and emerging ecological thought. it was not a simple “environmental dimension. ecological degradation. 1976. as the milieu surrounding a population. Beyond identifying economic. a new economics was proposed. deforestation. and social causes tied to an array of socio-environmental problems –pollution. 1977) derived from critical rationalism. or trying to subsume the 10 .e. Following the epistemological indagatories of George Canguilhem (1970. as the “external” processes that influence. then. An exemplary case of this “externalization” of material and symbolic processes impringing on a scientific paradigm is that of economic theory. 2001). environmental goods and services– by recodifying nature as natural capital instead of integrating nature as nature’s Being: the ecological organization of nature. where nature as a condition of sustainable production has been simply ignored. Thus. Sachs. focused on their own autonomous objectives of knowledge. this epistemological view transcended the stance of systems theory and the holistic visions that led to a will for interdisciplinary integration of existing sciences as a method to solve the fragmentation of knowledge associated to the environmental crisis (Leff. 2001). From that position. the laws of entropy that determine the flows and degradation of matter and energy in the economic process. outside the system of established scientific theories. not as the intended articulation.” that could be internalized within the systemic approaches and planning practices based on the principles of ecology. that could be extended to other paradigms of knowledge or serve as the unifying thread capable of weaving the transversality of environmental through into the dispersed and dismembered body of knowledge. von Bertalanffy. instead of recodifying nature in economic terms. as suggested and posited by diverse authors (i. In the perspective of environmental rationality. interdisciplinary fields and transdisciplinary methods capable of ap- proaching complex emerging socio-environmental problems (Leff. a new approach to interdisciplinarity emerged. 1972. political. as the unknown to the logocentric organization of science. soil erosion. condition and even determine the processes that sciences are concerned with. Beyond the methodological purpose of articulating the actual paradigms of science. from the standpoint of environmental rationality. In the realm of theory. it was possible to transcend a merely empirical and functional conception of the environment.. 1993). From a critical epistemological perspective that derived from systems theory conception of the environment as an externality of the system. is the reaction of economics to construct a new discipline of environmental economics by extending its traditional and mainsteram paradigm to embrace nature –ecological systems. cybernetics and general systems theories. the economy and society. but that have been erradicated from their field of knowledge.

Technological innovation is not restricted to “ecoefficiency” in the production system –dematerialization of production end recycling of waste–. Substantive rationality becomes fundamental to environmental rationality. 2009a). neguentropic productivity derived from photosynthesis and the ecological management of the metabolism of material and energy flows in agricultural and industrial. a paradigm of sustainable production can be thought of as the articulation of ecological. 1995. Environmental rationality is rooted and embodied in different matrixes of cultural rationality. 2010). This new productive paradigm carries within itself a complex array of innovative processes: In the level of theoretical rationality. beyond the scientific management of nature (Leff. the creativeness that orients the construction of sustainability through a dialogue of knowledges imbedded in social imaginaries. it is only though thinking that we can reflect on what has previously be thought. Culture is the source of meaning and inventiveness that resignifies the potency of nature. of thinking by means of thinking. Following Heidegger (1957/1988). –of the negentropic productivity of photosynthesis and the ecological organization of nature– signified and embedded in culture (Leff. In the level of instrumental and practical rationality. urban and rural. technological and cultural productivity: as an economic process based on the potency of nature. it promotes important shifts in agronomic production systems –agroecology and agroforestry– and new strategies for the collective and sustainable management of water and forests beyond the economic valuation of environmental goods and services under the geopolitics of sustainable development. BUILDING ENVIRONMENTAL RATIONALITY FOR SUSTAINABILITY: CREATIVITY IN THINKING. the “innovations” of environmental rationality are novelties brought about in the “production of ideas by means of ideas”. rearranging objective reality in the present world. eolic. nor a paradigm to guide a “new deal” State planification for sustainable development. the technological innovation process is subordinated to the preservation of the productive potentialities of nature supported by the organization of ecosystems. it carries the deconstruction of economic value and positive law based on the individual as the principle of economic and juridical actions. to bring about what there is still to be thought.. juridical. social) that became the pilars of modern rationality. ecolabelling and the compliance to environmental rules of trade. Ideas have always fed the economy and forged innovations as they entered into the productive processes in what Piero Sraffa (1973) named the “production of commodities by means of commodities”. In the field of economics and law. etc. It is from cultural rationality that nature is revalued. nor the scientific management of nature. it implies the deconstruction of the theories (economic. But even though knowledge has become a commodity. 2006. Environmental rationality is not a model. of intellectual property rights. domestic and social systems.Environmental Rationality established economic order within the limits and conditions of the biospheric ecological system. applying available knowledge to produce a practical novelty–. INNOVATIVE KNOWLEDGE AND SOCIOLOGICAL IMAGINATION Environmental rationality does not only reorient innovation towards sustainability but re-signifies the concept of production. to construct new paradigms based on common property rights over the common patrimony of nature and culture. but rather the “governance of the commons” based on cultural institutions (Orstrom. biofuels–. to what extent 11 . If innovation is the process of purposely reorganizing what there is –re-setting reality. 1990). new technologies for clean production –energy derived from renewable sources: solar.

As a political philosophy. demands an epistemological decentralization. However. that theorized. Environmental rationality as philosophical thinking emerges from a critical point and moment in the evolution of modern civilization: that of an environmental crisis conceived as a turning point in history. a crisis brought about by the ways of thinking and the forms of knowledge that guided the constitution of prevalent economic rationality and the technological developments brought about by scientific and instrumental rationality –together with the ethical principles and values imbedded in such configurations of rationality–. of an idea that reorients creativeness. scientific. If environmental rationality must be thought of as other to the prevailing social rationality. it goes beyond the articulation of disciplines and the blending of actual current knowledge developed by normal science. The unifying force born from the power of the One. viewed in the perspective of environmental rationality implies the creation of new ways of thinking. the General. Environmental rationality is forged in the deconstruction of metaphysical. the construction of sustainability. Environmental rationality impinges in knowledge but is rooted in the field of political ecology and environmental politics. and Systemic Totality. it goes beyond the simple adoption or application of philosophical traditions or post-modern philosophy to the understanding of present problems and situations in our societies. environmentalism has launched innovative thinking that has impinged in several different domains of philosophy and science.Environmental Rationality does thinking that implies an act of no-thingness –thinking on Being and Becoming beyond the present reality of things. inventiveness and innovation towards sustainability. The environmental crisis is conceived as a crisis of knowledge. today globalized under the dominance of economic rationality. and postmodern thought –in the territorialization of diversity. can be called an innovation? That is the predicament of environmental rationality. triggered by a limiting frontier in the expansion and development of the established rationality. untouched by the prevalent world order. Thus. it cannot emerge from any ontological or epistemological order –a cultural territory–. This external anchor point is the environment: environment as an epistemological concept. as the reflection of knowledge on social structure. Environmental rationality is born from the standpoint of its transcendence of metaphysical thinking. Environmental rationality does not emerge as “thinking within normal science”. environmental rationality is not ecologysed thinking. difference and otherness. the Universal. the Absolute Idea. legalized and legitimized human actions in the building of an unsustainable world. If environmental decay is caused by the counter-ecological workings of modern rationality. a Copernican revolution away from logocentric science –the centrality of thought that insists on placing modern rationality at the center of the universe of human life. It is expressed in the demands and struggles of peasant and indigenous peoples like the seringueiros (rubber tapers) movement of Chico Mendes and the network 12 . Innovation for sustainability demands new thinking that transcends any innovation of knowledge within the paradigms of normal science and leads to the creation of a new rationality. that is to say. its externality to logocentrism of science and delinking from hegemonic dominant rationality. As a crisis in knowledge. difference and otherness– on the basis of ecological potentialities and cultural knowledges that inhabit these unknown regions of the Real that are emerging from the South. Counter-hegemonic globalization demands the deconstruction of the one-dimensional oppressive force against diversity. or as the refinement of an already established logic (the reworking of what is at hand in the thinking principles and instruments of modern rationality). thinking that guides the deconstruction of the objectified world as to let the Being of nature and of culture be–. then sustainability cannot be constructed by the self-reflection of modernity over its own rationality.

2000). to the construction of Knowledge from the South (Santos. 2008) as an epistemological struggle that accompanies social processes of emancipation in the perspectives of constructing alternative sustainable worlds for its peoples. it emerges. Leff. It is a struggle for reappropriation of their patrimony of natural and cultural resources and for the territorialization of an environmental rationality (Leff. that struggle for the preservation of their ecosystems and for a sustainable development based on the harmonious coexistence of cultural diversity in a globalized world. However. the reconstruction of knowledges and of “other rationalities” emerging from “knowledge from the South” –from cultural knowledge and ecological potentials– encounter the established hegemonic economic and epistemic world order. 2010). Environmental rationality emerges not only from a spirit of emancipation. outside the realm of thought. this does not necessarily imply the possibility of delinking and abandoning once and for all Western thinking. extermination. it becomes the mobilizing force of many indigenous peoples throughout the Latin American region. The ideas of Enlightenment that colonized our ways of thinking. in its purpose to liberate the potentialities of nature and culture from the determinations infringed by the relationships of domination. environmental rationality emerges from a reflection on the Coloniality of Knowledge (Lander. but from its epistemological standpoint in the margins and the externality to logocentric knowledge. Escobar. inequality and unsustainability. 2009a). 2001. including the Coordination of Indigenous Peoples Organizations of the Amazonian Basin (COICA) and the Black communities of the Pacific Coast in Colombia. These social environmental movements go beyond claims against biopiracy. ecological damages and the distribution of benefits from bioprospecting and ecotourism in the new geopolitics of economic-ecologic globalization. to the era of globalization. Above all.Environmental Rationality of community based river and land extractive reserves of the Amazon region in Brazil. including their forests and genetic resources. as well as dominant paradigms of scientific knowledge and modern technologies continue to be imposed to our societies. 2008). to the Mapuches of Argentine and Chile. The field of political ecology is becoming an emancipation force slowly extending to large peasant organizations like the landless movement in Brazil and to peaceful unarmed popular movements. 2002. to demand their rights to re-establish their livelihoods and modes of production with nature (Porto Goncalves. philosophy and ethics. turns to the recognition of social imaginaries. Mexico. exploitation. and have led –as a reaction– to the emergence of an emancipatory knowledge and political culture. It is from this situated critical knowledge that Latin American 13 . as the Zapatistas in Chiapas Mexico and the Green Army of the Indigenous Peoples of the Ecuadorian Amazonia. from the Seris in the Northern arid lands of Sonora. in relation to the hegemonic power of the globalized economy as the organizing centre of the world. from the times of the colonial period. The emergent environmental rationality is constructed through a dialogue of knowledges with the critical Western thinking now underway in science. that are reaffirming their identities and reorganizing their productive practices for the management of their natural and cultural heritage. These reflections stem from a critique to Eurocentrist ideas (from the foundation of metaphysics in Greek philosophy through postmodern thought). alternative forms of knowledge and traditional life-worlds denied and subjugated by dominant paradigms (Leff. from the ecological and cultural roots of a social movement for survival and resignification of human life. our modes of production and our life-worlds. From a critical perspective of the oppression and dependence of Latin America and the Third World. In order for the globalized World-system to be deconstructed and for other possible worlds to be constructed. Environmental rationality as strategic knowledge.

a democratic and participatory management of the commons that challenges the totalitarian regime of meaning on nature and the dominance of the World economic order: a political ethics for diverse sustainable societies which neither submits to the merchandizing of nature. in order to attract their thoughts and transform them from the roots of the ecology and the cultures of Latin American territories. FUTURE RESEARCH DIRECTION AND BRIEF CONCLUSION Theoretical inquiry on environmental rationality is an open ongoing process for the construction of a sustainable future. are typically Latin American. the solidarities that must be forged to construct a sustainable future for all peoples in our living planet. the concepts of difference and otherness as cultural diversity rights. 2003. Several research routes are open for further theoretical and practical reasearch regarding the concept of environmental rationality and its application for innovation in social organization oriented towards the construction of a sustainable world order. Most important for this goal will be research on the social appropriation of the categories of environmental rationality in the building of a new economy. The pending debt of environmental rationality is that of building a more plural. one that orients the cultural re-appropriation of the common heritage of humanity. Only by setting this dialogue into practice can a political ethic of difference emerge. The theories forged in Europe were transformed from a critical perspective that was born from the sources of ecological potentials and the cultural diversity of our continent. to Martin Heidegger (1927/1951). must recognize their differences. 14 . habitus and practices of the people of the region. This epistemological odyssey –from eco-Marxism to political ecology and existential ontology rooted in ecology and culture– did not merely imply the influence of European thought on American lands. This led to a new theoretical path that stimulated a critical revision of many of the most important theorists of modernity. nor to a general sense of Being. to open the paths for a sustainable future. that are fertilizing new fields of political ecology in Latin America. 2011). pretending to unify the views and interests of the people. their being and becoming led by the heterogenesis of a new world order generated by coevolution of biocultural diversity and guided by a new environmental rationality. The concept of environment as potential. from Karl Marx (1965) and Max Weber (1978).Environmental Rationality Environmental Thought contributes an original outlook to sustainability (Leff. direct and close dialogue with the indigenous savoirs and cultural knowledges imbedded in the social imaginaries. that are differentiated by nature and culture. Further research on the theoretical consistency of the category of environmental rationality following its epistemological. Apart from a hegemonic or dominant rationality that forces a consensus in a unified knowledge. A synthetic list of inquiries and applications can organize a research programme include the following issues: 1. 2006). unique proposals about environmental complexity arose –beyond complex thought and the sciences of complexity– that displaced the critique of interdisciplinary methodologies and systems theories toward the dialogue of knowledge as an epistemological strategy to construct sustainable societies (Leff. the dialogue of knowledges among all social factors involved and environmental education for the training of new forms of reasoning. modes of thinking and ways of being. The epistemological inquiry set forth by that critical concept of the environment sowed a seed that fertilized the field of Latin American environmentalism. their irreducible otherness to a “common sense”. Emmanuel Levinas (1977) and Jacques Derrida (1989). From this epistemological field. nor to an ecological order.

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It focuses on strategic innovations that provide more positive aspects and fewer negative ones. While sustainability involves many perspectives.ch002 Copyright © 2012. and organizational developments that are game changers. Strategic innovations include radical technological innovations. . Strategic innovations are dramatic changes that have the potential to create dramatic new solutions that create exceptional value and eliminate or reduce negative effects and impacts. Sustainability and sustainable development are based on proactive strategies and actions that exceed expectations and outperform peers and competitors alike. Rainey Rensselaer Polytechnic Institute. and management constructs. DOI: 10. IGI Global. actions. business model innovations. While there are numerous theories and practical methods for managing in a national or even regional markets. The model incorporates the concepts of sustainability and sustainable development in creating the solutions.18 A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation David L. the complexities of doing business on a global basis have increased dramatically over the last two decades. most of them lack the sophistication necessary for leading change in a global business environment. strategies. the chapter focuses on how global corporations employ strategic innovations in response to the driving forces in the global economy and how they can improve their level of management sophistication in a turbulent business environment. USA Chapter 2 ABSTRACT This chapter presents the foundations of a conceptual model for connecting the key elements necessary for corporations to adopt sustainability in the context of the global economy and strategic innovation. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. systems and structures for doing business in the global economy. With the advent of globalization. product developments.4018/978-1-61350-165-8.

policies. Creating. and significant reductions in the negative effects and impacts associated with existing technologies and products. and people. Sustainability involves a transformation to higher levels of sophistication in how business leaders and government officials formulate and implement strategies. and less polluting systems. developing and gaining acceptance of a general model that fits multinational enterprises (MNEs). Today. and innovativeness in developing and deploying the best possible solutions for enhancing the well being of people. sustainability. In the report. ones that provide mostly positive benefits with few defects. Specifying precisely what strategic leaders must do to achieve sustainability. SD refers to the notion “that it [humankind] meets the needs of the present without compromising the ability of future generations to meet their own needs. cooperation. entitled Our Common Future. effective. It is based on fewer time and distance constraints. It requires creating newto-the-world solutions that are based on clean technologies and innovative products and more efficient. 1987. stakeholders. SD focuses on protecting the natural environment and enhancing the social and economic world as well as achieving superior strategic. Given that globalization is still far from a true reality. SD and strategic innovation is an arduous task.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation INTRODUCTION This chapter presents a model for adopting sustainability and sustainable development (SD) in business organizations based on the perspectives of globalization and the management constructs associated with strategic innovation. preserving the natural environment. and significantly less pollution and waste. problems. the removal of trade restrictions. integration. Given that an all-compassing model linking globalization. sustainability and SD are essential constructs for achieving positive gains and reducing negative effects and impacts. advanced technologies and sophisticated management methods and practices have dramatically improved the efficiency. p8) Strategic innovation refers to technological innovations and high-level product developments that have the potential to change the global competitive landscape based on advancements in the benefits provided to customers and stakeholders. Sustainability involves the quest toward more ideal solutions and sustainable success over time. and enhancements in information flows and currency exchanges. and actions plans to achieve such outcomes. SD originated in 1987 by the World Commission Environment and Development for the General Assembly of the United Nations that prepared the Brundtland Report. and financial results by the corporations. transnational 19 . market.” (The World Commission of Environment and Development. SD and strategic innovation may not be possible in the short term. It necessitates more inclusive and innovative approaches for collaboration. and benefits of international trade. and ensuring social and economic stability. While incredible improvements have been made over the last decade. SD is a critical element of sustainability that focuses on developing and deploying strategic innovations that exceed the expectations customers. the reduction in the costs of global communications and logistics. Globalization involves the development of an integrated global economic system. developing and deploying strategic innovations offer bright prospects for an enhanced global business environment with the greater possibilities for more people worldwide to enjoy the solutions provided by businesses. burdens. effectiveness. SD involves obtaining the best outcomes possible for the present generation and ensuring that future generations can realize their aspirations for social and economic well being in harmony with the natural world. there are many more changes necessary to ensure that globalization is a positive force resulting in sustainable outcomes for all of the participants.

While there has been much discussion about a shrinking world due to the incredible innovations in new technologies and the linkages between businesses and people. it can also be said that the business world has expanded multifold with the inclusion of all people living in the developed and developing countries. the digitization of many products. between the companies from the developed countries and those from the developing ones. final products and the related logistical requirements has made the integration of the global economy possible. technological and ethical realities that exist across the globe. Trying to prescribe a single pathway to sustainability and SD would require a model that is so intricate and detailed that it would take several books to spell out all of the variations. and non-governmental organizations (NGOs) among many others. actions and innovations that unfold over decades. global corporations generally served approximately one billion people. most are bystanders who might be considered latent customers waiting for the right solutions to meet their needs and circumstances. This profound change has been supported by numerous strategic innovations including the expansion of the internet. and diversity. Such guidelines are intended to provide insights and assistance in developing and implementing the requisite methods and mechanisms. solutions. Sustainability and SD involve a continuum in the formulation and implementation of strategies. Most importantly. The discussions herein do not include all of the requisite details to fully articulate how to develop and implement the model. a holistic model pertaining to sustainability and SD has to recognize and incorporate the differences in resources. Today. The intent herein is to offer insights about what can be done to become more sustainable in a world full of opportunities and challenges. as more companies from the developing countries play significant roles in the global business environment. the business world is not only global. While some are active participants in the served markets. Worldwide. globalization includes interconnections and interrelationships between business enterprises. Regardless. national governments. and the improvements in affordability. The objective of the chapter is to articulate the basic elements of a holistic model for improving the adoption of sustainability in the context of globalization.9 billion people who play a role in the global economy. and small and medium sized enterprises (SMEs) may take years to realize. and the between the old line corporations and the emerging companies. the interconnectivity of telecommunications. The lowering of the costs of manufactured parts. The adoption of the model would be voluntary and offer benefits to corporations. Globalization is a complex term that has many meanings from a limited view focusing mainly on the economic exchanges of the global economy to the multi-dimensional perspective involving an interrelated. but it is richer in scope. Moreover. cultural. such a model or models have to accommodate the social. BACKGROUND The business world has changed dramatically over the last two decades as the scope of the social. capabilities and sophistication between the MNEs and the SMEs. Most 20 . scale. governments. interactive. The chapter does not provide all of the answers. since they would have a sense of the underlying specifications so that they can more easily determine what needs to be done going forward. but those affecting developing countries as well. especially from an economic perspective. those living in the developed countries. business leaders. and practitioners alike.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation corporations. The model provides broad guidelines for what is necessary and beneficial from a global perspective. political and environmental forces impacting businesses has broadened to include not just those pertaining to the developed countries. economic. environmental. Prior to the fall of the Iron Curtain. political officials. there are approximately 6. innovative and more sustainable business world. economic.

effects and impacts. it is based on the context of all of the social. not just customers and stakeholders. It implies that participants and non-participants have to be included in the analysis of what is necessary and appropriate and in the creation of sustainable outcomes. environmental and ethical forces. In the limited perspective. For instance. However. technological. and the global economic system. the limited view pertains to economic exchanges and activities as the primary forces that drive international trade. and government officials view five to ten years out to be the long term. It presumes that such corporations and their strategic leaders comply with the existing laws and regulations and take due care of their specified environmental responsibilities. The underpinnings of the limited view are based on free enterprise and market capitalism. ones that generate advantages and financial rewards for the entities involved. The multi-dimensional perspective includes considerations about future generations of people as well. The European Union (EU) is an example of a regional economy that includes 27 nation states that have linked their economic interests and activities to enjoy economies of scale and more open associations. economists. economic. if the effects of oil depletion are the 21 . political. especially if the social and economic forces were stable and enduring. The multi-dimensional perspective also includes a longer time horizon. Globalization without sustainability. The key factors for achieving success are perceived to be cost-effectiveness. environmental and ethical aspects.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation importantly. sophisticated management constructs for decision making. technological. developing. difficulties and discontinuities often arise in the long term. It is also based on the realization that enduring economic success depends on satisfying all entities and individuals engaged in or impacted by business transactions. strategies. SD and strategic innovations may be viewed as a continuation of the “business usual” mindset that has dominated strategic management thinking over the last half century. high quality products. environmental and ethical forces. Such considerations are an integral part of true globalization that has yet to be fully developed. in which the main focus is on growing and expanding businesses without significant concerns about their social and environmental underpinnings. economic. more costeffective means and mechanisms for producing and transporting goods from remote locations to the markets across the world. but it is generally limited in terms of the social. It is based on advanced information and communications technologies. The “business as usual” mindset represents the line of strategic thinking. Historically. producing and providing innovative solutions for people based on their context and not just the objectives. business investments. usually five years or so. Economics is perceived to be the overarching factor and markets and customers are viewed as the main driving forces. The multi-dimensional perspective of globalization involves sophisticated management systems. The time horizon is relatively short. cutting-edge solutions. global corporations vie to satisfy customer demand and meet stakeholder expectations based strategic positions and global resources and capabilities. and innovative methods that are developed and deployed to enhance the positive aspects and eliminate the negative aspects of the social. such perspectives resulted in reasonable outcomes in the developed countries. The “business as usual” mindset has positives from an economic perspective. and actions of the global corporations. While most business leaders. It involves creating. proactive strategies. but they are not compelled to go beyond such mandates and requirements. The intent is to enhance free trade based on a transnational economic system. political. the long term in the context of the multi-dimensional perspective is measured in decades. On a global basis. The limited view of globalization is often stated in terms of the merging of national economies into a regional economy and ultimately into a global economy. and newto-the-world technologies and products. and tailored products and services.

effects. SD and strategic innovation necessitates a mindset shift in strategic thinking from exploiting the prevailing situations and selling the existing products to customers who have the financial wherewithal to developing innovative solutions that fit the needs. providing stimulus. especially those in the developing countries. impacts. Globalization based on sustainability. Indeed. and being rewarded by their stakeholders for behaving responsibly” (p1). especially if strategic leaders maintain the “business as usual” mindset. and consequences. The Next Sustainability Wave. Moreover. suggests that “sustainability strategies give corporations the choice of getting ahead of the curve. there is a significant possibility that the economic and social forces may be overwhelmed by increasing demand for energy. but chaotic thereafter. thus. SD and strategic innovation. with the addition of many new participants in the global economy and expanding global energy consumption. as enormous opportunities for translating non-customers into customers. Today. strategic leaders and senior management of all persuasions have to expand their capabilities and knowledge and adopt innovative management approaches that are in line with the realities of the world. As evidenced by the current economic crisis with its myriad of causes. Green to Gold. the so-called Great Recession. However. Business leaders across the spectrum of industries and markets try to develop and implement the most effective programs to maximize benefits and outcomes and minimize the risks and vulnerabilities. many of the same strategic leaders pay little attention to people in the least developed countries because most of the people are poor and seemingly do not have the necessary disposable income to buy the existing products. All leaders are being challenged to make dramatic improvements in the ways they manage their responsibilities and achieve desired outcomes. long-lasting companies regularly redefine themselves. politicians. such strategic leaders should view the creation of solutions based on the needs and perspectives of people. and allocating resources. expectations and circumstances of people on their basis. In support of sustainability. the current economic recession may be a harbinger of more challenging times ahead. Environmental-inspired innovations offer companies new and exciting way to find fresh expressions for their capabilities” (p301). government officials and NGO leaders as they try to right the global economy and develop new mechanisms for dealing with the related challenges. affecting the costs of all materials and goods and leading to significant competition for resources and unsustainable outcomes.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation most profound in latter stages of the life cycle of petroleum. UNDERPINNINGS AND GLOBAL REALITIES Prevailing Business Situation The current economic crisis. Winston in their book. Under such conditions. then the next ten years may be relatively stable in terms of conventional energy sources. Politicians and government officials focus on setting new policies. the business world may become less stable and secure as conflicts arise over obtaining the necessary resources. Daniel Esty (2006) and Andrew S. True globalization has to incorporate the concepts of sustainability. They are essential elements in achieving broadbased globalization and providing successful outcomes for all people. Bob Willard (2005) in his book. defining the new rules. articulate that “successful. many of the strategic leaders focus their efforts on the developed countries because people in those countries have money and can afford to buy the branded products and services. Sustainability is about leading change to create better outcomes and more enduring business value. Today. Moreover. the underpinnings and 22 . has shed new light on the many difficulties and problems facing business leaders.

affluent populations with significant disposable income. Today. open exchanges. Strategic leaders have to recognize that they are responsible for assuring that the best solutions possible are devised and implemented. A major untangling of the turbulence and new understandings of the global economy are necessary for creating the requisite solutions. most of today’s management models are not in synch with the new realities of globalization and the twenty-first century business world. They were underpinned by many assumptions that were relevant for the major markets like those in the US. With all of the improvements in management science. While such management constructs were innovative methods during the later years of the twentieth century. if they plan to create value and enjoy success. C. roughly in equal measure. there are incredible opportunities for companies to succeed. The great challenge for strategic leaders is not just to “right the mistakes” of the past or cut through the turbulence.K. Globalization requires global corporations to recognize new responsibilities. Insights about Global Realities and Possibilities The global economy includes all of the existing. Many factors and phenomena play out on a global scale. It does not provide the necessary support for the poor of the world nor does it include a scope wide enough to assure that solutions are complete. many of those assumptions and perspectives are questionable. and at the same time. the companies providing products and service to them that are profitable” (pp3-4). The present form of globalization is not inclusive. incomparable through they may seem. One of the most significant underlying approaches in the drive to be more successful is to make products and services more affordable through design innovations and incorporating 23 . yet many strategic leaders still follow the theories and practices that were developed during the 1980s and 1990s. Hawken clearly points out the problems with the prevailing business situation. France. Prahalad (2005) in his book. The world has changed significantly over the past two decades. especially on a global basis. Paul Hawken (2007) in Blessed Unrest discusses the challenges of globalization (p135): One of the failures of the arguments opposing market globalization is the visible lack of an alternative economic model that might address the plight of the world’s poor. and well-established infrastructures. linear increases in market demand. talked about how to handle the global challenges: “What is needed is a better approach to help the poor. Unfortunately.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation key elements of the global economy are too complicated and intertwined for “old school” approaches to succeed. social and environmental conditions and trends are now less predictable and more volatile. emerging and potential markets and customers in the world. Japan. they are based on the realities of the times. economic freedom. etc. an approach that involves partnering with them to innovate and achieve sustainable win-win scenarios where the poor are actively engaged. The Fortune at the Bottom of the Pyramid. UK. Germany. Most of the models viewed the business world in the context of the developed countries and Western business philosophies. The underlying perspectives were based on political stability. With all of the uncertainty. but to invent a more sustainable future by creating wonderful new solutions for people everywhere and by eliminating the problems and the underlying risks and difficulties. The economic. The global economy with its numerous interconnections and interrelationships brings with it many risks and uncertainties. managing global corporations is still an extremely risky venture. The failure of those making the case for globalized free trade is their inability to adequately address the results of rapid economic change in human and ecological degradation.

With positive actions. and territorial borders. expenditures. not just those of business leaders and/or high-level government officials. In Globalization: A Critical Introduction. territorial distances. strategic leaders in China are expanding their industrial outcomes at incredible rates. It involves a mindset shift from exploring “what is” to “what could be. it is not just a simply matter of obtaining information and data and discerning what is happening. Air and water pollution may be the limiting factor in China’s quest to be a global economic power. supporting and advancing the social. strategic leaders in rapidly industrializing countries have to create positive outcomes without overwhelming the social world and the natural environment with pollution and wastes. For instance. the analyses require exploring the possibilities as well as the realities. strategic leaders have the opportunity to solve future problems at low investments that in the long-term are inconsequential to overall economics of the processes. The multi-dimensional perspective of globalization includes the effects and impacts on a much larger scale. A. and possible failures. especially the customers. technological. it is often close to impossible to retrofit pollution abatement on a cost-effective basis. The resulting management constructs are more complicated because reality and future requirements have to be examined from multiple views involving more intensive analysis of the salient forces and more in-depth understandings of the interactions and interrelationships between the forces. Moreover. J. Once the plants have been designed and constructed.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation customers’ needs and expectations in the solutions. and societies of the world. and that everyone’s well being is positively enhanced and not exploited. Modernization. Such methods have been in play for several decades in the developed countries as companies like Walmart and Toyota have become global giants and great financial successes through innovations to make their products and services both more affordable and their systems more productive and cost-effective. are provided with right products and services that have been designed and delivered from an external perspective. The underpinnings include assuring that the recipients of the solutions. it also involves getting to the underpinnings of reality and trying to ascertain what could be done instead of just trying to understand what is being done. including all of the driving forces of change. Liberalization-reducing government imposed trade restrictions on the movement of goods between countries. Scholte (2000) identifies five categories that help to articulate what globalization is as follows (p15-17): • Internationalization-the growth of international trade and interdependence among countries and participants.” Strategic leaders have to view human developments and the elimination of poverty in the least developed countries as enormous opportunities for transforming non-customers into customers. “Deterritorialization”-reconfiguring geography so that social space is mapped out in terms of territorial places. what could be or should be not just what is. stakeholders. i. and environmental underpinnings of the global community of nations and people.e. Moreover. Globalization requires that businesses and governments become key participants in developing. market. “Universalization”-spreading of concepts and experiences to people around the world in harmonizing aspirations and outcomes. economic. but in doing so they are creating wastes streams that may become impossible to mitigate in just a few years. • • • • 24 . Such difficulties are much easier to correct before the industrial facilities and power plants are built. Thus.spreading social structures around the world affecting local self-determination and destroying local cultures. Failure to do so may result in significant long-term costs.

The main competitors not only seek to dominate customers and markets. They may quickly become global players. Clearly. strategic leaders must embrace the importance of the social underpinnings. This perspective is not a new paradigm for achieving growth and improvements for all people. and Russia (BRIC countries).A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation Scholte’s perspective provides a sense of the complexities involved in globalization. Proctor & Gamble. and thousands of others. Ford. The current form of globalization may lead to more intense competition among the key players without regard for the broader social. principally the G7. Brazil. but as indicated by Scholte. However. Shell Oil. there are many concerns and issues that have to be dealt with. Unilever. It may be viewed as simply a linear expansion of the economic power that has migrated from the Western countries. Globalization must include the whole context of reality (inclusiveness). with the numerous examples of toxic substances being used in producing products or incorporated in the products. consumer protection. ensure that people are successful and that success is enduring over time (effectiveness). and understand the needs of the future as well as the expectations of the present. stakeholders. build enduring and trust-based relationships with customers. there are many positive aspects. and environmental factors. Emerging companies may use their strategic advantages of low-cost labor and positive cash flow to grow rapidly. the evidence about whether globalization is real does not provide a compelling answer. DuPont. provide the requisite information about products. The expanding physical and informational links between distance markets have spawned a better understanding of cultural and regional similarities and differences among people. especially those impacting social institutions like the destructions of ingenious cultures and languages. create and deploy the best technologies and products possible. Moreover. and ultimately. To do this. In this scenario. Moreover. involve providing the best solutions possible (innovativeness). partners and people around the world (connectedness). contemplate non-traditional and countervailing perspectives that reveal ways of doing business more efficiently and effectively. The new powerhouses are China. India. companies in China are trying to secure sources of raw materials around the world from aluminum to zirconium. protect and preserve the natural environment. and environmental protection. political decisions and geography. Globalization today is more than economic forces. processes and services to all customers and constituencies (openness). but one of simply adding new players to the world elites. David Runnalls. globalization is really a different manifestation of the old world of the economic models of the twentieth century. proper work standards. in which all of the driving forces are considered and acted upon from a unified perspective. to a few new players who are vying for the share in the economic riches. and Mark Halle (2005) of the International Institute of Sustainable Development in their article. globalization involves moving away from just economic theories about international trade and exchanges to the more integrated business world. “Environment 25 . IBM. Globalization can be viewed as part of the evolutionary track of expanding opportunities for economic and social activities and interactions. they try to monopolize the essential resources for production through whatever means available. Adil Najam. recognize and respect cultural differences between societies. New companies in the BRIC countries may focus extensively on economic outcomes and try to gain superior positions against the old line corporations like BMW. Pfizer. economic. Public policy directives in the developed countries to eliminate historic barriers to trade and commerce contribute to common markets and more open communications and travel. For instance. there are great concerns that Chinese companies in particular are not following prescribed protocols or generally accepted practices for ensuring safeguards.

5. As more people around the world expect and demand products and service. And the least resilient ecosystems. For instance. Consumption-in both the North and Southwill define the future of globalization as well as the global environment. Today.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation and Globalization: Five Propositions”. The livelihoods of the poorest communities are most at risk. especially metal ores. These perceptions are very useful when exploring the meaning and future aspects of globalization. petroleum and water. Most MNEs participated in exporting and licensing and the large ones often had subsidiaries and operations in the other major economies. The newly prosperous and the established wealthy will have to come to terms with the limitations of the ecological space in which both must operate. the scope of their enterprises was relatively small even in the case of MNEs. and economic systems and structures. their external context did become more complicated with a greater geographic scope. Failures to resolve such difficulties may limit the overall economic and market potential. 2. is among the most critical factors for achieving strategic success. if not eliminate. It is crucial to realize that globalization is accelerating and that the availability of resources is a significant strategic factor for the sustainable success of global corporations. They impact the vulnerability of ecosystems and societies. A MULTI-DIMENSIONAL MODEL FOR THE ADOPTION OF SUSTAINABILITY The Strategic Logic for the Adoption of the Model External context in the long term drives change and the opportunities and challenges facing global corporations. corporations obtained most of their revenues and profits from their national markets. pollution and hazardous wastes. Resource vulnerabilities are becoming worrisome. The linked processes of globalization and environmental degradation pose new security threats to an already insecure world. Such vulnerabilities are multifaceted. The world is more complex and is expected to become more interdependent as emerging markets take their place in the business world of the twenty-first century. and also with the needs and rights of those who have not been as lucky. The rapid acceleration in global economic activity and our dramatically increased demand for critical natural resources undermine our pursuit of continued economic prosperity. 4. the economic realities have to be improved dramatically to satisfy all of the needs and at the same time keep the negative effects and impacts under control and mitigated to the extent possible. the availability of natural resources. For most of the early twentieth century. social. competition played out in the domain of the markets and the drive for revenue and profits. They include being unable to handle all of the wastes being generated and lacking the capabilities to mitigate. They did adapt their business models to recognize the additional forces and factors that required attention and actions. Concerns about the global market and global environment will become even more intertwined and each will become increasingly dependent on the other. For most the twentieth century. In the days when most corporations primarily focused on their home markets. As such corporations expanded internationally during the last century. The markets were generally expanding and custom- 26 . 3. identify several challenges and opportunities associated with globalization (P10): 1. all of the G7 countries had relatively stable political. However. the complexities of the situations were mitigated to a large extent because there were many similarities between the most advanced national economies.

whereas the US economy overwhelmed the economies of Canada and Mexico. Mexico and the US. creating cuttingedge brands that are unique. such changes expanded the prospects for trade and business growth by integrating national economies into regional ones. 27 . While the underpinnings and implications of the EU and NAFTA are profound and beyond the scope of this discussion. More recently. In a nutshell. As discussed earlier. The changes were more compelling in the EU than in North America. Most strategic leaders are still using management constructs that were developed for managing in national or regional economies. The EU enhanced economic exchanges throughout most of Western Europe and NAFTA eliminated many of the trade restrictions between Canada. It means that the basic requirements in serving national markets are still important. and managing the realities impacting global corporations. Moreover. strategic leaders of global corporations have to modify their perspectives of what is necessary for achieving success and adopt new models for including the essential elements. Regionalization introduces many more variables to the scope of the business environment. strategic leaders have to shift their strategic thinking from what the company has to do to serve its home market to how it can meet the needs and expectations of more complicated market situations. Variations in demand usually were easily accommodated through product innovations and modifications in marketing methods. UK and Italy) were more or less coequal. except that additional perspectives are also critical for achieving success in a much large business environment. some corporations are more successful than others and that outcomes are dependent on circumstances and the capabilities of the organizations involved. The logic behind the transition is not based on an “either-or” situation. Gary Hamel in The Future of Management (2007) suggests the “there’s little that can be said with certainty about the future except this. US economy was already interconnected with many other national economies on a global basis. many global corporations are struggling with the complexities of the global business environment. many lack the scope and sophistication for assessing. and maximizing profits to more advanced approaches like achieving market leadership. and obtaining desirable market shares. While some of the approaches may be useful in the global business environment. building a large portfolio of products and services. obtaining efficient and effective operations. In most cases. global corporations have made the transition from focusing on national markets to regional or more broadly based markets. the business world changed dramatically in the 1990s. understanding. France. Free trade was expanded with the formalization of the EU and the North American Free Trade Agreement (NAFTA).A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation ers demanded fairly similar products. While there were major differences and culturally based requirements like the French preferences for their own wines and American preferences for fast food. they have to become market-centric instead of company-centric. It is important to point out that these discussions only cover some of the most salient aspects and that in both cases the requisite models are much more complicated than outlined herein. sometimes over the next decade your company will be challenged to change in a way for which it has no precedent (p41). but a realization that the scope and scale have to become much greater as a corporation moves from national markets to regional ones. but the means and mechanisms for achieving success in the global economy are not well established. The difference might be explained by that fact that the national economies of the leading European countries (Germany. Globalization has taken root. Most importantly. As the scope expands. Obviously. especially considering the phenomena in the developed countries. They have to transition from basic constructs like improving their competitiveness in markets. most MNEs accommodated the market-related expectations. establishing strategic direction for exceeding expectations.

others can be applied in special cases. invest in new capital equipment. For instance. While global forces impinge on all corporations. It implies exactly what the term means. actions and decision making. it is fool-hardy to create new products. They were company-centric focused on improving the sales and profits of their products and services. to endure over the course of time. They have to recognize that success depends on more than addressing markets and satisfying customers and stakeholders. SWA’s strategic leaders have chosen to focus on a narrow perspective. if any at all. the hoped for gains in profitability became less and less viable as outsourcing evolved into a global phenomenon. While it is impossible to know and manage everything in the world. Ultimately. not just market-centric. The transformation to a broader scope using more sophisticated constructs and models does not mean that the traditional constructs and models are no longer appropriate or useful. Southwest Airlines (SWA) is a specialized US airline that successfully serves small markets. In a global setting. Some may be embedded within the systems and structures of the more contemporary models. For instance.e. The higher level of sophistication identified under “global” in Table 1 provides strategic leaders with the prospects of realizing more enduring performance and success. i. sophisticated strategic leaders have to be holistic in their thinking and have inclusive strategies. and develop new ventures among numerous other business initiatives unless they are sustain- 28 . in which the underpinnings and forces are less complicated. It involves incorporating all of the driving forces and facets of the global business environment into the strategic logic of the corporation and the models used for decision making. etc. Its model is fine-tuned to the US and its business environment is national in scope and nature. While very little in the business world lasts forever. but they also have the risk of being quickly duplicated by competitors. the more inclusive the model and the more sophisticated the elements. Such methods have helped consumers in the developed countries obtain more affordable products and services and allowed governments to keep inflation low. strategize and execute from the very broad perspectives. the broader the scope. innovative and responsive. if they except to realize success in a complex and turbulent reality. analyze. management constructs that can be easily copied are subject to being generic approaches with limited advantages. however. to strengthen the framework. for more than a decade many strategic leaders in the developed countries viewed globalization in terms of outsourcing processes and activities to lower their cost structures. Globalization necessitates a transformation in management constructs and models from marketbased approaches to inclusive and innovative ways of realizing sustainable success. to keep going regardless of the challenges. engage. While strategic leaders believed that such strategies and actions would lead to profound outcomes and financial success.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation Managing in the global economy necessitates more comprehensive and sophisticated management constructs and models for realizing extraordinary performance and achieving longterm success. to support from the foundation. Globalization requires that strategic leaders consider. Sustainability is the imperative of the twentyfirst century. in many cases the improvements are simply not good enough to stay ahead of the changes and expectations in the business environment. They have made improvements. Most strategic leaders realize that their corporations must be more capable. global corporations have to become enterprise-centric. For instance. Table 1 provides some of the salient factors involving the transformation from national market to regional one and then to global perspectives. Simple methods have the allure of being easy to understand and implement. such theories were sound in the short term but over time have become less powerful as competitors followed the same line of thinking. the more difficult it is for others to emulate the strategies and actions. However.

therefore. For instance.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation Table 1. economic. While there are strategic leaders. ethical. and all of the short-term and long-term requirements to make the solution succeed and endure.” sustainability is really about integrating the social. regional and global markets Scope Focus Imperative Means Mechanisms Measures Strategies Company Competitiveness Products & Services Operations & Marketing Process Innovations Profitability Competitive Strategies National Market Market Leadership Cutting Edge Brands Strategic Planning Product Innovations Market Share Market Strategies Regional Global Business Environment Sustainability Sustainable Solutions Sustainable Development Strategic Innovations Sustainable Success Preemptive Strategies Dimensions Market Salient Factors of the External Context Customers Competitors National Stakeholders Communities Employees Shareholders Production / Consumption Competitive Positions Revenue & Profits Products/Services Dominant Technologies Incremental Innovation Regulatory Compliance Pollution Prevention Waste Management Legal System Political Structure Regulatory Mandates Values and ethics Accepted Principles Established Behaviors Customers Allies & Partners Regional Stakeholders Civil Society National Identity Social systems Value Proposition Market Positions Economic Performance Innovative Products Advanced Technologies Radical Innovation Beyond Compliance Green Management Waste Minimization Political Economy Governmental Structures Directives World Class Standards Axiomatic Principles Proper Behaviors Customers & Non-customers Contributors & Recipients All Stakeholders All people Cultural Diversity Social Structure Value Creation Value Maximization Sustainable Success Cutting Edge Solutions Clean Technologies Strategic Innovation Openness & Transparency Sustainable Enterprise Zero Defects & Wastes International Laws and Policies International Organizations International Treaties Universal Standards Global Compact Profound Respect Social Economic Technological Environmental Political Ethical able over the long term. but in the long term the consumers in the developed countries may not be able to afford the products. It includes the products and services. A sustainable solution is the complete package of everything that is necessary to provide the customers and stakeholders with their own successfully outcomes. 29 . It is based on the realization that customers and stakeholders really want and desire solutions. and market forces and considerations into a holistic perspective (model). in which success is obtained in every dimension. environmental. Sustainability requires an integrated model for decisions. political. practitioners and scholars who discuss concepts like “environmental sustainability. strategies. outsourcing of jobs from developed countries to developing countries may result in improved cost structures. Sustainability is about realizing ongoing success from every dimension. solutions and actions. the support mechanisms. technological. such approaches may not be sustainable. Salient factors pertaining to national. Sustainability is facilitated through sustainable solutions. not just the economic or environmental ones. the complementary products. if they do have sufficient disposable income.

fast follower. 2010. developing and delivering more valuable solutions. Preemptive strategies require extremely assertive actions in making dramatic or radical improvements to the external and internal dimensions of [the company and/or] business units… Aggressive does not mean increasing the rivalry among competitors. the extended enterprise. The following excerpts provide the main perspectives (Rainey. strategic leaders have to have the confidence and courage to develop new solutions that offer extraordinary value and new-to-the-world outcomes. capabilities and resources. From a sustainability perspective. Preemptive strategies usually involve the full integration of the whole enterprise into a seamless and highly assertive value delivery system (holistic management system) that is fully capable of planning and executing every action at the highest level of quality and performance. and all of the key contributors. SD requires preemptive strategies for leading change.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation SD involves the mechanisms that are employed to create sustainable solutions. or strategic change leaders. Preemptive strategies necessitate changing and even disrupting industry or market space norms through fast-paced. preemptive strategies involve strategic innovations that significantly or radically improve underlying technologies. It is underpinned by strategic innovations. Sustainability involves applying the most sophisticated management constructs possible to attain market leadership and value creation. hard to duplicate strategic actions that provide distinctive and sustainable advantages for first mover. it does mean taking every opportunity to make profound changes that advance the well being of customers. This includes integrating the extended enterprise into a complete system. Strategic innovations are particularly powerful when they create extraordinary value for all contributors and recipients and eliminate difficulties and challenges across the business environment. pp373-376): Preemptive strategies are proactive approaches for leading change and taking the initiative to aggressively move on opportunities and challenges in the business environment before such actions are expected or become obvious. Enterprise-wide Strategic Management: Achieving Sustainable Success through Leadership. and using all of the capabilities and resources in the most effective and least damaging ways. and reinventing the strategic management system and value delivery system with outstanding intellectual capital. leading change to secure sustainable advantages. Preemptive strategies eschew the notions of reacting to change or anticipating changes only slightly ahead of a necessity for action. and to build enduring relationships with all of the essential contributors and recipients. and Value Creation. In my book. and advance sustainability. products and servicesthe solutions. Most importantly. enriching and exploiting improved process capabilities. the construct of preemptive strategies is developed and discussed in detail. the organization. Such innovations include inventing and validating clean technologies. In the 30 . Preemptive strategies involve transitions and transformations to the next higher levels of achievements and sustainable outcomes… [Preemptive strategies] involve out-of-the-box thinking about how to move closer toward perfection and obtain the best solutions for customers and stakeholders. Preemptive strategies are cutting-edge methods for leapfrogging expectations and competitors and achieving sustainable success. Preemptive strategies imply that strategic leaders seek out every opportunity to forge positive changes and exploit new opportunities before customers or competitors understand the implications. Strategic thinking shifts from the competitive spaces of the past to preempting the market spaces and creating the business enterprise of the future. sustain success. Strategies.

Some of the key underlying concepts include (Rainey. They understood that laying the foundation and building solid walls would provide the means for others to continue building. pp678-680): Management across the world is engaged in the relentless struggle to keep pace with technological. opportunities to lead change and move beyond the social. Moreover. global corporations are a long way from achieving the level of sophistication that is necessary to achieve a modicum of sustainability within a decade or two. economic and environmental changes that seem to accelerate as time moves forward. 2006. they were willing to invest their time and efforts in the process because they believed in the vision. The opportunities for providing these solutions range from finding ways to expand health care and obliterate hunger to protecting natural resources and eliminating waste streams. the effects of such achievements today are often measured in months. It is akin to the building of the great cathedrals of Europe. P2).A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation context of globalization. However. Sustainability requires dedication and ongoing development. Moreover. The requisite model includes the key elements for leading change through innovation. economic. Across the world people want solutions to the problems they face. Sustainability is more than the “triple bottom line” articulated by John Elkington (1997. Great strides in competitive advantages are marginalized by the gains of peers and competitors. They are essential for true globalization. there are also enormous opportunities. Given the current state of affairs in the business world. While Elkington’s concept is an important contribution to management theories. Innovation and Leadership. The Model: Sustainability in the Context of Globalization and Strategic Innovation Sustainability and SD fit well in the context of globalization. and the changing business environment. and connectedness. it provides the underlying elements and perspectives that make the concept of globalization truly global. While continuous improvement was one of the main management themes of the late twentieth century. the quest for perfection. not perfection itself. Sustainability integrates of all of the external driving forces into a coherent model for creating value and sustainable solutions for the present and future. the important factors for realizing sustainable are detailed. and building enduring relationships with people through social responsibility. Sustainability is the relentless pursuit toward perfection through innovativeness. The penultimate objective is the quest for greatness. and environmental considerations in managing businesses. preemptive strategies and sustainable solutions necessitate dynamic actions to produce sustainable success. Sustainable Business Development: Inventing the Future through Strategy. The architects and builders recognized the daunting nature of such projects. inclusiveness. the pursuit of sustainability and SD are the critical perspectives driving global corporation in this century. They knew that it would take many generations of skilled and dedicated people to realize the dreams. they realized that the succeeding generations of their relatives and compatriots would enjoy the fruits of their labor and that the structures would provide humankind a lasting testimonial of their contributions and achievements. sustainability is a preeminent management construct in its own right with or without globalization. In my book. especially from the development and deployment of new-to-theworld technologies and products. social. sustainability and SD are inextirpable linked with strategic innovations. The “triple-bottom line” includes social. economic and environmental mandates. The model provides a framework pertaining to how the key elements interrelate. However. with all of the challenges. Nevertheless. managing the systems and structures across the organization and the extended enterprise. The 31 . Where past breakthroughs led to competitive advantages that lasted for decades.

and non-customers. it is impossible to articulate all of the details. Enterprisewide Strategic Management: Achieving Sustainable Success through Leadership. it is an adaptation of the model presented in my book. in which strategic leaders create extraordinary value for all. Given that people are central to sustainable success. building enduring re- 32 . not just making shortterm profits at the expense of long-term success. and broader framework for leading change in complex business situations. Model for improving the adoption of sustainability in the context of globalization and innovation model is depicted in Figure 1. The focus is on the global business environment and market spaces. The underlying aspirations include creating sustainable solutions and achieving sustainable outcomes through SD and strategic innovations. Market spaces • • include existing markets. p160). sophisticated.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation Figure 1. 2010. emerging ones. While the framework maps out the essential elements. While many existing models are either company-centric based on core competencies or competition-centric based on rivalry. customers. Strategies and Value Creation (Rainey. The model offers several exciting perspectives: • The model provides an inclusive. sustainable success focuses on making people the center of strategies and actions and making them successful.

Without direction from strategic leaders. but profit is really a derivative of good analysis. It focuses on integrating the corporation’s strategies and actions with the external contributions of the extended enterprise and the needs and expectations of the market spaces. it examines the whole perspective rather than focusing on the parts. The Necessary Revolution (Senge. and practices that facilitate developing and deploying the best solutions possible. pp33-41)) SD is often conceptually accepted by global corporations. strategies and actions. structures. K. and market space considerations. The simple yet most compelling philosophical perspective is putting the business environment or external context first before thinking about internal context. For instance. systems. It is based on the recognition that people and the natural environment are the overarching considerations and that profit is important for sustaining companies. These perspectives are reinforced by the contributions of C. Indeed. Unlike most of the major initiatives of the last century like strategic planning and total quality management. This represents a quantum leap forward in connecting the systems. ethical. Krishnan (2007) in the new age of innovation. It examines the business environment in the context of the whole global landscape. it involves a complex array of solutions. It includes the systems. While the underpinnings and aspirations are often clear. theoretical constructs and practical approaches for leading change in global corporations and managing their businesses. and strategic leadership and management in the context of sustainability and sustainable development. decision making. S. structures. processes. Strategic leaders have to provide the resources and commitments to implement the revolutionary ways to do more good and less bad as Peter Senge discussed in his book. and processes required for obtaining results. 2008. planet and profit. structures. The Means: Sustainability and Sustainable Development Sustainability is the overarching constructs that includes the philosophical perspectives. They require concerted efforts and significant investments. Strategic leaders have to have the courage and dedication to take on incredible challenges. 2006. technological. which is often the prevailing methodology. It discusses solutions in the context of social. and organizations. The intellectual challenges include determining the vision and strategic direction and the strategic leadership philosophies and constructs for leading change. to think about radical ways of providing solutions. The model has holistic connections with strategic management and operational constructs. 33 . SD cannot be implemented The model addresses perspectives and constructs that are in line with 21st century dynamics. in which they state that building relationships with external contributors are a main source of competitive advantage (p46). Prahalad and M. processes and techniques.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation • lationships is essential for realizing the expected outcomes on an ongoing basis. Sustainability is a continuum of strategic thinking and actions that is internally driven by visionary strategic leadership. sustainability and SD do not get traction. It explores not only the prevailing situation but how innovative solutions taken from the market perspective can create new opportunities. pp117-119). and to use preemptive strategies for realizing extraordinary outcomes. This fits the concept of “people. environmental. It recognizes that customers want solutions that exceed their needs and expectations. the model integrates concepts for dealing with customers and stakeholders and building relationships rather than just focusing on marketing and selling.” (Bergmans. economic. enterprises.

However. ethical. finance. but transforming the corporation and organization to lead change and being ahead of mandates and expectations is the essence of SD. supply chain management. Strategic innovations involve high-level investments into employees. the organization. These elements are translated into strategies and action plans that are implemented by the organization and its enterprise. learning. legal. technological underpinnings. strategic leaders have to provide the key elements for establishing the basic foundation and the strategic direction. business portfolios. Strategic innovations are radical changes to the corporation. The Mechanism: Strategic Innovations The transformation to highly levels of achievement is predicated on strategic innovations. the extended enterprise. They include. environmental management. the leadership. Global corporations seek practical approaches to their quests to be competitive and achieve ongoing success. and tactics. intellectual property. While most global corporations have well-functioning operating systems and reasonably effective processes.e. principles and ethics of the organization based on the broader social. its business units. Strategic innovations are a global corporation’s answers to how to develop a unique place in today’s turbulent and complex business world. and the technologies. Strategic leaders too often think about what their organizations are instead of what they must be. Strategic leaders and the directors of the corporation determine the governance structure and company policies. Moreover. they do offer a greater probability of achieving game changing outcomes that are more difficult for competitors and would be rivals to emulate. and product lines. the management constructs are often based on twentieth century requirements rather than on the current realities or future ones. Strategic leaders ensure that the capabilities and resources of the organization are aligned with the strategic direction. products and processes. Results are accomplished through support systems and structures. relationships. protocols. While strategic innovations do not always result in significant advancements in competitiveness and market success. They define the values. Like many of the military situations and organizations of the past. quality management. the missions and the objectives. Strategic innovations make sustainability and SD real for the people who are task with carrying out the actions. Operational management engages in the implementation and execution. brands. strategic leaders often view strategic innovations.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation on a project basis. instead of being proactive and contemplating what is necessary for the future. The key elements for being successful in national markets are also necessary for success in the global economy. As depicted in Figure 1. They must set strategic direction. It includes a myriad of the critical systems and processes that a used to realize outcomes and achieve success. SD involves a long-term approach for transforming the corporation and its enterprise(s) into an integrated and innovative entity. They also involve the tangibles of developing and commercializing new products and creating and building new business ventures and the intangibles of enhancing one’s reputation and acquiring new knowledge. Understanding the past is important because it gives us insights about the social and economic dimensions. in which significant efforts and funds are allocated to create the systems and then one can enjoy the results at completion. and environmental responsibilities. 34 . i. but are not limited to. know-how. strategic leaders allocate the resources and provide learning opportunities for employees and contributors across the enterprise. strategic leaders are often well prepared to fight the battles of the past. marketing. health and safety management and waste management. programs. SD requires an embedded structure that is parallel to the salient factors associated with the transition from national and regional markets to global ones as portrayed in Table 1.

While the potential results of incremental innovations are usually more predictable and successful from a product or process point of view. Leadership and talent development are crucial for assuring the going commitment to sustainable success. Radical technological innovation is a primary mechanism for effecting strategic innovation. the actual business outcomes are often less fruitful and enduring. as risky and subject to many perils. and value delivery expressed and supported using the value systems and extended enterprise. and structures and build enduring relationships. Among the most crucial are strategic innovations that create unique advantages for the corporation through innovative solutions. This results in new-to-theworld products that have superior attributes and value. but the resultant business performance and financial outcomes are often unchanged and the products are eventually replaced or eliminated. LOD is critical for realizing sustainable success. Strategic innovations are necessary to assure that global corporations stay ahead of the driving forces and expectations in the business environment. systems. It incorporates the full spectrum of internal and external ingredients to create exceptional value and realize sustainable success. Systems Business model innovation (BMI) Structures Leadership and organizational development (LOD) radical innovations. Innovative solutions engender outstanding combinations of value creation. they are not necessarily more risky than incremental innovations or doing nothing when all factors are considered. While it is clear that strategic innovations are more challenging. While there are many variations. The strategic leaders initiate the development of new technologies using the research and development (R&D) programs and projects. Types of strategic innovations Categories Solutions Main Types Radical technological innovation (RTI) Salient Aspects RTI involves developing new or dramatically improved technologies that change the basis for delivering value. The investment in incremental innovations may be positive. improving obsolete products may result in additional sales and revenues in the short term. Some of the best opportunities are those involving eliminating the negative side of existing technologies. BMI involves a conceptual combination of all of the entities and the patterns of interrelationships and interfaces that are linked together in formal and informal arrangements to create and deliver value-producing outcomes that are guided by strategies and actions. Radical technological innovations depend on external context. Table 2 lists some types of strategic innovations. Creating a new-to-the-world solution starts with insights and innovativeness. Radical technological innovations are based on insights from the business environment and the organization’s imagination about what can be accomplished. Exploring the global business environment and the market spaces and determining how the corporation and its enterprise(s) fit the needs and requirements for the future are effective ways for initiating the long process of creating new technologies.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation Table 2. value innovation. Global corporations can take a proactive approach and invest into transforming their businesses by developing new technologies that are cleaner and more efficient and effective. It involves the development of new competencies and capabilities and the transfer of know-how and management wherewithal within the corporation and enterprise and between the generations of leaders and practitioners. the corporate R&D generally involves developing new-to-the-world technologies and/or products with potentially exceptional business value. It also involves starting new business units that have superior solutions with new technologies. but the business may lose valuable time and money pursuing marginal outcomes. Strategic leaders must allow for risk taking 35 . For instance.

From strategic management and strategic innovation perspectives. He cites the incredible progress made by companies like Embraer of Brazil. understanding. creating radical innovations that solve problems for people in emerging markets are also great opportunities. customer interfaces. Hamel’s business model includes “four major components: core strategy. Leadership and organizational development address the needs of the people in the organization and how to enhance their knowledge and capabilities through learning and experience. Unlike the business world of the early twentieth century that was based on machine-driven methods. value networks” (p70). the most important part of strategic innovation is the development of talent. It is inclusive of all of the essential dimensions in managing and leading an organization. partners. the processes. Gary Hamel (2000) discusses the ‘age of revolution’. and customers. Lenovo of China. In Leading the Revolution. A higher level of sophistication is necessary for incorporating all of the forces impinging on the entire organization and its linkages. hierarchical approach that included operations management of the value system on the bottom and strategic business management at the top. and the present and the future. Antoine van Agtmael (2007) in his book. He views innovation as an essential element for achieving strategic success. the practices and the programs into a comprehensive management system. Leadership and organizational development invoke a spirit to become the best and to build new capabilities and competencies for the emerging technologies and practices of the 21st century. It is a unifying approach that integrates the people. people are the innovative force. These companies are vying for their place in the world. They create the solutions and the systems. twentyfirst century corporations are based on intellectual capital. He incorporates into the “new innovation” model the concept of a solution (pp283-313). He suggests that “it is not knowledge that produces wealth. Today. both internal and external. but insights into opportunities for discontinuous innovation” (p14). 36 . Business model innovation encompasses the whole. Traditional business models limited the scope of the analytical framework to facilitate decisionmaking and simplify the interactions. Taiwan. South Korea and Mexico are gaining footholds as world-class competitors through brainpower and innovation. Business model innovation involves the convergence of the solution. global corporations used simple business models for managing their businesses. It provides the means and mechanisms for the organization to acquire the new knowledge and skills to perform to the highest standards. 1985. strategic resources. The general methodology employed a de-coupled. decision-making. Due to the lack of integration at the operating level. stakeholders.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation and even failures to occur as the R&D people find new ways of achieving success. The strength of the approach became the weakness. fully integrated business models are pivotal for success as more corporations depend on supply networks. Given the diversity of the global competitive landscape and the expectations of people and society. An effective business model is a comprehensive management construct that forms the basis for analysis. continuous improvement. The core competencies and capabilities of the corporations are its true strategic assets. as well as radical innovation. strategic leaders had to play a significant role in resolving difficulties within the system. details how many of the emerging companies in BRIC countries. During the mid-1980s Michael Porter’s models of the value chain and the value system dramatically shifted the management constructs from a vertical organizational approach to a system approach with horizontal processes (Porter. strategic alliances. Moreover. and TSMC of Taiwan. Samsung of South Korea. The Emerging Markets Century. systems and the structure. and external relationships for sustaining success. pp33-35). Historically.

environmental and financial interests of businesses and society continue well into the future. True globalization may only be possible in the context of sustainability. preserving the natural environment. They have to think about the whole enterprise and ensure that solutions and systems are fully aligned and providing successful outcomes for all contributors and recipients. SD and strategic innovation. solutions. They must be thorough in their assessments of context to obtain insights about what the solutions have to be. strategic leaders have to seek and develop innovative ways to keep ahead of change. global corporations have to adopt a more inclusive and comprehensive model of their external and internal context. the decision making methodology for strategic innovations has to become more comprehensive and farsighted. They have to produce win-win outcomes. It is critical that business leaders. They must avoid creating tensions and conflicts among people across the world. Strategic leaders have to preemptive the market and competitive situations through strategic innovations that open the doors to new possibilities and success. simply shifting jobs to low-wage countries to obtain low-cost products may result in cost-effective products that people in the developed countries cannot afford to buy because they lack employment opportunities and personal income. They have to incorporate sustainability and SD in their models and ensure that they can exceed customer and stakeholder expectations and outperform competitors. develop. Future developments may be stymied because resources have to be allocated for cleaning up the messes created due to poor decision making or simply not available because of resource depletion. integrated systems. short-term successes may turn into complex challenges and difficulties that limit long-term performance and outcomes. 37 . This necessity is especially important for global corporations. From a strategic perspective. Solutions have to be multifaceted and holistic. Otherwise. political. and instability. ensuring that the economic. if they aspire to obtain competitive advantages. In a global business environment of limited time and scarce resources. and outcomes and to use the judgments of all of the participants in the decision making process. Global corporations have to expand their reach and sophistication to create sustainable solutions. challenges. Good is no longer good enough. if solutions are to endure. the focus shifts from “business as usual” approaches to creating sustainable solutions and developing holistic systems and structures to deploy the solutions. technological.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation CONCLUDING COMMENTS Rapid changes in the business world over the last two decades have made most of the prevailing management constructs obsolete. For instance. The model discussed in the chapter provides a framework for creating win-win outcomes that are balanced in terms of the social. Ultimately. government officials and people understand. and enjoy sustainable success. pollution and wastes are critical factors that have to be eliminated via clean technologies and new-to-the-world products. With true globalization. economic. and robust structures that are proactive and unique. Good solutions require an integrated approach with strategic leaders and contributors working together using strategic innovations. The underpinnings must focus on protecting future generations of people. produce and deploy sustainable solutions and achieve sustainable success. achieve outstanding business performance. They have to use learning and acquire new knowledge to obtain a more comprehensive understanding of the realities. Decision makers have to be proactive. Globalization without a multi-dimensional perspective is a prescription for enduring ongoing problems. environmental and ethical forces. social. Global corporations have to lead change and become sustainable enterprises. they need to use their imaginations to envisions how to create the best strategies. Great decisions are based on the collective wisdom and intellectual capital of the people involved. For most global corporations. For instance.

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Space and time are compressed and geography becomes less of a critical factor. The focus is primarily on leading change and value creation. Globalization: The notion that the world economies are shifting toward a borderless economic structure. in which global corporations vie to satisfy customer demand on a global basis. 39 . and infrastructure. reduces or controls pollution and waste streams better than alternates. It also involve making substantial changes to the existing strategic management system including developing new customers. challenges. equipment and know-how that eliminates. and the strategies and action plans. The context includes both time and space considerations. and solutions. requirements. Construct: A construct is a theoretical framework or model used to analyze and determine strategies. and constraints. analytical. supply networks. Radical Technological Innovation: Radical technological innovation involves creating new-to-the-world technology that brings about revolutionary changes. new markets. strategic partners. methods. stakeholders. Sustainable development involves making dramatic improves and positive changes to the full scope of relationships and linkages of the supply networks. It includes the business environment and the management systems of the organization. systems and structures. It combines information. Sustainability: Sustainability implies that all human and business activities are carried out rates equal to or less than the Earth’s natural carrying capacity to renew the resources used and naturally mitigate the waste streams generated. systems. residuals and impacts. It involves making evolutionary changes to the products employing the prevailing technologies and organizational capabilities. Context is framed based on defining the scope of the analysis and the inclusion or exclusion of variables. competition. understanding and decision making. related industries. Extended Enterprise: The extended enterprise includes the contributors to the solutions and recipients who use the solutions. and support service providers for handling wastes. It includes customers.A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation tems. and processes for making incremental improvements to existing products and services. Context: Context provides the basis for analysis. challenges. It provides a framework for a descriptive. processes. new supply networks. Product Innovation: Product innovation includes the initiatives. It often creates new industry or market structures or involves dramatic changes to the existing ones. and structural understanding of the needs. A construct is intended to be a representation of the dimensions and elements of business situations. specifications. and other related entities. techniques. structures. opportunities. data and experience with theoretical thinking about how to view the business situation in light of its opportunities. customers and stakeholders. Sustainable Development: Sustainable development is a holistic management construct that includes the entire management business system from the origins of the raw materials to production processes and the customer applications and to the end-of-life solutions. Preemptive Strategies: Preemptive strategies are intended to gain sustainable advantages by significantly improving the solutions.

additionally. environmental. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. we use an exploratory research strategy to further investigate the links between SOI and PSS. . Product-Service System (PSS) – i. can spur the diffusion of SOI. Germany Erik G. we also emphasize the role of a joint achievement of sustainability-oriented product innovations and PSS innovations. The complexity of SOI and the sustainability potentials of PSS are illustrated. Hansen Leupana University Lüneburg. Moreover. However.40 The Case of Osram’s Off-Grid Lighting Friedrich Grosse-Dunker Dark Horse GmbH. DOI: 10. developing products under the paradigm of SOI is risky: both the product’s market success and (non-economic) sustainability effects are uncertain. which is generally described as the integration of economic. As sustainability presents a new source of ideas and visions leading to new business opportunities and competitive advantage.ch003 Copyright © 2012. Germany Product-Service Systems as Enabler for SustainabilityOriented Innovation: Chapter 3 ABSTRACT Corporations increasingly subscribe to the principles of corporate sustainability. a combination of products and services –constitutes a significant approach to overcome some of the limitations of SOI and. We present a case study on off-grid lighting in Kenya and analyze the sustainability effects on the product and PSS level.4018/978-1-61350-165-8. and social dimensions. the role of Sustainability-Oriented Innovation (SOI) is ever more emphasized.e. In this chapter. IGI Global.

but also raising consumer demand for socially and environmental benign products drive the need for more sustainable products and services. There is virtually no research on cases where the product innovation joins the introduction of the PSS. Pawar et al. Scholars have lately emphasized to put sustainability at the core of the corporation. Engelhardt et al.. corporate sustainability seeks to address these issues by transcending the conventional responsibilities of businesses (i.. Building on this framework. a case study on off-grid lighting in Kenya is presented and its sustainability effects are analyzed. Our research question is thus twofold: (1) how can the mechanism of PSS help to introduce a sustainability-oriented product innovation? (2) Which sustainability effects materialize on the product level. and on washing machine and power tools service centers (Mont. The cases often evaluate the sustainability impacts of PSS (Pawar et al. which ones at the service level? This chapter addresses this gap with a case study approach (Yin. the innovation considers only the servitization of the unchanged product or technology.. criteria. Hansen et al. One important lever for SOI is the concept of product-service systems (PSS) or servitization (Baines et al. 2001. We furthermore emphasize the importance of PSS as being an innovation enabler on a (technological) product level and therefore underline the importance of product-service offers in the context of sustainability. the prevailing form of doing business has been increasingly challenged by a number of problems such as climate change. 2006). 2003). to make profits) to also include non-economic aspects such as ecological and social responsibilities (Sharma. and processes to develop more sustainable products and services (Hansen et al. Current empirical studies on shared use in business to consumer markets are usually case studies (Baines et al. 2003). along with improving efficiency of each system element” (Mont. 2005). Schaltegger & Burritt. 2009). PSS is said to be a concept that “aims to improve overall system efficiency. 2000). and social inequalities. its products and services (Hart. Devisscher & Mont. life-cycle assessments. These challenges culminate in the view that to only focus on economic aspects of business is ever more difficult or even impossible as it is essentially unsustainable (Hart & Milstein. The results and implications of the case study are then discussed and future research directions are given. a literature review introduces the concepts of SOI. existing cases predominantly focus on developed nations. 2003) about a multinational corporation based in Germany that offers a product-service system in a developing nation. 2009. 2007) and focus on such as car sharing (Huwer. i. PSS approach represents a spectrum between pure products and pure services (Baines et al... 2002. Manzini & Vezzoli. 41 . Generally. environmental degradation. 2010). The notion of sustainability-oriented innovations (SOI) thus embraces concepts. 2008). However. In this case. and PSS. Mont 2001. 2004.. New regulations.. From a business perspective. 2004).Product-Service Systems as Enabler for Sustainability-Oriented Innovation INTRODUCTION For the last decade. PSS follows the idea that the environmental burden is dramatically decreased when switching from selling products to providing solutions through product-service combinations. 2007. ride sharing (Hansen et al.. Besides few others (Devisscher & Mont. most of the case studies are limited to studies where existing products and technologies are integrated into a PSS. as well as social impacts. 2007. In contrast to mid to long-term leasing and performance contracting in the business to business context (Williams. Schaltegger & Wagner. PSS where the manufacturer remains with the ownership of the products are especially interesting. environmental. 2008. The remainder of this chapter is structured as follows: first.e.e. 1997. 2010). By concurrently addressing economic. 2009). i. this chapter focuses on systems of shared use in business to consumer markets. 2009).. 13). the case highlights the multi-dimensionality of SOIs. 2004.e.

g. 2004. Rennings & Zwick. 2005). These risks include not only the product’s economic success (Cooper. 2008. 2006). also referred to as the target dimension of innovation. 1997. organizational.g. 2006). 2008). process. Table 1 shows a matrix based on the life-cycle dimension and the triple-bottom line. For instance. Life-cycle assessment (LCA) has become a major research field in literature (Kloeppfer. social. 2003). From Products to Product-Service Systems (PSS) Innovations are commonly classified into the categories of product. and economic targets) and the dispersion of innovation sustainability effects. Day. the importance of SOIs has generally been acknowledged (e. Hockerts. as the case of bio-fuels demonstrates (Kölsch & Saling. 2007). Two arguments support this view. 2002). whether they contribute positively or negatively to sustainability. Schaltegger & Wagner. 1997). Hart. i. Beyond the triple bottom line reflecting economic. 2001). 2010). The reluctance in advancing SOIs can arguably be attributed to the high risks involved in this kind of innovation (Hall. though it also has some limitations (Schaltegger. Due to the multi-dimensionality of sustainability targets (social. they consume less energy. Hansen et al. but also the direction of environmental and social sustainability effects of innovations. Based on these insights. 2009. On the other hand. i. Whilst the emphasis in life-cycle assessment has been on environmental considerations. 2006. Mont. to a problem of “eco justice” (Schaltegger & Burritt. two other dimensions – life-cycle and innovation type– are important for assessing sustainability effects of product innovations. 1998). Within the latter understanding of innovation. 2008. The latter type of risk is also termed directional risk (Paech. products can be manufactured with improved eco-efficiency (e. Preuss. Spillemaeckers & Vanhoutte. 2005). sustainability presents a new source of ideas and visions leading to new business opportunities through new markets and customer segments (“market pull” or “vision pull”) (Hart. 2002).. people are usually concerned about the technological dimension of products (and – from a life-cycle perspective – of processes related to manufacturing the product). environmental.e.e. Both dimensions are addressed in the subsequent sections. environmental innovations can lead to negative societal impacts. For instance. the assessment of innovations with respect to sustainability is considered highly complex (Fichter. and thus on new product development. Second. integrated sustainability analysis has gained research attention as well (Spillemaeckers & Vanhoutte. First. recent studies show that only a minority of businesses consider sustainability as a source of innovation (Hockerts & Morsing. 1998). and environmental considerations (Elkington.Product-Service Systems as Enabler for Sustainability-Oriented Innovation BACKGROUND Sustainability-Oriented Innovation (SOI) There is wide agreement that the challenges of sustainability offer significant potential for product and service innovations and related business opportunities. 2005). However. The current chapter focuses on product innovations. Life-Cycle Assessment and SOI The life cycle dimension refers to the physical life cycle of a product from resources extraction to end-of-life treatment. 1997. or market innovations (Hausschildt & Salomo. 2008. 2007). new social and environmental regulations and laws increase the pressure for innovativeness (“regulatory push”) (Fichter. 2005) or companies shift the product portfolio towards addressing environmental challenges 42 . Schaltegger & Burritt. conventional innovation projects sometimes result in innovations with positive sustainability effects (Fichter & Arnold.

public washing machines) or simultaneously (e. In general.e. wages. three degrees of product-service combinations can be distinguished (e.Product-Service Systems as Enabler for Sustainability-Oriented Innovation Table 1. the product take-back service (end-of-life phase) allows the producer to recycle or remake the product and thus contribute to environmental (but also to economic) value. For example.g. These are systems of shared use.g.. Hansen et al. 2006). A good example is the case of Interface Inc. recycling. lower maintenance costs entail more intense use (e. 2001): Product-oriented PSS add a service to the conventional product. Second. Third. car sharing. when switching to a more fuelefficient car. For all three reasons mentioned.g. it is important to go beyond the technological level to also consider the level of the PSSs. benefits (e. more sustainable products may be difficult to introduce and diffuse. Pawar et al. The current chapter focuses on such systems of shared use. simply because the additional environmental and social characteristics make the products too expensive for consumers. 2002) are responsible for that the overall consumption increases might exist. 1999). 2010). In an extreme case. there mere number of products. though product eco-efficiency can be strongly increased. i. consumers (or users) use the same products either subsequently (e. 1997). The benefits of PSSs are very thoroughly analyzed in the literature.g. (2009) differentiates three major streams of literature: the first stream of “product service systems” highlights the environmental benefits of PSS. Baines et al.g. or re-use Health threads of landfills Social Occupational health & safety. services. A PSS is defined as “[…] a system of products. Mont. 1999). they alone cannot solve some of the overarching sustainability challenges. the increased aggregated resource consumption related to product manufacturing and ownership. rebound effects (Dyllick & Hockerts. but later became involved in leasing carpets. For example. 2009) Target dimension Manufacturing Economic Environmental Production efficiency Use of environmental friendly materials and processes Life-cycle phases Packaging/ distribution Efficient packaging. which originally focused on selling carpets. Instead of replacing entire carpets.. satisfy customers needs and have a lower environmental impact than traditional business models” (Goedkoop. child work. Sustainability of products/technologies related to the physical life-cycle (Hansen et al. ride sharing instead of a private car. minimized transports Use/ maintenance (Technical) quality Durability.. more kilometres might be driven). networks of players and supporting infrastructure that continuously strives to be competitive. This definition shows that the traditional distinction of products and services is nowadays becoming less clear (Wise & Baumgartner. the company only replaces worn tiles. i. product service bundles may turn into pure product-based services based on product leasing and contracting rather than selling. efficient logistics Reduce packaging resources. In general.e.g. At least three reasons should be mentioned: first. 2007. adapted products for people from poor communities/developing countries) (Hart. a further increase of the service factor leads to product-service systems in a narrower sense (Mont. The second stream “integrated solutions” analyses financial effects of PSS and the third stream of “experience services” highlights benefits created by consumer interactions and co-created values. complaint handling End of life Costs of take-back/ disposal/ landfill Dangerous materials. benefits of PSSs result from a shift of 43 . Third. re-make. energy consumption Customer health & safety. Whilst these efforts are very important. clean technologies) or social challenges (e.

transferability. is now responsible for the maintaining. recycling. 2006. 2007. sustainability) benefits of PSS. car sharing services need less cars “in action”. while keeping the value proposition of their offer on a constant level (Baines et al. When selecting the case. Yin. fewer products are sold and thus the number of products in the end-of-life phase is reduced (Aurich et al. to increase credibility (Shah and Corley. and media reports. Hence. we may state that the higher the service part of a SOI. For instance. Manzini & Velozzi. value creation and resource consumption can be decoupled with the effect of creating sustainability effects (Baines et al. Interface Inc. We carefully considered trustworthiness criteria of credibility. It does not follow a strategy of statistical sampling and thus the number of case studies is not a measure for the quality of this approach. PSSs offer the opportunity of dematerializing the value creation (Mont. Mont. With regard to data collection. 2004). 2003). 2001). we drew on multiple sources of data in order to analyze the case from multiple perspectives and.. PSS offer a promising innovation strategy for SOIs. embedding a highly innovative and sustainability-oriented technology. even a single in-depth case study can contribute to theory (Flyvbjerg. Bearing those findings in mind. 2006. OSRAM is a company fully owned by Siemens AG.. 1985. its positive sustainability effects.Product-Service Systems as Enabler for Sustainability-Oriented Innovation risks.. 2001). as will be further explained in the following paragraphs.. as contradictory effects may arise through PSSs (Manzini & Velozzi. We conducted a single case study about OSRAM... Hence. dependability. CASE STUDY: OFF-GRID LIGHTING Research Method In order to gain a better understanding of the relation between SOI and PSS. a company providing off-grid lighting in Kenya. 2001). For instance. Ehrenfeld. Data collection covered public corporate reports and websites.. Case study research is a strategy for the “systematic production of exemplars” (Flyvbjerg. 2006). Yin. 2007. Pawar et al. 2002) or to even increase the value proposition. 2006. which are described in the following. 2006). by retaining the ownership of products. and conformability (Lincoln and Guba. and costs to the manufacturer. Access to data was another reason for selecting the case (Yin. The example is also one of the flag ship programs within the area of Siemens’s corporate sustainability advances. In systems of shared use. and disposal of its carpets and has therefore a high interest in. 2009). However. we subsequently analyze specific sustainability effects within a case study research strategy. 2002). the higher the consideration of the products’ life cycle and. Mont. and thus it is also well documented. 2003). providers of PSSs have strong incentives to consider the total life cycle and to optimize their offers and value chain over the complete PSS life cycle (Aurich et al. responsibilities. which are associated with the ownership of products (Baines et al. as this is one alley for a purposeful theoretical sampling and thus contributes the trustworthiness criteria of dependability (Shah and Corley. for instance. Furthermore. documents from the public domain. sustainability effects have to be assessed carefully. The documents were 44 . 2006). 2006. consequently. prolonging the life cycle of its carpets and recycling old carpets. 2007. 2003). As a result. providers of PSS have strong incentives of minimizing their resource input to reduce costs and capital expenditures. 2006). Rather. hence. 2006) in our methodology. we followed a strategy of extreme cases (Flyvbjerg. OSRAM provides a very unique approach for introducing a new PSS. leading to a significant increase of overall resource efficiency of the service system. This kind of analysis is also referred to as system thinking (Manzini et al. By increasing the service content of offers. one of the largest multinational corporation based in Germany. Shah and Corley. This chapter is especially interested in the environmental (and more broadly.

Approximately 75% of their income accounts for lighting only. A. production (lighting can considerably prolong working hours). In the sense of transferability (Shah and Corley. (2009) Background to Off-Grid Lighting Lighting is of fundamental value for human beings and greatly influences everyday life. fuel-based lamps are highly inefficient for lighting purposes and therefore burden excessive costs on its users. levels of innovation) and.6 billion people in sub-Saharan Africa do not have access to power grids (Mills. We further controlled the criteria of dependability by a critical audit of data: whereas the first author collected the first-order data (mere data) and proposed a first draft of the second-order findings (theorizing). The data analysis can be considered abductive (Dubois & Gadde. This area is inhabited by 30 million people and is characterized by the use of local fishing vessels. around 1. The triangulation of data from different sources led to the emergence of the overall picture (Yin. kerosene often causes pollution of potable water. (2008) Loew et al. 2006) – were reduced. both ecologically and socially.osram. 2008). K. (2009) Mills (2008) Rybak. Table 2. Fuel-based lighting leads to the emission of roughly 190 million tonnes of CO2 per year. at the same time. In addition. Munich. which can cause severe health damages in the population. fuel-based (primarily kerosene) lamps are often the only viable lighting source in vast areas within developing countries to this date. to name only a few. Kerosene lamps also emit several toxic gases. the practice of kerosene lamps implies additional fundamental negative impacts. The fishermen use swimming kerosene lamps as lures for fish and are therefore highly dependent on Esch et al. Thus. which mainly fish at night. lighting substantially impacts on security issues. For instance. kerosene is an affordable energy carrier. the research findings contain “thick” descriptions of empirical data related to the abductive categories. (2009) Zeug. especially when used for fishing purposes. Furthermore. lighting costs can account for up to 10% of household incomes (Mills.Product-Service Systems as Enabler for Sustainability-Oriented Innovation collected between 2009 and mid 2010 (Table 2). Germany. especially when used inside buildings. and overall structures. However. risks with regard to data recording and management – as they are expressed in the trustworthiness criteria of conformability (Shah and Corley. We used a content analysis to investigate the various documents presented earlier. The following findings section provides some background information on the case setting. 2006). 2003). education (lighting enables studying in the evening) and poverty reduction. OSRAM website: http://www. Global Nature Fund website: http://www. Then the off-grid lighting PSS is presented and its effects on both the technological and overall PSS level analyzed. However. and is available even in remote rural areas. After all. Data collection for case study Type of data Public corporate reports/data Documents studied Siemens (2009). concepts. Moreover. 2002) relying both on an initial (deductive) conceptual framework (life-cycle. 2008). The use of kerosene lamps is extremely widespread in the Lake Victoria region of Kenya. Sustainability Report 2008. Reports from public domain Media 45 . the second author served as a critical reviewer of these processes. As we solely relied on secondary data from explicit documents and reports. letting inductive findings emerge from the data.

an on-site station was established. it also poses some disadvantages and new economic. but created a PSS by lending those products to local residents. the introduction of O-Lamps with energy saving lamps results in several advantages in comparison to the earlier used kerosene lamps. this productbased service promised cheaper. and SolarWorld. the price of charging the batteries is around 20% lower than the price of kerosene for the same amount of lighting. environmental. working conditions. we resign an in-depth comparison of different cost structures of O-Lamps and kerosene lamps. In order to do so. etc. Today. Hence. Osram’s product portfolio was recently acknowledged with the German Sustainability Award. The costs of recycling Off-Grid Lighting as a Product-Service System In 2004. This service was supported by micro loans to make it affordable to local residents. we can analyze the economic effects of the O-Lamp. Basic sustainability effects (resource consumption. However. In the following. considering the maintenance phase from a user’s point of view. A simplified version of the earlier presented Table 1 serves as evaluation matrix.) are – for reasons of clarity – not explicitly mentioned. the sustainability effects of this solution in the use and end-of-life phases of the physical life-cycle are analyzed. if we assume costcovering business practices of OSRAM. Together with OSRAM. 88% of its revenues were generated outside of Germany. Then the impacts derived from introducing the PSS are discussed. an innovative product-service system was developed in Kenya. which are described in Table 3: Economic effects: The assessment of effects within the lifecycle of production is generally undertaken from a company’s point of view. etc. Hence. Osram is one of the two leading lighting manufacturer worldwide. Generally speaking. and social risks. panels installed on the rooftop of the building. we focus on the effects of the product (i. the Global Nature Fund and a local Kenyan NGO started to work on an alternative to kerosene lamps. By capturing solar energy. general lighting. especially in Africa. In order to further expand its revenues in this market. e. At this point. The analysis is limited to major and well-known effects of the PSS. Osram is heavily engaging in the development of energy-efficient products. Furthermore. Osram is increasingly seeking market opportunities in emerging markets. being active in numerous markets. Firstly. Interestingly. which is almost twice as big as Osram’s original lighting market. the technological level) itself. Osram perceives climate protection and sustainability issues as one of the major drivers in the lighting industry. The market for off-grid lighting is of peculiar interest. OSRAM did not sell those lamps.Product-Service Systems as Enabler for Sustainability-Oriented Innovation Company Background Osram GmbH was established in 1906 and is a fully-owned subsidiary of Siemens AG. which consisted of a rechargeable battery (O-Box) unit and a robust and waterproof energy-saving lamp (O-Lamp). However. OSRAM manufactured portable lamps. a manufacturer of solar panels.e. automotive lighting. Analysis of Technology Level From a technological viewpoint. a leading manufacturer of lighting solutions. as they already provide a good indication of the overall value and effects of the proposed offer. as its size is estimated to amount to €50 billion per annum. but are not higher than accumulated lending revenues per lamp.g. they developed a new solution tailored to the needs of developing countries. where lamps are handed out and recharged by using solar 46 . more reliable and ecologically beneficial off-grid lighting. which is described below.) and in-depth analyses (cost structures. which in 2008 already generated 66% of its total revenues. In 2009. negative effects for production and recycling exist. eco-balances. ballasts and luminaries. To sustain its growth potential.

when home from school or work. children have improved opportunities for education. It has to be noted that the reduction of CO2 is possible due to solar energy collected on the roofs of the recharging stations. the introduction of off-grid lighting leads to a maximum reduction of CO2 and other toxic emissions while the lamps are used. kerosene lamps are rather improper due to the poor quality of light. the introduction of a lending service enables the access to technological innovations and SOIs in the first place. Hence. the sales based on transfer of ownership do not allow such separation and can only be sold once. By having access to better and longer lighting. if not recycled properly. young children may only be able to study in the evening. O-Lamps pose some environmental risks in the end-of-life phase. in this case study. can be avoided. Analysis of the PSS level The off-grid lighting solution depicts an illustrative example of a PSS: by lending rechargeable battery packs. Environmental effects: Considering the use phase. Generally. foremost.g. the assessment of the production phase is very company-specific and carried out in this case study rather generically. In fact. This is due to the fact that the actual usage of a product can be split up in single value-adding packages and then sold separately. The support of micro loans adds to this fact that lower economical entry barriers can be considered as a key achievement of PSS innovations in developing countries.Product-Service Systems as Enabler for Sustainability-Oriented Innovation Table 3. The analysis of the use phase. Sustainability effects on the technological level Target dimension Use/ maintenance Economic Environmental 20% lower energy costs Zero emissions Fewer pollution from kerosene Zero air pollution Zero accidents from kerosene lamps Improved living standards and education n/a Fewer pollution from kerosene Risk of mercury Risk of battery disposal Risk of mercury Risk of battery disposal Life-cycle phases End of life Social O-Lamps were not known at this point of time. in developing countries PSS can be re47 . these products carry certain risks. environmental pollution from spilled or dumped kerosene is removed entirely. learning conditions. Consequently. In contrast. the assessment of sustainability effects on a PSS level is of particular interest (Table 4): Economic effects: As mentioned above. lending out lamps leads to a lower price level per „utility unit“ and therefore significantly increases the market reach of this product. However. Accordingly. Another indirect. as some hazardous materials are part of the energy saving lamps (e. but noteworthy. Therefore. From an end-of-life perspective. plumb). Social effects: Regarding the use phase. reveals remarkable effects. accidents with kerosene lamps. the reduction of toxic emissions in houses of the local users leads to healthier living environments and less air pollution. mercury) and batteries (e. while a classical approach of selling lamps and transferring ownership would impose a very high economical entry barrier. the product is much more affordable to local residents. when not recycled properly. effect is the improvement of living and.g. Furthermore. however. these packs can be used more often and can be maintained more easily. However. the use of mercury within the O-Lamps and the use of batteries cause health risks. Furthermore. but can be considered as negative and moderate. By offering a lending service of its product. which may lead to severe burns or deaths.

The operation of energy hubs as charging station is an investment in local infrastructure and thus may also add job opportunities to local communities. 2004). By collecting solar power at the recharging stations. We could identify those effects within this case study again to support the following findings: firstly. the PSS leads to an extension of the responsibilities of the manufacturer. Social effects: Noteworthy social effects on the level of the PSS are created mostly during the use phase. the collection of battery packs and their recycling and disposal is more feasible. as both components incorporate toxic and environmentally harmful materials. Environmental effects: Major environmental effects of the overall PSS can be determined in the use and end-of-life phase. By lowering the economical entry barriers.g. it adds to the positive sustainability impacts by integrating solar power to its system. by introducing a PSS (instead of mere product sales). and life-cycle dimensions of SOIs. The company now owns batteries and lamps and is hence responsible for their recycling and disposal. the resource efficiency could be significantly increased (by using the batteries more often). Pawar et al. Furthermore. Still. More generally. our findings lead to several implications which are discussed in the following.g. PSS and its Effects on Sustainability The effects of PSS on sustainability have been generally discussed elsewhere with regard to developed countries (e. which include toxic materials Life-cycle phases End of life garded as enabler for SOIs on a technological level. Table 5 gives an overview of all effects on the technological level and the PSS level. in which the generation of synergies is explicitly mentioned as a major benefit of PSS (Manzini & Velozzi. clean and renewable energy sources can be guaranteed in the use phase. (2009) identified the challenge of “designing value” in order DISCUSSION AND FUTURE RESEARCH DIRECTIONS The case study exemplifies the multi-dimensionality of SOIs and demonstrates the importance of structuring sustainability effects along the target 48 . kerosene trading) at risk – the positive job effect thus might be outweighed. it may also be considered that such new infrastructure and offerings put previous job opportunities (e. the PSS discloses the accessibility of technology to the poor and can hence lead to improved living standards of the population. The use of solar panels is only feasible by taking advantage from economies of scale at the recharging stations. Regarding the end-of-life phase. In summary. This finding supports research on PSS. Secondly. The case illustrates an additional positive effect resulting from the shift of responsibility: as OSRAM is responsible for the recharging of the batteries.Product-Service Systems as Enabler for Sustainability-Oriented Innovation Table 4. Sustainability effects on the PSS level Target dimension Use/ maintenance Economic Environmental Social Lower economical entry barriers Access to clean and renewable energy sources Access to improved lighting New job possibilities Recycling and disposal of lamps and batteries. This is extremely important in the presented case. 2002). Mont.

service. oriented product innovations through a PSS can thus be a good strategy to maximize positive sustainability effects (Figure 1). OSRAM designed its offering different to its traditional products of mere selling of bulbs. Hence. which is unveiled in our findings: PSS can function as economic enabler for SOIs – and more generally. Our case study underlines this finding by illustrating a rather different product design of OSRAM: by integrating batteries and recharging stations. hence minimizing economic entry barriers to using products and/or services (Mont. Furthermore. 2001.. (2009) highlighted the importance of simultaneously designing the product. 2009). rather than transferring ownership. companies have to review their product innovations and may design them differently (Pawar et al. the price of using a product for the first time drops significantly.Product-Service Systems as Enabler for Sustainability-Oriented Innovation Table 5. when advancing to the layer of PSS. The Role of SOIs for the Development of PSS Pawar et al. the taken approach may add to the further understanding of a PSS’s sustainability effects. The product itself was adapted to fit in the newly developed PSS. for product innovations (Manzini & Velozzi. and organization in order to successfully establish a PSS. Hence. Future research should thus analyze the role of PSS for successfully introducing radical SOIs. 20). PSS as Enabler for SOIs This case study emphasizes another profound effect of PSS. 2007). The presented approach – especially the separate evaluation of technological and PSS levels – may add value by providing an in-depth understanding on how and where value is created and where additional value might be created.. This is extremely important in developing countries where relatively high purchasing prices constitute significant barriers to the diffusion of products. This notion emphasizes the interdependencies of the technological and PSS levels of innovation. 2002). either in niche markets or at transition into mass markets. By selling the utility of products. Introducing sustainability- 49 . Overall assessment of sustainability effects Target dimension Economic Innovation level Product PSS Life-cycle phases Use/ maintenance ~20% lower energy costs Company: lower economical entry barriers through rental and thus creation of new markets Zero emissions Fewer pollution from kerosene Access to clean and renewable energy sources Zero air pollution Zero accidents from kerosene lamps Improved living standards and education Access to improved lighting (long-term: new job possibilities) End of life Environmental Product Fewer pollution from kerosene Risk of mercury disposal Risk of battery disposal Recycling and disposal of lamps and batteries Risk of mercury Risk of battery disposal - PSS Social Product PSS to successfully implement PSS. the need of being able “to model” a PSS was identified (Baines et al.

Further research should look at processes of open innovation and customer integration (e. 2001. when introducing PSS (Pawar et al. Huiten et al.g. 2006. 2007.Product-Service Systems as Enabler for Sustainability-Oriented Innovation Figure 1. Additionally. By integrating local and international NGOs in the development of its offering. arguably. However. However. OSRAM failed to fully integrate its customer into the development process. Additionally. 2001). OSRAM’s PSS is not fully suited to the needs and usage patterns of its target group and. those deposit fees are considerably high.. Manzini et al.. CONCLUSION This chapter emphasized the role of innovation for addressing sustainability as well as the role of sustainability as a source for innovation. OSRAM pursued this notion fairly well. Mazini & Velozzi. One of the reasons. 2009. 2009. 2002). Manzini & Velozzi. as only fully charged batteries are lent at full cost which does not correspond with the fluctuation of local demand for off-grid lighting. However. thereby impeding most of the potential customers from purchasing the service. 1988) in order to build more successful PSS. 2002). the income of local fishermen is highly volatile and thus their need for electricity is equally varying.. 2001. the need of incorporating a multi-stakeholder approach is highlighted. Manzini & Velozzi. why the solution is not adopted by the local population in Kenya so far. Product- 50 .. 2006). can be traced back to its pricing system: OSRAM charges deposit fees to be able to use the system. being sensitive to the cultural context can be regarded as one of the key success factors for the integration of PSSs (Wong.. This emphasizes the importance of integrating customers into the development of PSS as early as possible (Hansen et al. hence. Simultaneous innovation at the technological level and PSS (or functional) level Success Factors for the Introduction of PSS General barriers and design features for the introduction of PSS are discussed in literature (Baines et al. This invalidates the general flexibility benefit of the PSS which would allow for a better adjustment to customer needs (Cook et al. The case may further stress the requirement of new methodologies for the design and development of user-tailored PSS (Morelli. For instance. von Hippel. Huiten et al. OSRAM’s offer is rather inflexible. Baines et al. 2002. 2004). 2007.. Ultimately.. 2002). Halila & Horte. could not fully unveil its sustainability potentials.

. An analysis of a product service system in Bolivia: Coffee in Yungas. 130–141. as PSSs are combinations of products and services and.. (2002). K. A. 3(3/4). The presented case study showed an example of simultaneous product and PSS innovations and revealed how to assess the various sustainability effects on both levels. 553–560. J. International Journal of Innovation and Sustainable Development.1504/IJISD.. Journal of Cleaner Production. R.01. (1989). Peppard. ACKNOWLEDGMENT We thank Prof. J. Mesicek. 1480–1494. J. J.1243/09544054JEM858 51 . Future research should emphasize this role of PSS in market entry strategies also in developed nations. for providing us with valuable feedback. BC. Furthermore.019 Baines. 221(10). Cook. H. doi:10.2006.Product-Service Systems as Enabler for Sustainability-Oriented Innovation Service System (PSS) represents an important approach for both perspectives. Omann. Lightfoot. The triple bottom line of 21st century business.022229 Dubois.. Nachhaltige Produkte und Dienstleistungen – Leitfaden zur Entwicklung zukunftsfähiger Geschäftsfelder (co-authorship by C. doi:10. Fuchs. Part B. doi:10.. T. Life cycle oriented design of technical product service-systems. Greenough. (2008). K. & Vorbach. multiple new hurdles and opportunities emerge. Leitfaden. G. (2006). Neely. T.1016/S0148-2963(00)00195-8 Dyllick. Systematic combining: An abductive approach to case research. C. doi:10.. However. Journal of Business Research. In Proceedings of the 2nd International Symposium on Environmentally Conscious Design and Inverse Manufacturing (pp.. 1455–1465. Jasch). Griessler. Engelhardt. M. Elkington. H. 11(2). B. Stefan Schaltegger. CT: New Society Publishers (Conscientious commerce). doi:10. doi:10. State-of-the-art in product servicesystems.. Designing sustainable product service systems.1002/bse.01. I. Beyond established effects of PSS of saving materials due to fewer products in the market (as the same product is used more often by various customers) the PSS could also be a beneficial innovation strategy for introducing new products/technologies in the market. & Mont. Journal of Engineering Manufacture.. Hammerl. M.. 12-23). O. (2002). M. 55(7).2008. REFERENCES Aurich... F.. C. Evans. R. L. & Wilson.018 Devisscher. 14(17). & Gadde. we thank one unknown reviewer for his/ her constructive suggestions. Eisenhardt. Beyond the business case for corporate sustainability. E. Canada-Stony Creek. (2007). (1998). head of the Centre for Sustainability Management (CSM).323 Ehrenfeld. 1543–1552. as they go beyond product ownership.jclepro....1016/j. 14(4). Academy of Management Review. Hinterberger. (2001). Cannibals with forks. (2006). jclepro.. 532–550. S. A.. & Wagenknecht. 262–284. Proceedings of the Institution of Mechanical Engineers. Gabriola Island.. S. T. The transfer and application of product servicesystems: From academia to UK manufacturing firms. (2003). D. & Hockerts.-E. Journal of Cleaner Production. Bhamra. Building theories from case study research.2006.1016/j. & Lemon. 14(17). Business Strategy and the Environment. T.

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or business model which. Product Innovation: Gualitatively new products which differ significantly from a comparable condition (Hauschildt & Salomo. World Commission on Environment and Development.2009. 3. R. service. Wong. UK. there is no generally accepted definition of the exact amount of purchasing power yet and the debate on this specific amount is still ongoing. 2002). Corporate Sustainability: Corporate Sustainability can be defined as meeting the needs of a firm’s direct and indirect stakeholders (such as shareholders. Case study research: Design and methods (3. Doctoral dissertation. in comparison to a prior version. and eco justice (Schaltegger & Burritt. multi-criteria triple bottom line perspective aiming at the integration of economic. 5. CA: Sage (Original work published 1984). 31.). (2004). whereby tradeoffs between economic capital on the one hand and environmental and social capitals on the other are possible only when the reduction of either one side is compensated with a sufficiently high increase of the other (Hansen et al. employees. London. P. Harvard Business Review. K. & Baumgartner. 54 . 77(5). 1987). Sustainable Development: A development that meets the needs and aspirations of the present generation without compromising the ability of future generations to meet their needs (World Commission on Environment and Development. M. 133–141. (1987). Applied social research methods series: Vol. environmental. process.8. 1999). Yin. environmental. and social capital through eco-efficiency and effectiveness. Thousand Oaks. DIE ZEIT. networks of players and supporting infrastructure that continuously strives to be competitive. UK: Oxford University Press. Low-Income Market: Customers with annual purchasing power parity (PPP) of $1500 or less (Prahalad & Hart.Product-Service Systems as Enabler for Sustainability-Oriented Innovation Wise. KEY TERMS AND DEFINITIONS Case Study: A case study is a research strategy which focuses on understanding the dynamics present within single settings (Eisenhardt. Cambridge University. technology. R. ed. Zeug.which can be operationalized by the heuristic. Implementation of innovative product service-systems in the consumer goods industry. 1989). Our common future. has a positive net effect on the overall capital stock (economic. (2003). services. socio-efficiency and effectiveness.. clients. social). communities etc). 2008). 2010. Product-Service System (PSS): A system of products. 2002) . 1. 2007). without compromising its ability to meet the needs of future stakeholders as well (Dyllick & Hockerts. Sustainability-Oriented Innovation (SOI): A new development (and commercial introduction) of a product. (1999). satisfy customers needs and have a lower environmental impact than traditional business models” (Goedkoop. Go downstream: The new profit imperative in manufacturing. Wagner and Llerena. Kein Licht für Afrika. pressure groups. (2009). 2005). Notably.. K.

Finally. is found in the latest projects for aviation sustainability. To do this. extravagant. Japan Yuya Kajikawa The University of Tokyo. the latest experts’ talks are collected from four international meetings for aviation and the environment held around the world between September 2009 and May 2010. which invited experts and researchers from Japan. To smooth the transition of innovation from sector’s initiatives including radical change such as low-carbon alternative fuels. and the chance to buy local products of another hemisphere in their own towns. which emits various problems such DOI: 10. The aviation and a “sustainable” future is very complicated issue socially and economically. the shared visions and the latest activities for sustainability in the aviation sector are presented and perspectives on the innovations that this sector should achieve are discussed.4018/978-1-61350-165-8. The expansion of networks between agents of the sector. however air travel also allows people to meet their friends and families living on other continents. Japan Shinji Suzuki The University of Tokyo. Europe.ch004 as “sustainability”. Aircrafts fly using fossil fuels. which is considered to be essential for the success of innovation transition. IGI Global. aviation connects countries. INTRODUCTION Some environmentalists believe that air transportation is evil because it is energy consuming. we discuss directions for future research. and polluting. we emphasize the need for more discussion about new economic measurements. using multi-level perspectives for a transition management of aviation innovation for sustainability. Japan Chapter 4 ABSTRACT In this chapter. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. and North America. . Furthermore. Copyright © 2012.55 Innovation for Sustainability in Aviation: World Challenges and Visions Hiroko Nakamura The University of Tokyo.

Finally.. for example. the details of which will be described in the next section. while the balance of NOx effects to ozone production and methane reduction and the potentially grave effect of contrails are still uncertain (Szodruch. policy. science) (Weber et al. Hoogma et al. In this chapter. SNM researchers have taken a lot of case studies of the transition mechanism of various domains. And the sixth section concludes our findings. and is vulnerable at the infancy. SNM scholars have analyzed processes to try to determine what is the best for successful development of niche. engine manufacturers. and other aspects of the niche (Schot & Rip. 1996. air control services. They have identified some strategic factors. Over a hundred years after the Wright brothers flights. Last year. 2009). One prominent school of thought in recent systems innovation debates is called Strategic Niche Management (SNM). and the sector’s shared visions toward aviation for sustainability. 2009). broad and deep social networks. waste water plants and so on 56 . Geel (2006) pointed out that the networks within the socio-technical system for aviation were one of the keys to success in precedent innovations. technology. or public services such as biogas energy plant. research institutes. and learning processes at multiple stages where the actors related to the niche learn about the design. air quality. 2006). airports. aviation has achieved countless technological and system innovations in the area of fuel efficiency. ecoefficient house etc. robust expectation shared between actors of a niche. The main agents of the aviation sector are listed as follows: airlines. culture. Researchers of systems innovation have been developing many theories and tools to promote the transitions required to make it possible to move innovations from laboratories to market.Innovation for Sustainability in Aviation No single country has full control of international flights. The third section presents the data sources which the analysis is based on. which indicates that the management of aviation in the future can not be achieved without international negotiations and challenges. and governmental and non-governmental organizations.. users. noise. This chapter is organized as follows: the second section explains the theory we use for the analysis of experts’ talks and the background of the aviation and the environment issues. cultural and political acceptability. The fifth section proposes future innovation management directions. in this chapter. the aviation sector is now tightening and widening the networks between various agents to challenge the climate-change issue. With successful experience in innovations. infrastructure. researchers. speed and safety. 1999). the sector produced the first globally harmonized agreement on reducing the sector’s impact on climate change (ICAO. The fourth section discusses the technological and system innovation trends. markets. aircraft manufacturers. Studying the history of technology innovations. products such as organic food. industry structure. BACKGROUND Research into Innovation and Sustainable Development Recent social science research into innovation and sustainable development can be classified into two groups: cleaner technology and systems innovation (Smith. The latter is important since cleaner technologies are often not adopted without some transformation of socio-technical systems (ex. 2002). we treat CO2 emission reduction as the main solution for aviation impact reduction for climate change. Here niche is used to describe an emerging and innovative technology or system. network expansions of agents of the aviation sector and perspectives for achieving the sector’s responsibility toward a carbon-neutral society. user needs. we investigate how the sector is going to control the flight for sustainability in such a difficult weather..

How the aviation sector will bring niches up is very interesting to the researchers of SNM. Kivits et al. This number itself doesn’t tell us whether the impact is “small”. that a stable increase of traffic is forecasted. 2010). we can find the increase of the sector’s interest on the environment issue. VISIONS AND TECHNOLOGY DIRECTIONS OF THE AVIATION SECTOR In this section. The Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) asked the International Civil Aviation Organization (ICAO) to pursue limitation or reduction of greenhouse gas (GHG) emissions from international flights (Conference of the Parties.2% to 5. however. ICAO formed the Group on International Aviation and Climate Change (GIACC) to develop an ICAO program of Action in January 2008. “significant” or “fair” (Randles & Bows. UNFCCC’s principle on common. The ICAO’s discussion on climate change. for example. but differentiated responsibilities (CBDR).5%~4. which vary from R&D projects in manufacturing to international initiatives for air transport management (ATM) systems are now organized around the world. which causes WTO subsidies disputes.9% of current anthropogenic radioactive forcing (Lee. the development requires a lot of investment and government supports. and aviation’s Chicago Convention principle of nondiscrimination and equal and fair opportunities to develop international aviation.. 2010). 2002. 57 . 2007). 90% noise reduction and 70% CO2 reduction (or fuel-efficiency increase) compared to the 1950s (Blackner. In other words. A number of activities. Dries et al. Smith. respectively. 2010). There are a few studies about aviation (Haan & Mulder. The brief summary of each organizations and the meetings are as follows. Boeing estimated an average 5. Raven & Geel. however. visions shared widely among the aviation sector and directions of technology development are discussed on the basis of the experts’ talks gathered from four international meetings for aviation and the environment. to achieve a consensus in the ICAO.9% growth of worldwide passenger traffic and cargo traffic. Furthermore. More studies are expected to accelerate both the SNM research and the aviation sustainability.Innovation for Sustainability in Aviation (e. The sector has achieved significant improvements in environmental performance. The meetings were held between September 2009 and May 2010 by 2 major international organizations that are connected strongly with European and North American leading industries and institutes and by authors. 2009) because aviation also brings a number of social and economical benefits. 2006.g. in each meeting. 2009). but especially in North America and Europe. It must be remembered.. a consensus both of countries which ratified the Kyoto Protocol and those countries which did not. A continuous increase in world fear about climate change and the absence of a central force in the ICAO consequently called to fore the sector agents’ awareness of their responsibility to work on climate change issues and their ambitious to take leadership in aviation development towards sustainability. Consideration on the two principles of the CBDR and the Chicago Convention caused very slow progress in the discussions. has been caught between two opposite principals. over the next 20 years (Boeing 2010). 2010.. 1997). It is interesting to note that. because systems innovation in the aviation sector is very difficult due to the long product lifecycle and huge sunk costs (Kivits et al. Aviation for Sustainability The impact of air transport on the atmosphere and the climate was estimated as 3. 2009) with a high uncertainty due to emission at high altitudes (Szodruch.

the workshop was organized with invited speakers from government. in Amsterdam. and non-governmental organizations. The Centre for Aviation Innovation Research (CAIR) is an inter-disciplinary organization within the University of Tokyo. in Washington D. In 2005. May. The Council holds an International Congress in the fields of Aeronautical Sciences every two years (ICAS homepage) and receives hundreds of aeronautical researchers and student participants. and even the Air Forces. Some of presentation documents can be downloaded from the AIAA homepage. oil companies. were dedicated to “a candid discussion of how to make aviation more energy efficient and “green” and how to effectively use aerospace technology to understand and limit climate change” (AIAA homepage). aircraft and engine manufacturers. The former seminar invited experts and researchers from Japan and Europe to discuss the technological feasibility of attaining emission reduction targets as well as future research directions on the issue.S. but in the course of preparation. and research institutes. 2010. 2010.Innovation for Sustainability in Aviation The American Institute of Aeronautics and Astronautics (AIAA). The workshop was initially planned as a workshop for noise issues. It was not until recently that environmental themes were considered important enough to discuss as a main theme. CAIR’s main objectives are to research aviation innovation from a wide range of views. non-governmental organizations. held “Inside Aerospace”. in 2007. “Towards a Global Vision on Aviation Safety and Security”. the theme was replaced with wider environmental issues. oil companies. certification and access to the airspace”. research institutes. including aeronautics. 2009. which is the world’s largest technical society for aerospace. which also included the subject of emissions. airlines. and economics. airlines. at Arlington. 58 . and in 2009. established in August. Some of presentation documents can be downloaded from the CAIR homepage. While the themes of recent meetings were about the aerospace workforce. “Aviation and Environment”. Half of the speakers came from Japan and the others from Europe and the U. This fact implies also the recent increase in the sector’s attention to the climate change. The AIAA invited key speakers from government.S. academia. Most speakers came from the Europe. and Japan to share their knowledge of technologies that have enabled significant reductions in aircraft noise and emissions to date. the theme was “UAV-Airworthiness. Both meetings invited governments. Technologies being developed for further reduction in aviation’s environmental footprint were discussed. the Netherlands. the meetings held on the 11th and 12th. All of the presentation documents from this 2009 meeting in Amsterdam can be downloaded from the ICAS homepage. aviation policy.S. aircraft and engine manufacturers. airlines. and to help promote and design the aviation industry as one of the leading industries in Japan. but one speakers was from the U. academia. the theme for the international workshop was.C. aircraft manufacturers. Most speakers came from North America. The International Council of the Aeronautical Science (ICAS) is the sole global organization for a free international exchange of information on aeronautical science and engineering. It also holds an International Workshop biennially for “international experts in the field to exchange views and to identify further areas of potential cooperation”. but some speakers were also from Europe. The latter workshop organized by CAIR and the Boeing Company invited experts from the U. academia. On the 28th of September 2009. an annual international forum for aviation and space leaders. One concrete objective is to contribute to realize maximum utilization of airspace by developing a set of policy recommendations. CAIR held an “International Seminar on Aviation and Climate Change” on February 18th. and an “Aviation Environment Workshop” on May 19th. 2010.

On the other hand. An important benefit of NextGen is to provide environmental protection (FAA homepage). created and have been promoting a fourpillar strategy since 2007 to achieve a vision of “carbon-neutral growth in the mid-term and to build a zero emission commercial aircraft within the next 50 years” (IATA homepage). which meets US future air transportation safety. as a representative of the airline industry. World aviation goals Organization ICAO IATA Vision Title “Programme of Action” “Carbon Neutral Growth from 2020” “A Vision for 2020” CO2 and other aviation environmental performance targets -2% annual fuel efficiency improvement up to 2050 -Further discussion on more ambitious goal -1. the National Aeronautics and Space Administration (NASA) in November 2007. Additional gains may be possible through operational improvements * Concepts that enable optimal use of runways at multiple airports within the metropolitan area ACARE (Europe) NASA (USA) “NASA subsonic transport system level goals” Visions for the Future of Aviation Before discussing the major activities of the aviation sector for sustainability. ‘new technologies’. and (3) reduction of carbon emissions by 50 per cent by 2050 compared to the 2005 levels in June 2009.5% annual fuel efficiency improvement from 2009 until 2020 -Carbon neutral growth from 2020 -50% carbon emission reduction by 2050 compared to 2005 levels -50% CO2 reduction -80% NOx reduction -50% noise reduction compared with 2000 Conventional configurations relative to 1998 single aisle (N+1=2015***) -32dB below Stage4 for Noise reduction -60% below CAEP6 for LTO NOx emissions reduction -33% aircraft fuel burn reduction** Unconventional configurations relative to 1997 single aisle (N+2=2020***) -42dB below Stage4 for Noise reduction -75% below CAEP6 for LTO NOx emissions reduction -50% aircraft fuel burn reduction** Conventional configurations relative to 1998 single aisle (N+3=2025***) -71dB below Stage4 for Noise reduction -75% below CAEP6 for LTO NOx emissions reduction -Better than 70% aircraft fuel burn reduction** with Exploit metro-plex*concepts ***Technology Readiness Level for key technologies = 4-6 ** Recently Updated. The “Next Generation Air Transportation System” (NextGen) is an air transport management concept for the year 2025 and beyond. and environmental needs. The IATA. ‘renewable fuels’ and ‘policy initiatives including the environmental management system (EMS) to address environmental impacts. ‘Improved technology’. which serve as a frame for each of the activities. security. (2) carbon neutral growth from 2020. we would like to present visions and strategies besides the Kyoto Protocol. ‘Effective operations’. mobility. NextGen uses a five-pillar strategy of ‘advances in science and modeling’. The International Air Transport Association (IATA). These strategies are summarized in Table 1. The fourpillar strategy. ‘operational improvements’.Innovation for Sustainability in Aviation Table 1. set three goals as follows prior to the ICAO: (1) CO2 efficiency by 1. presented the tech- 59 . 2009). The NextGen concept was enacted in 2003 by the Congress of the United States. ‘Efficient infrastructure’ and ‘Positive economic measures’ is comprehensive (Haag.5 per cent per annum from 2009 until 2020. which “represents some 230 airlines comprising 93% of scheduled international air traffic”.

With the UNFCCC Conference of the Parties (COP) 15 close at hand. We discuss each innovation from (1) to (5). A target for domestic aviation. These high targets are well shared and stimulate integrated development approaches between agents. NASA is currently investigating a “failsafe” structure design instead of “safe-life” for lightweight composite structures in its research project. (2) low air resistance aircraft design. which can contribute to the reduction of both aircraft weight and air resistance by integrating the wings and the fuselage. According to the panel discussions of the CAIR seminar in Feb 2010. while considering (6) as a separate direction below: 1. The target is 15% improvement in energy efficiency (fuel consumption per pax-km performed). simple replacement by CFRP won’t bring enough reduction of weight because a drastic change of structural design is also needed to benefit from the use of CFRP. In Boeing’s newest product. SRA2. the environment. (3) lean combustion and a high bypass engine. such as open rotor engines. and the efficiency of the air transport system and security. The challenges for the European aviation industry include quality & affordability. There are dozens of technical and operational innovation proposals which include what could not be expected from development approaches by a single agent. (4) an optimized electric system and (5) optimized flight routes Another direction is to replace fossil fuel by 6) biofuels. however. 80% NOx reduction. The ICAO Programme of Action on International Aviation and Climate Change has a 2% annual fuel efficiency target for improvement up to 2050 and further discussions are expected on even more ambitious goals. and resistance to the severe environments of heat.Innovation for Sustainability in Aviation nological goals for future-generation aircraft that should be in service from 2030 to 2035 (NASA homepage). Light weighting of aircraft: Weight is as critical as cost in aircraft development. ICAO finally reached the first globally harmonized agreement on reducing the sector’s impact on climate change at the High-level Meeting on International Aviation and Climate Change in Oct 2009 (ICAO. has arisen from the national sector-based approach under the Kyoto Protocol Target Attainment plan. “Pultruded Rod Stitched Efficient Unitzed Structure” (PRESEUS) (Collier 2010). 2009). Replacement of metal by Carbon Fiber Reinforced Plastics (CFRP) is expected in this sector. and fire is required aircraft material. we found that various levels of innovative ideas have been proposed and developed. Addendum) of the Advisory Council for Aeronautics Research in Europe (ACARE) exist to “better serve societies’ needs while becoming global leaders in the field of aeronautics”. “European Aeronautics: A Vision for 2020” and the Strategic Research Agendas (SRA1. load. safety. innovation in aerodynamics is achieved through state-of-the-art Computational Fluid Dynamics (CFD) technology and advanc- 60 . The ambitious environmental goals are 50% CO2 reduction. however. 2. There are two main directions: One direction of innovation is to reduce fuel use by (1) lighter weight. Japan does not have a clear shared vision throughout the national aviation industry. Technical Development Directions Through observation of the current sector’s movement toward sustainable aviation. and 50% noise reduction compared with 2000 levels (ACARE homepage). Lowering air resistance of the aircraft: NASA is now conducting research about a Blended Wing Body (BWB).

2010). military operators. is effective in improving the propulsive efficiency by reducing the passed air flow speed. which allows aircrafts to take preferred routing and trajectories. etc. For thermal efficiency. the Japan Aerospace Exploration Agency (JAXA) is conducting hydrogen and fuel cell hybrid engine research with which an aircraft can cruise with fuel cell power and then use a hydrogen gas turbine engine when the fuel cell power is not enough. the engines generate a lot of power. Optimizing the flight route: Currently. however. during the cruise. The Federal Aviation Administration’s (FAA’s) PerformanceBased Navigation (PBN) system. The development of the open rotor must challenge safety and mounting issues.. reduction of pilot/ controller voice transmission. are being developed and are under international agreement negotiation. The replacement can remove a lot of weight from the hydraulic system. 3. the cabin requires a lot of electricity for air conditioning. is an example of an innovative development. confronts the problem of the hypersonic rotation of blades and engine size. business and general aviations of different countries are being made globally. In fact. of the air that passes around the engine to the air that passes through the engine. Pratt & Whitney has developed a speed reduction gear which can improve propulsive efficiency with very high bypass ratio. 61 . the main issue has been how to make higher pressure and temperature in a combustion room possible without NOx increase. but also for electric power generation and the power of the hydraulic and heating systems. 4. etc. The major technological challenge is how to manage plural operations safely without an additional load of works on operators and navigators. A higher bypass ratio. GE and Boeing have developed a non-engine-bleed system in the 787. 5. aircrafts fly to their destination in zigzag for various reasons such as political and technological issues. An idea to store electricity. improvement of propulsive efficiency and thermal efficiency. will cause an increase of aircraft weight due to the weight of the battery. Optimizing the electric system: The output from jet engines are used not only for propulsive purposes. The open rotor engine which allows a very high bypass ratio is now under development in many institutes and companies. meal preparation. a unique alternative cycle process with an intercooler system is now under investigation on a long-term basis. While many political efforts to encourage effective use of airspace with airlines. Research is being conducted to minimize the inbalance and to effectively use the engine output by generation and storage of electricity. A higher bypass ratio. Test flights of PBN conducted and have shown a significant reduction of fuel consumption as well as other benefits like optimal use of air space. Mitsubishi announced the use of a geared turbo fan (GTF) engine made by Pratt & Whitney in the Mitsubishi Regional Jet (MRJ). Furthermore. During the take off and climb. In Europe.Innovation for Sustainability in Aviation ing wing technologies like multi-function ailerons and high-aspect ratio wings with CFRP (Blackner. Improving fuel efficiency of the engine: Improvement of fuel efficiency is pursued in two directions. On the other hand. there is an inbalance of supply and demand in electric power generation. which replaces the bleed air heating and de-icing system by changing the engine’s output to an electric signal. a new air traffic management system which can optimize the route according to the airports’ particular environments and latest climate reports.

too. 2010. For low carbon jet fuel. have been approved by the American Society For Testing and Materials (ASTM). Ito. SNM also emphasizes the importance of high expectations to the vision by all of the actors and of internal and external learning cycles on technologies. PERSPECTIVES ON AVIATION FOR SUSTAINABILITY In this section. Many test flights have been completed by Boeing. A close relationship among agents has supported a number of innovations since the Wright brothers. and Biomass to Liquid (BLT) have been challenged. is very important. 2010. For the success of the project. the aircraft manufacturer “works together” with not only engine manufacture and other suppliers but 62 . 3rd generation biofuels derived from algae avoid this criticism since they can be grown on soil or in water that is otherwise unsuitable for food production (Sustainable Aviation. even without combustion characteristics change. During the development of a new aircraft. Airbus. or biomass are being processed in the Fisher-Tropsch process to log chain paraffins and are finished in hydroprocessing and separated into final XTL products. Aircraft development and operation involve thousands of people all over the world. an international standards for aviation. “dropin” fuel which can replace current jet fuels without change to aircrafts has been actively investigated (Okai. 2009).. Any compound change in fuels. 2010).. which was issued in Sep. whether current aviation sector’s activities toward sustainability can be implemented successfully. experts say that biofuel is technically feasible. 2010). which have been developed for more than thirty years. we are going to investigate. 2005). such as the Boeing 787. and policies (Van der Laak et al. 2009. According to the findings from SNM research. Development of Biofuels: Airlines still have few choices when it comes to jet fuels (kerosene) because jet fuels for aircraft are strictly controlled by international standards. need to be approved for safety and reliancy. 2007). Schaltegger et al. are criticized for their strong adverse effects regarding food shortage in developing nations (Hansen et al. According to Shell (Ito. users. ASTM D7566. 2010). While 1st generation biofuels often produced from seeds or grains such as wheat.Innovation for Sustainability in Aviation 6. The use of XTL products produced by new industry processes. Coal to Liquid. a standard for Aviation Turbine Fuel Containing Synthesized Hydrocarbons. 2009. Synthetic gas from natural gas. natural gas. and the cost of feedstock and poor yields are the big obstacles when the biofuels try to replace the kerosene. or biomass using the Fischer-Tropsch process. the cost of production due to the longer refining routes. on the basis of SNM findings. and many research institutes (Blackner. accommodates up to 50% blends of conventional aviation turbine fuel with synthesized hydrocarbon blend components produced from coal. relying only on kerosene is a menace to the airlines in terms of future energy security and high prices. development of a broad network including actors from dominant “regimes” such as policy makers. For alternative aviation. Szodruch. infrastructures. On the other hand. or the Mitsubishi MRJ. 2010. For energy diversity generally. Aviation is an integrated multi-technology system. Active Networks Table 2 shows some examples of active networks found among agents in the aviation projects for sustainability.. Bauldreay. suppliers. knowledge institutes and also new actors such as small innovative firms. the fuel candidate must be handled like oil so that XTL such as Gas to Liquid (GTL). coal.

Focus on NASA N+1 goal .6 integrated technology demonstrators . European Commission Collier (NASA) CAIR-May FAA Continuous Lower Energy and Noise (CLEEN) Project . Activities. “Improved technology” Boeing 787 Dreamliner .R&D team .33% fuel burn reduction 54 industries 54 industries Hanlon (FAA) CAIR-May EU Clean Sky Programme . COA. Landscape of aviation activities for sustainability Airlines Aircraft/ Avionics Manufacturers Data Sources* Blackner (Boeing) CAIRMAY Sakura (Mitsubishi) CAIRFeb Parakeh (P&W) Inside Governments /Air control services Engine Manufacturers Airports Others (fuel suppliers) Projects.50% fuel burn reduction Boeing. Wetzel (Federal Environmental Agency) CAIR-May Blackner (Boeing) CAIRMay Sustainable biofuel viability Commercial Aviation Alternative Fuels Initiative (CAAFI) . ANZ. GE 20 small and medium enterprises UOP etc.40% CO2 reduction JAL.Environmental team .Business & Economics team Air Transport Association (ATA) Aerospace Industries Association (AIA) AIA Airports Council International North America (ACI-NA) FAA Shell Young (ATA) Inside Maurice (CAAFI) Inside Baudreay (Shell) Inside continued on following page 63 . GE.Pratt & Whitney PurePower PW1000G: 12~15% fuel efficient ANA Mitsubishi P&W JAXA FAA.Certification-Qualification team . VJM Boeing P&W. Honeywell P&W. Technologies ANA €€ Boeing GE& Rolls-Royce NASA FAA Research institutes / Academia IATA four-pillar strategies. JCAB Contracts Contracts NASA NASA Environmentally Responsible Aviation (ERA) Project .Focus on NASA N+2 goal .Table 2. R-R Federal Aviation Administration (FAA) 15 instit. + 17 univ.20% reduction in fuel and CO2 (Relative to the 767) Innovation for Sustainability in Aviation Mitsubishi MRJ . R-R.70% lower CO2 emissions from ICAO CAEP6 requirements .

Continued Projects. SG. NZ.CO2 will be capped at the 97% level of average emissions for 2004-2006 and will be lowered to 95% from 2013 . “Effective operations” and “Efficient infrastructure” Asia and Pacific Initiative to Reduce Emissions (ASPIRE) Performance Based Navigation (Next Gen) . UAL. CAIR-Feb US Airports FAA Japan Civil Aviation Bureau (JCAB) Shimizu (JCAB) CAIRMay Anger-Kraavi (Cambridge Uni) CAIR-Feb EU Table 2.Required Navigation Performance (RNP) IATA four-pillar strategies. JP US Airports Air service of AU.Radar Navigation (RNAV) . FAA. ANZ. “Positive economic measures” JAPAN . Technologies IATA four-pillar strategies. NZ.Corporation tax and property tax reduction to promote new efficient aircraft . CAIR-May JAL.All airlines operating in territory of the EU from 2012 . Activities. QFA. JP US Others (fuel suppliers) Data Sources* Funai. SIA Hanlon. SG. CAIR-Feb Hanlon.64 Airlines Aircraft/ Avionics Manufacturers Governments /Air control services Engine Manufacturers Airports Research institutes / Academia AU. FAA.Application of Act on the rational use of energy for large airlines Innovation for Sustainability in Aviation EU-ETS . JAL.

is an active member of CAAFI. any slight change to a jet fuel needs a certification approval because of the strict priority to safety in this sector. In addition to the projects in the Table 2. CAIRFeb and May stand for “International Seminar on Aviation and Climate Change” on February 18th. and an “Aviation Environment Workshop” on May 19th. aerospace manufacturers and air navigation service providers. The five flights demonstrated the maximum potential for environmental efficiency. May. ASTM D7566.S. there is an interesting initiative within UK. on the 10th of October 2009 succeeded in a 4. and the FAA – to demonstrate optimized operational procedures to reduce fuel burn with current best practices and existing technology. Japan. Airways New Zealand.825kg fuel consumption reduction. * Inside stands for “Inside Aerospace” held by AIAA on the 11th and 12th. which has contributed to the fuel readiness level of the Fischer-Tropsch process and other alternative fuels. a 15. and optimized a flap/ undercarriage/ thrust-reverse operation. JAL flight J077 from Honolulu. energy producers.S. AIA leads the R&D Team. took a User Preferred Route for the oceanic phase of the flight with a dynamic airborne re-route procedure instead of a route determined by 24-hours old climate data. IATA & EU programs SWAFEA and Alfa-Bird (Bouldreay. respectively. CRC. natural gas. was approved in 2009 with an exceptionally fast procedural speed because of supports to evaluation and qualification of alternative fuels by CAAFI and other agencies (Rumizen. and this approval is usually a long procedure. The flight was fueled with the latest on-board loads data. Airports Council International – North America (ACI-NA). aircraft and engine manufacturers. 2010. Shell. arrived with Continue Descended Approach. international participants. government agencies” has accelerated preparation for alternative fuel introduction (Maurice. The oceanic routes have a culture which accepts changes. Japan Airlines (JAL).S. To date ASPIRE has conducted five flight demonstrations with Air New Zealand Qantas. ASTM. 2010. as well as many advanced ocean ground automation systems. CAFFI: CAAFI has been working to lead development and deployment of alternative jet fuels for commercial aviation since 2006 under the leadership and sponsorship of the Federal Aviation Administration (FAA). The sorts of agents 65 . Among various projects. ASPIRE: ASPIRE was created in 2008 as a joint partnership between air navigation service providers – Airservices Australia. the FAA leads the Environmental team and the Certification-Qualification team. used the closest runway. researchers. 2009). and has the most modern aircraft fleet. to Kansai. or biomass using the Fischer-Tropsch process. and 2010. 2010 held by Authors. 2010). and ATA and ACI-NA comprise the Business & Economic team. and Singapore Airlines on oceanic routes. U. airports. For example. which is a specification for Aviation Turbine Fuel Containing Synthesized Hydrocarbons accommodates up to 50% blends of conventional aviation turbine fuel with synthesized hydrocarbon blend components produced from coal.247kg CO2 emission reduction (Funai. in other words. The Japan Civil Aviation Bureau (JCAB) and the Civil Aviation Authority of Singapore (CAAS) joined in the ASPIRE partnership in 2009. Air Force. and the later project involves more different agents than in most other aviation projects (Table 2). For example. which brings together the UK’s leading airlines. the Asia and Pacific Initiative to Reduce Emissions (ASPIRE) and the Commercial Aviation Alternative Fuels Initiative (CAAFI) are especially interesting because the networks found in the former project are international.Innovation for Sustainability in Aviation also with airlines and government agencies. as well as various international aviation alternative fuel projects: FAA-PARTNER. followed shorter departure routes adjusted by the U. “The coalition of airlines. United Airlines. Aerospace Industries Association (AIA) and the Air Transport Association of America (ATA). 2010). and U. In CAAFI. 2010). Sustainable Aviation.

manufacturers and research institutes expect technological breakthroughs for technological and operational innovations. The expectations of the airlines themselves are especially important because it is the airlines that finally decide whether or not to modernize their fleets (e. depending on the business and social environment for operators such as airlines and sometimes airports. On the other hand.Innovation for Sustainability in Aviation involved in the initiative is typical as for aviation but the aim of this initiative is broad. However. 2009). 2010). Even though many airlines are open to development in various alternative fuel projects such as CAAFI for example. through its homepage (Sustainable Aviation homepage). A Forked Expectation Governments and other non-profit organizations expect suppression of greenhouse gas effects in the aviation sector for innovations presented in the previous section. Therefore. “Fuel reduction = CO2 emission reduction”. the expectation from airlines for innovations is heterogeneous. the aviation industry still needs more discussions about the stage where CO2 emissions reduction is not equal to cost reduction any more. Airlines open the window of opportunity for technological and system innovations to spread in actual operations. and aircraft range without any trade-offs in safety and security. the main expectation of airlines to biofuel programs is energy security and corporate social responsibility. which didn’t ratify the Kyoto-protocol. a lack of ideas about positive economic measurements. in many presentation documents of the four meetings. the positive participation of airlines to the development does not promise the positive use of the low carbon alternative fuels if the current kerosene jet fuel is still available and less expensive than alternatives. we need a new mechanism to keep such different expectations to the same direction. Lufthansa’s fleet modernization programme of 170 aircrafts with a list-order price of 16 billion euros (Haag. a slide with the equation: “Fuel reduction = CO2 emission reduction” is shown. “Drop in” biofuels.. The initiative sets a series of eight goals and 34 commitments relating to economic. The cap-andtrade scheme can add more value to low-carbon technologies so that these technologies can enter the market. Governments and airlines. environmental and social aspects of aviation. which are the main customers and users of new technology and systems. are one of the most feasible candidates for low carbon alternative fuel. This equation amplifies the driving force behind innovation. look for cost reduction before reduction of greenhouse gases. From the discussions in the four meetings. fuel efficiency is a critical factor in addition to speed. however biofuels are not competitive against current jet fuel (Ito. Airlines. although the 66 . In the new aircraft development phase. or pass national legislation for cap-and-trade.S. accelerates the sector’s activities on sustainability innova- tion. speed. however. In terms of cost. seemed to stand out.. So even if biofuels can be used technically. In order to introduce technological and system innovations and the use of low carbon fuels to achieve a carbon-neutral environment. The cap-and-trade scheme is considered by many politicians and economists to be one of the most effective methods for realizing a low GHG society (Duval. load capacity. CO2 efficient airport operation etc. many regional initiatives have been established with the aim of reducing GHG from particular regions and most initiatives are preparing a cap-and-trade scheme. Nonetheless. in actuality. the 4th pillar of IATA strategies. This priority among fuel efficiency. load capacity and aircraft range changes. however. 2009)). Recent soaring fuel prices and the expectation from governments to operators to reduce CO2 emissions raise the need for fuel efficiency in the priority competition. The initiative is strong and leads the government (Sunetra. 2010).g. The initiative is for the long term sustainability of the UK aviation industry but provides interesting and important reports about alternative fuels. In the U.

subsidies and tradable permits as marketbased policy options. 2010). plays a significant role to reduce noisy aircrafts. we must note the IATA’s report. or the complexity of the international aviation agreements. long discussions are still necessary before putting such a scheme into effect. this scheme still has the problem of reducing airline business rather than replacing conventional fleets with innovative low-carbon technology. they may start the reduction from abandonment of the routes to developing regions. Schematic roadmap of aviation CO2 emissions under the effect of reduction measures (Adapted from IATA. such as ICAO “chapter”. strict noise standard. There is another option. (d) an optimized electric system and (e) optimized flight routes). the EU-ETS was sued recently by the US Air Transport Association of America (ATA) to halt and is assumed not to be able to start from 2012 (Young. other measures to compliment the time gap from now until the introduction of the cap-and-trade scheme to the aviation sector. (b) low air resistance aircraft design.Innovation for Sustainability in Aviation aviation industry is not yet included in the scheme (McCann. Because when airlines need to reduce the business. While we found growing networks. We need. emission charges. The reduction of airline business causes a reduction of mobility. which is similar to IATA’s 4th piller of. Even though cap-and-trade is a positive mechanism urgently needed in the implementation of aviation for sustainability.S. In aviation operation. which is not a positive economic measure nor a market-based approach but a regulatory approach. therefore. The EU emission trading system (EU-ETS) is one of a few propositions made to the aviation sector as a positive economic measure. Besides of these facts. While the cap-and-trade scheme can be expected to evaluate the cost benefits of low-carbon technology for aircraft. we have seen that there are various projects of aviation sustainability and we have analyzed the perspectives of these projects. “stage”. secure of mobility is also important in a different frame. we recognized that the driving forces from markets are within the limits of expectation on cost-efficiency. the aircraft can not operate. The authors assessed that any of these options confront problems of uncertainty in aviation’s impact on climate change. or on the U. The standard has proven its big effect on airline fleet strategies. CO2 will be capped at the 97% level of average emissions for 2004-2006 and will be lowered to 95% from 2013. If an aircraft doesn’t satisfy the noise standard. which warns that even we implement all of the technology and operational innovations (a) lighter weight. for example. However. The ICAO is now investigating a CO2 standard similar to noise and NOx. Daley and Preston (2009) assessed market-based policy options. for the mitigation of aviation impact to climate change. 2009) 67 . 2010). FUTURE RESEARCH DIRECTIONS In previous sections. in the regional economic gap issue. it is not achievable to bring aviaFigure 1. distortions of international airlines or manufacturing markets. From 2012. the EU will begin an emissions trading system (EU-ETS) for all airlines operating in the territory of the EU. (c) lean combustion and a high bypass engine. Stopping the significant increase of traffic is actually one of the purposes of EU-ETS supporters. For example. ‘Positive economic measures’. The authors listed environmental taxes.

If we could combine the favourable driving forces. this type of refuelling is risky in terms of safety. or of aircraft technology itself. Niches are a level of emerging innovations and are situated at the margin of the regime. And we think it is important to understand the driving force in the aviation socio-technical system in multi-level perspectives. For example. A lot of technical papers and significant benefit have been proposed. using an aircraft of 5000km range capacity with stops of lubrications at airports can be about 40% more fuel efficient than carrying the same number of passengers along a 15000km distance using an aircraft of 15000km range capacity. The MLP distinguishes three levels (niche. For such a socially challenging issues. Green’s short-range aircraft idea is an effective solution for the reduction of CO2 emissions. It comes from SNM researches and has a complementary relationship with SNM (Schot & Geel. Supersonic transportation attracts some of airlines and business travellers. which covers all of the flight. Many stakeholders wish aviation for sustainability. for carrying fuels. 2008). The development of longer-range flights is often described in the first slides of manufacturers and airline presentations. A MLP approach may help Green’s (2002. we may be able to load low-carbon technologies on personal aircraft in the same way as Toyota obtained technology and cost supremacy in the hybrid engine mark by mounting the hybrid engine in the compact size car and pursuing low profit but high volume. We need to discuss how to manage a radical technology or system change. MLP approach will be useful to list the problems to solve and organize the learning process. Customers will not accept the trouble of stopping in several airports once they have taken a non-stop flight. small aircraft might have advantages in terms of the difficulty of develop- 68 .5 hours in 2006 by 777-200LR. Each innovative aviation scenario including “sustainability” has opposite and favourable driving forces and may not able to be realized by itself. In other words. On the other hand. Some of MLP researchers study the interaction of different niches or regimes. 2 stops and 26 hours in 1990 by 747-400 to 0 stops and 19. In brief. but it is considered unrealistic. Geels concluded that co-evolution at the regime level was clearly visible in his case studies of past technology or system replacements. Multi-Level Perspectives (MLP) is a useful approach to understanding transition pathways of an innovative idea to integrate in the main stream of a system or a society. For example. Although there is the idea of air-to-air refuelling. “Regime” changing innovations are expected for “Carbon Neutral Growth from 2020”. Landscapes are the macro-level of society as a whole. according to Qan- tas. This difference is due to the weight of fuel. Cohen (2010) detected the small but strong human desires for personal aeromobility pushing back the force for sustainability. 2006) radical idea of flight with short-range aircraft with several refuelings before arriving at their destination. there are some options that may go opposite direction of “sustainability”. we might be able to obtain sustainability and even further ideals for the sector. regime and landscape) in a system. The interplay between dynamics at multiple levels leads transitions. Green’s idea is against the development of longrange aircraft. There was a strong interaction between technology and markets. Transitions are not caused by a change in a single aspect. There are several options for the future aviation system. Even though the requirements for safety and security will not change between small and large aircraft. development of aircraft technology reduced the number of stops of the London-Sydney flight from 32 stops and 10 days in 1939 by Flying Boat. but by the interplay of many aspects and actors. but this idea doesn’t appear in a roadmap of this sector. a long distance flight consumes nearly half of the fuel. But according to Green. Regimes are a level of the main or existing streams and create stability of the system. See Geels (2006) for further explication.Innovation for Sustainability in Aviation tion to CO2 carbon neutral emissions (Figure 1).

may need a paradigm shift due to the higher overall complexity of issues. H. 2010. from http:// www. Kyoto.. and CAIR between Sep. Arlington. Current Market Outolook 20102019. such as allowing people to meet their families on different continents.. J. F. A fuel producer’s perspective. The cap-and-trade scheme is considered to be one of the best solutions. Europe.carbon technology in the sustainability context. J.. Air transportation interacts with current business and the economical practices and policies and well as through social activities. T. We collected and analyzed the latest experts talks from four international meetings for Aviation and the Environment held by ICAS. Earthscan Climate. M. but rapid growth of airline traffic. These meetings invited experts and researchers from Japan. Retrieved August 28. In spite of ambitious innovation plans. Bauldreay. S. 2009 and commercial/cmo/ Collier. we have presented future research directions using a multi-level perspective approach. AIAA.Innovation for Sustainability in Aviation ment because of the strength and complexities of the system as well as the scale of the market. strong traffic growth makes it difficult to suppress the aviation impact to climate change. May). Niche management and its contribution to regime change: The case of innovation in sanitation. 69 . Climate change and aviation (pp. (2010. P. Presented at the AIAA Inside Aerospace Conference. we propose management of the sector’s future options in multi-level perspectives as a future research directions for sustainable aviation. (2007). (2009). which has fewer constraints. 3rd Session. M. Aviation – Current energy challenges. We saw that various levels of vision are well shared between agencies and many technology and system innovations are upcoming. L. A. however. and North America to mitigate the aviation impact to climate change. Environmental technologies update. Finally. 9. which is useful in discussing how to bring innovations to practice. Dries.boeing. (2010). need a specific remedy before a trade scheme is finally put into effect after many more necessary long discussions. Technology Analysis and Strategic Management. Sustainability issues. Presented at the University of Tokyo Boeing Aviation Environment Workshop. B. 729–746. & Preston. Aviation and climate change: Assessment of policy options. Therefore. especially in Asia is expected in the near future (Upham. Manufacturers may be able to innovate their technology development from small aircraft. The aviation sector has had a number of innovative successes.). J. & Upham. CONCLUSION Only 1% of the world population has flown yet. Tokyo. Kyoto Protocol to the United Nations Framework Convention on Climate Change. May). NASA’s Environmentally Responsible Aviation (ERA) program. Conference of the Parties (1997. December).. We also found that the networks between agencies are expanding through initiatives. Blackner. (2010. Daley. 347–372). but at the same time. 2010. and transform these technological developments in big aircraft much earlier than in direct development to big aircraft. How to achieve aviation for sustainability without jeopardizing mobility is a huge issue for the sector. we may REFERENCES Boeing (2010). Tokyo. (Eds. D. van Villet. In Gossling. B.Presented at the University of Tokyo Boeing Aviation Environment Workshop. & van Villet. 2003). We discussed the need for positive economic measures to put a higher value on the need for low. VA.

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Strong Air Traffic Growth: The growth of air traffic is statistically faster than economic. 2008). ‘Effective operations’. GDP growth and eventually has canceled the recent effort of fuel-efficient improvement (Szodruch.Innovation for Sustainability in Aviation KEY TERMS AND DEFINITIONS Carbon Neutral Growth: Airlines are the first global industry. ‘Improved technology’. 2009). created and have been promoting a four-pillar strategy. Sustainable System Innovation: Researchers of systems innovation have been recently developing many theories and tools to promote the transitions required to make it possible to move innovations from laboratories to market. IATA 4 Pillars Strategies: The International Air Transport Association (IATA). ‘Efficient infrastructure’ and ‘Positive economic measures’. since 2007 to achieve a vision of “carbon-neutral growth in the mid-term and to build a zero emission commercial aircraft within the next 50 years” (IATA homepage). which committed their growth without increase the carbon emission from 2020. Multi-Level Perspectives (MLP): MLP is a useful approach to understanding transition pathways of an innovative idea to integrate in the main stream of a system or a society (Schot and Geel. 72 .

Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. Muga University of Mount Union.73 Diffusion and Adoption of Innovations for Sustainability Helen E.055 x 1018 joules) in year 1800 to 500 quadrillion BTU (5000 x 1018 joules) in year 2000 (UN Environment Programme. Key reductionist approaches to assessing sustainability such life cycle assessment (LCA). They may also be used during the production stages to assess whether a business needs to use a different raw material to make their products. The integrated sustainability methods of life cycle assessment and life cycle cost analysis enable a business to assess alternative products or processes at the planning and design stages. .ch005 land. 2005). energy consumption has increased from 10 quadrillion BTU (10. social network analysis.25x1012 moles/year in year 1850 to 9x1012 moles/year in 2000 (Crutzen. USA Ken D. Unsustainable Copyright © 2012. and sustainability indicators are discussed in detail and applied to an engineering infrastructure scenario. life cycle cost analysis (LCCA). loss of tropical rain forest and woodland. Population.4018/978-1-61350-165-8. water use. Thomas Auburn University. Water use increased from 200 km3/year in 1900 to 5000 km3/yr in 2000 and nitrogen fluxes increased from 0. and nitrogen flux to coastal zones have also increased over time. amounted of domesticated DOI: 10. carbon dioxide emissions. Population increased from 600 million in year 1750 to 6 billion in year 2000. INTRODUCTION Over the centuries. USA Chapter 5 ABTRACT The primary focus of this chapter is on the theory and concepts of sustainability and why they are important to innovation and vice-versa. and mental models of individuals in the diffusion and adoption of innovations are also explored. The role of management. IGI Global. Carbon dioxide emissions increased from 250 ppmv in year 1800 to 360 ppmv in year 2000. 2007).

and the diffusion and adoption of sustainability concepts and theory to a large extent attempts to address current global challenges that society and future generations face by reducing excess consumption. and play. promoting efficient management and use of natural resources. sustainability is defined as. the whole or complex system).e. equitable social progress. . In this chapter. prudent use of natural resources. bike paths. and maintenance of economic well-being without compromising the environment and society. natural resources and services. either at the decision stage or during the operational stage. Commercial and residential buildings consume around 36% of energy and over 65% of electricity in the U. and transit arrangements” (Dearry. 2004).S. and indicators) and their application to the built environment. clients. what is important is that it strives for protection of the environment. parks. We also focus on the role of management in the diffusion and adoption of innovative strategies that contribute to sustainability and drive it over the ‘tipping point. The introduction. “meeting the needs of a firm’s direct and indirect stakeholders (such as shareholders. 2005).defined as the point at which an object is displaced from its current state (of trajectory) into a new state (of trajectory). Long-term strategies towards achieving sustainability should consider all three aspects (i. emissions. Green Building Council. schools. These global challenges/issues are intricately linked to one another. treatment plants. Of great importance are the types of strategies that businesses and various entities adopt and their impact on sustainability. These edifices include homes. and around the world. harbors. unsustainable management practices exacerbate current global problems. and reducing consumption of energy sources that contribute to climate change The term “sustainability” has different meanings to different people.EPA. life cycle cost analysis. power generation facilities. (U. At the business level. Further. They also include roads.S Green Building Council.S. employees. Over three billion tons per year of global raw materials (40%) are consumed in the United States (U. communities etc). 2005). One of the definitions of sustainability is that it is “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland. These engineered structures sustain and support human activity and continuity. The built environment is one of the largest consumers of raw materials and 74 energy.Diffusion and Adoption of Innovations for Sustainability practices such as excess consumption. and indicators) and their application to the built environment. The built environment includes “all of the physical structures engineered and built by people—the places where we live. life cycle cost analysis. 2000). and climate change. In 1997 alone. For example. pressure groups. 2002). we focus on the theory and concepts of sustainability (life cycle assessment. and storm-water management systems. 1987). do the innovative strategies that are adopted drive the business toward sustainability or away from it? A great deal of emphasis is given to the role of learning and its impact on the change in mental models of individuals as these play a critical role in the adoption and diffusion of innovation. without compromising its ability to meet the needs of future stakeholders as well” (Dyllick & Hockerts. Figure 1 shows the interaction between population. energy. construction and demolition waste amounted to 65% of all solid waste in the U. Figure 1 shows the three dimensions of sustainability. work. workplaces.S (U. OVERVIEW OF SUSTAINABILITY AND SUSTAINABLE DEVELOPMENT While there are varying definitions of sustainability from different sectors of industry. we focus on the theory and concepts of sustainability (life cycle assessment. construction.S. and demolition of buildings contribute a significant amount to total solid waste in the U. In this chapter. renovation.S.

According to the United Nations Educational. This subsequently contributes to increase in emissions (+) which in turn contribute to climate change (+). 2007). Further inclusion of the triple bottom line in decision-making. Inclusion of environmental and societal aspects in addition to economic aspect into long-term strategies enables a company/firm or other entities to meet the needs of the present without compromising the needs of the future. Scientific and Cultural Organization (UNESCO). animal and plant species. (2003). Planet and Prosperity) are inter-connected and hence may influence each other in multiple ways. sustainable development ‘is a vision of development that encompasses populations. sustainable development is the design and use of human and industrial systems to ensure that humankind’s use of natural resources and cycles do not lead to diminished quality of life due either to losses in future economic opportunities or to adverse impacts on social conditions. Ongoing research and development in the field of sustainability science has expanded those 3 core pillars to 5 pillars of sustainability: environment. brought about by a change in mental model of the decisionmaker towards sustainability. technology) is key to controlling. emissions. According to Mihelcic et al. mitigating the upward trend unsustainable practices. The adoption of sustainable practices by the public and in the energy sector also contributes to a decrease in energy consumption (-). Linkages between population. Population growth requires significant amount of natural resources and energy to sustain and support. energy consumption. The three core pillars of sustainability (Figure 2) or the ‘triple bottom-line’ (i. A decrease in population leads to a decrease in energy and resource consumption (-). consumption. An increase in population. People. resources. leads to an increase in energy and natural resources (+). politics. reducing. society and economy (McConville & Mihelcic. and climate change.e. It also gives the entity a competitive advantage over its competitors as the public and society become socially and environmentally conscious. education.Diffusion and Adoption of Innovations for Sustainability Figure 1. with positive and negative impacts. has the potential to significantly reduce/mitigate the upward trend in carbon dioxide emissions. Adoption and diffusion of sustainable strategies (sustainable management practices. Strategies that concentrate on short-term gains often focus on one aspect of the triple bottom line. ecosystems. Understanding the inter-connectedness and employing strategies that consider all three dimensions is critical to achieving sustainability. water use and nitrogen fluxes in waterways. human health and the environment. natural 75 . culture.

human rights. thus allowing prevention. resources and that integrates concerns such as the fight against poverty.’ In the context of sustainable development. education for all.g. changes of consumption patterns and income levels in local communities). social and economic issues (OECD. Performance measurement of the implementation of development plans and management actions. Benefits from good indicators include (adapted from OECD. there are different kinds of indicators. as well as be economically and technically feasible to measure for them to be classified as good (OECD. Indicators are measures expressed in single numbers. and Measures of management effect. (2) social progress. Measures of the impact of product development and production on the biophysical and socio-economic environments (e. qualitative descriptions or existence/non-existence of certain elements concerning environmental. They are signals of current issues. health. Measures of management efforts. need for action and results of actions.. and (3) environmental protection for the present and future generation through the use of various assessment methods such as life 76 . and Regular monitoring which can lead to rolling improvement. each with different purposes for decision makers: • Early warning indicators (e.g. intercultural dialogue. 1993). raw material shortages). human security. According to the Organization for Economic Cooperation and Development.. decline in product sales and number of customers who intend to return). and social (people) dimensions with emerging dimensions of culture and politics • • • • • • Recognition of emerging risks and or conflictive issues. gender equality. Reduced risk of planning mistakes. 2003): • Better decision making in order to lower risks or costs. The three interconnected pillars of sustainability consist primarily of the environmental (planet).Diffusion and Adoption of Innovations for Sustainability Figure 2. Measures of the current state of the industry that the product primarily serves. emerging situations or problems. • • • • • SUSTAINBILITY THEORY AND CONCEPTS Sustainability. indices of the level of deforestation. Sustainability indicators should be easy to comprehend. economic (prosperity). Reduced public liability. Detection of impacts to allow for timely remedial action when needed. strives to achieve the following: (1) maintenance of economic well-being. percentage or ratios. results or performance. Indicators of stresses on the system (e. indicators are information sets which are formally selected to measure changes in assets and issues that are key for the product development and management. as defined by The Brundtland Commission. etc. 2003).g.

land. to construction. We can evaluate the impacts of process. bridges. industrial processes. we can reduce the problem into smaller problems and evaluate them separately. together with engineering works such as roads. Table 1. systematic approach that considers the triple bottom line is essential for long-term and possible short-term planning. economic approach to evaluating the project across all life cycle stages (planning. The piece of the puzzle that is often not connected in practice is that the built environment also encompasses socio-cultural activities and human interaction with the physical infrastructure and with the natural environment. and the environment by removing and or reducing contaminants.g.g. design. and the natural systems (air. Such integrated assessment methods can also be used in determining where improvements/innovative strategies can be made. Transportation systems including roads. Human activity influences behavior of the built environment components in unexpected ways. life cycle cost analysis. Power generating facilities enable human activity. and other civil infrastructures that support and enable human activity and urbanization. In order to assess the impacts of various projects. and transportation to be possible and also sustain society. and activities in the built environment using a single-method approach. storm-water management systems. Water and wastewater treatment facilities and storm-water management systems are design to protect human lives. Engineering projects that build these infrastructures are always hinged on a single reductionist assessment method. economic and societal impacts of competing alternatives may be used as a guide to aid in decision-making in selecting and implementing the most appropriate strategy. bridges are the “veins” or “conduits” that provide accessibility to goods and services from the natural and built environment and maintain and/or improve human well-being. The following paragraphs cover the basic concepts and theories of sustainability including the methods of various methods of assessment and how such methods lead to innovation. These various integrated methods of assessment attempt to evaluate the impacts of various processes. to operation and maintenance and demolition/retrofitting). The built environment is a system that consists of all types of buildings such as houses. Or alternatively. holistic perspective. products.. products. economic activity). and sustainability indicators. human wellbeing. a holistic. Results from such a study that utilizes integrated assessment methods to gauge the environmental.Diffusion and Adoption of Innovations for Sustainability cycle assessment. Hence social and environmental assessment methods are also critical. then appropriately reconnect them within a systems context – a ‘sum of all the parts’ approach. and the natural environment with each other and other infrastructure that makes up the built environment. The concepts of sustainability as covered in the Introduction section are applied to the built environment as a system. we can study buildings and we can 77 . power generation facilities. They also enable dynamic interaction of human activity (e. When these interactions are not considered the analysis remains incomplete. They are also used to compare alternatives from a systematic. e. and activities over a set lifetime. For example in the built environment. other civil infrastructures. treatment plants. human well-being (social). Once we’ve reduced the problem to smaller problems we can then apply a systematic analysis to each of the specific problems or component. water) with each other and with the civil infrastructures and the interface at which they converge. SUSTAINABILITY ASSESSMENT METHODS APPLIED TO THE BUILT ENVIRONMENT The built environment and urban systems are a complex interaction between human activity (economy). These civil infrastructures are part of the considered human system. shops.

and Simapro are tools that can be used to evaluate the environmental impacts of a given product. for example raw materials that are used to build a commercial property. Economic (life cycle cost analysis). etc. one that incorporates the triple bottom line (societal. Some of the critical components or parts of the built environment include buildings/structural support. and society. Environmental (life cycle assessment). use. distribution. 2006. 1993). gas and water lines. A systematic methods approach such as an integrated framework of life cycle assessment (LCA). Life cycle assessment (LCA). water reservoirs. Societal (risk assessment). Therefore the reductionist approach is used to attempt to solve problems within a system while the complex systems approach is used to thereafter to frame and define the issues (Checkland. activity/service at various life stages (raw material extraction. Greenwood. With LCA/EIO-LCA/Simapro we can determine the environmental outputs for. and disposal. transportation systems. LCA/EIO-LCA/ Simapro enables us to identify what stage of a product’s or process’ life significant environment 78 . Each of these ‘parts’ may be put together to gauge the overall sustainability of the system. reductionist approaches are best applied in the study of sub-systems whereas the systems approach looks at whole systems (Checkland. environment. Environmental (life cycle assessment). a company may focus on the economic aspect by reducing costs in order to achieve short-term gain often times at the detriment of environmental and social dimensions (i. Figure 3). As an example. a systematic approach to as- sessment. Traditional methods of assessment. 2009). triple bottom line. services. a reductionist approach to identifying a problem along with the application of a systematic approach to assessment is often the best option. where cost was the only factor taken into consideration. and indicators are necessary to evaluate these component-specific impacts from a sustainability perspective. manufacturing. With such a complex system as the built environment. the system can be divided into smaller parts that inherently are connected and support its overall function. such as cost-benefit analysis and life cycle cost analysis. Such an option is also best suited when long-term strategies are concerned. 2009) Reductionist Approach to Identifying Problem Reductionist Approach to Assessing Sustainability Economic assessment. a reductionist or subsystem approach). and environmental assessment) can then be applied to each part.e. Muga. Strategies that are top-down and/or bottom-up approach have the potential to move a company or entity towards sustainability or away from it. information systems. Economic-Input Output Model (EIO-LCA). Applying reductionist approach to the built environment. life cycle cost analysis (LCCA). Integrated methods of assessment that attempt to address the three pillars of sustainability: economic. However uncertainty of data and lack of data make getting to this stage challenging. process.Diffusion and Adoption of Innovations for Sustainability Table 1. Reductionist and systematic approaches to addressing sustainability (adapted from Muga. Economic (life cycle cost analysis). This is where we would like to be. and Societal (societal indicators). 1993. Once each ‘part’ is identified. The various reductionist approaches to addressing sustainability can be seen in Table 1. We can also use these tools to evaluate the outputs from various energy sources used during the operation of the facility. Systematic Approach to Identifying Problem Systematic Approach to Assessing Sustainability study pavements/roads separately then reconnect them to a systems context. According to General Systems Theory. economic.

processes. or capturing heat for in-house energy use.Diffusion and Adoption of Innovations for Sustainability Figure 3. emissions occur and where improvements can be made. of various competing alternatives can be compared using LCA. economic and societal impacts. an innovation might be re-designing and manufacturing the products so that they have long-lives. Life cycle stages involved in the manufacture of a product. For example in Figure 3. While the integrated assessment methods for sustainability enable us to compare alternatives processes. often making them cheaper to produce. But for any product that is made lighter it affects the entire LCA since it reduces costs from materials required to shipping of raw materials and final products. Thus this whole system thinking or systems approach to innovating sustainably has been captured by the Rock Mountain Institute in the following principles to be considered for sustainable integrative design. hence avoiding land-fill. Products made with less material have less negative impact all the way from production to disposal. They are useful tools in aiding decisionmaking. technologies. and pathways where innovation can take place further reducing undesirable outcomes or increasing desirable outcomes. Innovation can also take place when performing an LCA or LCCA over the different life cycle stages. LCCA or other assessment methods. and end of life uses of a product before a project begins. in the extraction stage. to determine the alternative with the least environmental. It is clear how a light-weight truck can save energy as it takes less fuel to operate. or recycle the product in order to make a completely different product. an innovation might be re-designing a process so that less energy is consumed. These methods may also be used to evaluate the operation and maintenance stages when it is in progress. processes. The life cycle stages. and technologies with the least negative impacts. innovation and engineering: 79 . Integrated assessment methods such as LCA and LCCA may be used at the planning and design stage to evaluate the impacts of alternative materials. When it comes innovating and designing sustainably. an innovation might be to re-use of the product in another process. In the processing and manufacturing stages. or utiliz- ing waste material that might otherwise be landfilled. an innovation might be what kind of equipments do we use and how do we carry out the extraction so that have minimal impacts. Figure 3. it pays to think light. In the endof-life stage. In the use stage it might be. they also enable us to identify.

network density. of any kind. social units). betweeness and closeness. thereby reducing carbon dioxide emissions from fossil fuel use and contributing to a sustainable planet. geothermal) are one of the innovative technologies that provide clean. not assumptions and rules Start downstream Seek radical simplicity Tunnel through the cost barrier Wring multiple benefits from single expenditures Meet minimized peak demand. in some level of seniority to others. as well as in economics. Understanding these emerging energy systems.e. competencies and opportunities for any given business. Innovative energy systems are a tremendous business opportunity for companies. takes on a cyclical process with evaluation of sustainability challenges. adjacency. 2006). This reshuffling of human resources for optimum yield of innovative throughput necessitates continuous monitoring of internal social networks through the calculation of key SNA indices such as centrality. 1994). The social network perspective focuses on relationships among social entities and is an important addition to standard social and behavioral research. in the development of the best innovation network to ensure a business has the best competitive advantage possible. According to Nidumolu. boundary spanners. to control some commodity. there is a need for calculated and strategic management of resources. Where innovations are concerned. product possibly of a higher quality and increased life span yet spurs further innovation. how to increase their life span spurs further innovation. and somewhat for project management in industrial engineering (Taagepera. biomass. Thus an understanding of the actual and perceived managerial structure for arriving at innovations will allow for altering the social network to reduce ‘processing time’ for innovative product development. optimize over integrated demand Include feedback in the design INNOVATION AND SUSTAINABILITY Innovation and sustainability go hand in hand. Table 2 describes these in some depth. marketing. renewable energy to humans. sustainability is now the key driver of innovation. SNA is used widely in the social and behavioral sciences. 2008). These authors say that contemporary innovation. According to some measuring indices of SNA. Management. Their key findings are highlighted in Figure 4. what materials works best. Prahalad and Rangaswami (2009).Diffusion and Adoption of Innovations for Sustainability • • • • • • • • • • • • • • • • Define the shared and aggressive goals Collaborate across disciplines Design nonlinearly Reward desired outcomes Define the end-use Optimize over time and space Establish baseline parametric values Establish the minimum energy or resource theoretically required. then identify and minimize constraints to achieving that minimum in practice Start with a clean sheet Use measures data and explicit analysis. relationship. which is primarily concerned with attributes of the social units (Wasserman & Faust. refers to the use of people (i. particularly human resources. This is one key area where the application of Social Network Analysis (SNA) can assist. smarter ways of conducting their activities. Competing businesses emerging with similar. Innovations and the development of new technology provide a way for humans to improve their lives (social progress) through better. Energy systems (photovoltaic cells. reachability. characteristics of each actor’s interaction or management activities will affect the holistic management of assets in terms of sustainability and structure (Li & Chen. Innovation needs to be influenced by a population’s current mental model with regards to any 80 . with sustainability at the core.

competencies and opportunities in relation to innovation (adapted from Nidumolu. During the innovation development process this is where the proponent of the innovation has the 81 . Thus there is a need for developers to be connected with the population for which the innovation is intended. Sustainability challenges. Prahalad & Rangaswami. a needs assessment of the population should be done and used as the driving force of the innovation research and development. 2009) product expected to be developed for use within this population. beliefs and notion of complexity should be revealed for consideration of what the innovated product needs to appease. Within this assessment key understanding of the population’s knowledge. This is key to the sustainability of the innovation.Diffusion and Adoption of Innovations for Sustainability Figure 4. So as a major preinnovation step.

It can be calculated by: Network density = where T is the number of ties present. The centrality can be found from: Centrality ratio (Ci) C Network density i = ∑ (z j =1 N i =1 N ij N + z ji) ij ∑∑Z j =1 where Ci is the centrality of the ith actor. The reachability matrix is the product of the adjacency matrix with itself and it uncovers the number of paths that an actor can be reached. 82 . The resulting matrix represents the sum of frequencies or the ‘frequency of contact’ required between 2 actors. the “length” or number of unique walks between actors. White & Romney. a cradle to grave analysis). the innovation developer should consider the life cycle analysis (LCA) of the material chosen with regards to where the raw materials come from through to how the materials can impact the environment at the end of life (i. 1989. Here all the pillars of sustainability should be considered. This is a measure of the percentage of all the possible ties present and varies from 0 to 1. Reachability tells us whether two actors are connected or not by way of either a direct or an indirect pathways of any length. Relationship – This matrix shows the relations between actors using integers that represent the strength of the relation between 2 actors. This gives a ready index of the degree of dyadic connection in a population. This means that actor can avoid the potential control of others. The post-innovation sustainability hinges upon acceptance of the product by the target population through a change in their mental models. Zij is the value of a relation from the ith actor directed to the jth actor in the kth network. This ratio is the ratio of the aggregate relations involving the actor over all relations in the management structure. 2009. An actor is considered to be close when it has the shortest paths to all others. 2007) Numerical measure SNA matrices Definition Adjacency . Reachability – Reachability is a measure of path distance. in tandem with the pre-innovation mental models of the population.Adjacency tells us whether there is a direct connection from one actor to another (or between 2 actors for un-directed data). Quantitative measures and relational characteristics of strength of management in SNA (adapted from Freeman. A boundary spanner refers to an actor that has access to other networks.Diffusion and Adoption of Innovations for Sustainability Table 2.e. in achieving an innovative product that attains the company’s triple bottom line.e. which are usually nodes located in strategic locations within the network. Outhwaite & Turner.e. Betweenness Closeness Boundary spanners Centrality This refers to the extent to which an actor acts as a ‘broker’ or ‘gatekeeper’ in the network. N is the number of actors in the network. Hassan. the adjacency matrix is multiplied by itself as many times as the path requires. The centrality value of the actors in asset management will therefore depend on the frequency of contact of an actor relative to that of other actors. For binary data this is simply the ratio of the number of adjacencies that are present divided by the number of pairs i. Centrality identifies the most important actors in a social network. the proportion of possible dyadic connections actually present. Simply put it is the proportion of ties present to the maximum number of ties possible. This necessitates aggressive strategic marketing (i. Note that i ≠ j and N is the number of actors in the network. To determine path distances of more than one. For example. T N ( N − 1) / 2 overarching power to infuse sustainability into the design of the product/technology/strategy.

2003). because it is not economically viable compared to other alternatives such as fossil fuel. SNA has been used since the early 1970’s as the theoretical basis for the examination of general social and behavioral science communities (Wasserman & Faust. 1983) and are referred to as mental models. Craik (1943) suggested that the mind constructs “small-scale models” of reality that it uses to anticipate events (Johnson-Laird & Byrne. 2000). Social Network theory and methods of SNA are being increasingly used to study real-world networks in order to support knowledge management and decision making in organizations (Hu. These include mental models of individuals that lead to diffusion and adoption. 2009). The high cost of photovoltaic cells and lack of governmental incentives mean that companies and individuals will not adopt it even though it is sustainable. The mental models of individuals play a critical function on how they weigh the alternatives. the comprehension of discourse. MENTAL MODELS AND DIFFUSION AND ADOPTION OF INNOVATIONS The mental model of an individual is critical to adoption of an innovative strategy that contributes to sustainability. 1994). Individuals construct mental models of themselves and the environment that they are required to interact with from perception. and attitudinal consequences both for the individual units and for the system as a whole” (Knoke & Kuklinski. Such models are conceptualizations of the world that the mind builds by incorporating the individuals’ views of the world.e. macro level) focusing on larger societal and community organizational structure. and intention to involve innovation that contribute to green thinking/ sustainability in their decision-making process. perceptual. In the preceding paragraphs we discussed key parameters that link innovation to diffusion and adoption to achieve sustainability. their clear comprehension of the discourse on sustainability. SNA is inherently based on the underlying premise that “the structure of relations among actors and the location of individual actors in the network have important behavioral. Individuals interacting with their immediate environment are exposed to new ideas. micro level) of a person’s intimate social network to system studies (i. In addition. social networks. what they weigh their alternative on. of themselves. A change in mental model of an individual can impact or ‘infect’ others in their network to adopt 83 . idea or technology according to the demographic and psychological characteristics of defined adopter groups (Rogers. and learning which results in a shift in their mental models. of their own capabilities and of the tasks that they are required to perform (Norman. The importance of SNA is highlighted by the demonstration that an individual’s behavior can often times be categorized by their relations with others.Diffusion and Adoption of Innovations for Sustainability diffusion) to lead the population to adoption of the product. The ability for an individual in an organization to adopt an innovative idea is largely dependent on their interactions in social networks and its influence on the diffusion of the innovative idea. 1982). once a strategy or an innovative technology that addresses sustainability has been developed/identified. social network research can range from small-scale studies (i. decision-making be it from the top-down or bottom-up is critical to its diffusion and adoption within an organization and into mainstream.e. caused by interactions in their professional networks. and the role management. and use them in their decision-making. Adoption of an innovation or green thinking by an individual is due to a shift in their mental models. and their eventual decision. An individual’s mental model of innovation/ green technology and sustainability reflects their awareness and perception of how it improves for example the organization that they work for and its operations. According to Rogers (2003). Adoption describes the acceptance of a new product. imagination.

Figure 4 shows how diffusion spreads through a social network of an individual over time. etc). and spread of the ‘infection’ or innovative idea is crucial to achieving sustainability (reducing carbon dioxide emissions. and other information/knowledge processing entities (Wasserman & Faust. From organizational theory of management. A faster diffusion and change in mental model (Adoption Curve 1. computers. excess consumption. 2003) Management plays an important role in the diffusion and adoption of an innovative strategy that addresses sustainability. Sustainability as- Figure 5. is the point at which enough individuals in a system have adopted an innovation so that the information’s further rate of adoption becomes self-sustaining (Rogers. and why they important to innovation and vice-versa. Transposing the idea of social network to a management structure. FUTURE RESEARCH DIRECTION AND CONCLUSIONS The primary focus of this chapter was on the theory and concepts of sustainability. A rapid change in mental model. This gives rise to social network analysis (SNA). Critical mass or the ‘tipping point’ (Figure 5). The social network in Figure 4 is comprised of two individuals. groups. diffusion and adoption is a function of the strength of a management structure of a firm or company. the ties between the individuals within the structure. defined as the mapping and measuring of relationships and flows between people. two way ties between individuals (a←→b) are more important than one-way time (a→ b). web sites. The adoption of an innovative idea becomes self-sustaining when the ‘tipping point’ is reached. and the key individual connectors who enable transmission of the innovative idea and/or policies between the different hierarchies. 1994). The dynamics of diffusion and adoption of innovation over time due to change in mental models of individuals (adapted from Mukherjee & Muga.Diffusion and Adoption of Innovations for Sustainability an idea. Two way ties represent transfer of crucial information among lateral and/or lower rank individuals to a lateral/ higher rank managerial individual. 2010) 84 . Figure 5) of an individual leads to a quicker adoption rate (steep inflection point) and a rapid spread of the ‘infection’ within the individual’s immediate social network with the innovative idea. how they can be applied to a business. diffusion/ adoption rate. organizations.

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2003). social and economic issues (OECD. Mental Model: Conceptualizations of the world that the mind builds by incorporating the individuals’ views of the world.Diffusion and Adoption of Innovations for Sustainability KEY TERMS AND DEFINITIONS Adoption: The acceptance of a new product. 2003). idea or technology (Rogers. 2003). and other information/knowledge processing entities (Wasserman & Faust. idea or technology according to the demographic and psychological characteristics of defined adopter groups (Rogers. percentage or ratios. work. Sustainability: Development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland. 2004). organizations. workplaces. Tipping Point: Point at which enough individuals in a system have adopted an innovation so that the information’s further rate of adoption becomes self-sustaining (Rogers. 1987). Reductionist and Systems Approach: Reductionist approaches are best applied in the study of sub-systems whereas the systems approach looks at whole systems (Checkland. Indicators are measures expressed in single numbers. and play (examples: homes. 1983). Sustainability Indicators: Information sets which are formally selected to measure changes in assets and issues that are key for the product development and management. 1993). computers. Built Environment: All of the physical structures engineered and built by people—the places where we live. schools. groups. web sites. Social Network Analysis (SNA): Mapping and measuring of relationships and flows between people. 1994). Diffusion: The spread of new product. and transit arrangements) (Dearry. parks. 1993). qualitative descriptions or existence/non-existence of certain elements concerning environmental. of their own capabilities and of the tasks that they are required to perform (Norman. of themselves. 88 .

Spain José Emilio Navas López Universidad Complutense de Madrid. It also provides an innovative approach. which highlights the mediating role of the kind of competitive advantage generated. processes and organizational modes of the company. More specifically. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. IGI Global. considering Environmental Innovation as an expression of Social Innovation through the incorporation of ethical arguments to products. Environmental Innovation.ch006 Copyright © 2012. as it explains the Environmental Innovation from the literature on Social Innovation. we analyze both the existence of a direct relationship between Environmental Innovation and Firm Performance and the existence of an indirect relationship between the two. It is argued that the inclusion of environmental criteria to business activities promotes the creation of new core competencies. . (2) The different types DOI: 10. The main contributions of this work can be summarized as follows: (1) It explains the nature of Environmental Innovation through the Social Innovation literature. offering a creative and innovative perspective to the organization that can lead to the achievement of sustainable competitive advantages.4018/978-1-61350-165-8. and Their Effect on Competitive Advantage and Firm Performance Javier Amores Salvadó Universidad Complutense de Madrid.89 Social Innovation. Spain Chapter 6 ABSTRACT The proposal below provides a special emphasis on the relationship between businesses and natural environment. Spain Gregorio Martín de Castro Universidad Complutense de Madrid. which allows consideration of some key aspects of administrative and technological innovations that have not been taken into account the academic literature.

Additionally. The connection between Social Innovation and changing environments is confirmed by the words of the Nobel Prize Simon Kuznets (Pol & Ville. and also would have been much more difficult the development of railways if they had not also developed securities markets. biodiversity and ecosystems. The remainder of the chapter will be structured as follows: The first section discusses the concept of Social Innovation. 2009). and Their Effect on Competitive Advantage of environmental innovations are analyzed as a necessary step to understand the strategic options in the environmental field. A broad concept of Social Innovation is used. companies must be able to reduce their emissions and their levels of consumption of materials. our society is experiencing a time of change. allowing the company to choose from innovative strategies (based on pollution prevention) or more conservative strategies (emissions control). 1995). For these reasons. since it directly influences the type of environmental strategy chosen. without the existence of firms and banks (both defined as social innovations). Environmental Innovation. allowing the company to choose from innovative strategies (based on the creation of new core competencies via pollution prevention) or more conservative strategies (emissions control). including impacts on climate. The systemic changes offer many opportunities for Social Innovation and the societies at large are immersed in learning new habits and rules. 1998). A review of the major contributions made by the literature regarding the term is carried out. which allows consideration of some key aspects of administrative and technological innovations that have not been taken into account the academic literature. New forms of efficiency and new ways of seeing and doing things are discovered.Social Innovation. According to Kuznets. More specifically. in this chapter we will analyze the role of the Environmental Innovation (understood as an expression of Social Innovation) in achieving business results. Taking Social Innovation as starting point. throughout the chapter the nature. 1987) in its report to the United Nations as the kind of development that meets the needs of present without compromising the needs of future generations (Sharma & Vredenburg. Although industrial development of the last two hundred years has brought prosperity and wealth. The practical implications of the relationship between environmental innovation and performance are of great importance. the industrial revolution had not taken place. (3) Environmental Innovation is related to business performance. Industrial activity has grown to such an extent that has already produced irreversible effects on our global environment. According to these arguments. both the existence of a direct relationship between Environmental Innovation and Firm Performance and the existence of an indirect relationship between the two will be analyzed. the paradigm shift towards Sustainable Development. it has unintentionally caused environmental degradation as well (Shrivastava. Nowadays. the practical implications of the relationship between Environmental Innovation and performance are of great importance. since it directly influence the type of environmental strategy chosen. INTRODUCTION The concept of Social Innovation is directly linked to the idea of change. determinants and types of environmental innovations will be shown in order to show a complete picture of the topic. developing new clean technologies that are more efficient than current and inclusive business models that facilitate the creation and distribution of wealth more evenly. highlighting the mediating role of the kind of competitive advantage generated. defined by the Brundtland Commission (World Commission on Economic Development. a definition in line with the concept of Environmental Innova- 90 . Furthermore.

Mumford. Thus. to social purposes. Martin. On this first contribution. 1999. Hamalainen & Heiscala. 2002. 1947. some authors associate the term Social Innovation with the idea of institutional and social change (Lewin. the main conclusions will be provided. Environmental Innovation. two basic directions can be identified in the existing definitions in Social Innovation literature as shown by the four quadrants of Figure 1. This approach provides 91 . SOCIAL INNOVATION Social Innovation is an emerging field that remains under-researched (Social Innovation Exchange and Young Foundation. On the contrary. Social innovation as mission and change tion is proposed. to the public good or to the satisfaction of needs not covered by the market). determinants and typology. 2006. is very interesting the contribution carried out by Pol and Ville (2009). The distinction outlined above fits perfectly with the two main streams on the literature on Social Innovation. and on the other. Both. 2010). 2007.Social Innovation. not for profit organizations. non-profit organizations exist to fulfill social objectives. and their objectives are more aimed to meet the social needs of those more disadvantaged than to create a global change. Very few are the efforts to classify and organize the various contributions. as Pol and Ville (2009) pointed out. 1997. Centre for Social Innovation. Scherhorn et al. 2008). 2010). The second section examines the concept of Environmental Innovation emphasizing its nature. and Their Effect on Competitive Advantage Figure 1. which discusses some of the definitions given to the concept of Social Innovation elaborating a four group classification (understanding the concept as linked to institutional change. and the third section highlights the relationship between Environmental Innovation with the economic performance of the company. companies and social businesses have the potential to act as change agents for the world and also be economically viable. companies can be seen as profit-maximizing businesses. Duchin. Finally. are not economically viable. In between. usually. In this sense. On the one hand. we can find social businesses that at the same time have to cover operations cost but also are more cause-driven than profit-driven. and taking as reference the characterization of the different types of businesses proposed by Professor Yunus (Yunus et al...

Social Innovations are triggered by an interest in improving the well-being of people in society. From another point of view. 2010). a wide-ranging concept. they argue that Social Innovation’s mission is to satisfy unmet social needs. 1970. Daniel and Farmer (2010) DEFINITION Researcher as a strategist for Social Innovation. cultural and environmental challenges to benefit the planet and the people who inhabit it. place it near from philanthropic activities and away from the idea of economic benefit. within this category can be included some businesses whose objective is to maximize the economic benefits such as those based on the use of green technologies or social businesses in general (understanding these as those that maximize social benefit and are also financially sustainable). Within this category can be included those activities carried out by nongovernmental organizations (NGO’s). Its aim to improve the welfare of groups and communities. (1997) Duchin (1999) Mumford (2002) Martin (2006) Hamalainen and Heiscala (2007) Centre for Social Innovation (2008) Yunus. Pol and Ville. 2007). Understanding the company as an agent of social change (Bies et al.Social Innovation. Those new ideas that address current economic. or provide improvements in well-being for remote or socially isolated communities. since it does not focus only on meeting specific social needs but also understands the term as a necessary instrument that accompanies the change in values. Social Innovation as the changes in social structures that enhance the social and economic performance and the collective power of resources. in defining Social Innovation emphasize its social mission (Taylor. 1970. The authors that associate the term Social Innovation with the idea of institutional and social change. as such they may: seek to further the social conditions of work. 2008. Lewin (1947) conceives the researcher as a strategist for Social Innovation and demands the production of theories for the transformation of society. and Their Effect on Competitive Advantage Table 1. Mulgan. (Figure 1.. Building social innovation models require two additional specificities: (i) favoring social profit-oriented shareholders. Social Innovation associated with social experimentation. Gabor.. hope to provide socially useful solutions to ongoing community problems. Once exposed the different approaches given to the term. one can see that this conception of Social Innovation is perfectly compatible with the entrepreneurial phenomenon. Social Innovations as the changes in lifestyles or behavior of consumers. So. top and bottom right). (2010). (Figure 1. and (ii)clearly specifying the social profit objective.. this chapter will focus on the development of the former. starting from the idea of Social Innovation and change we will try to reconcile the achievement of economic returns with the Sustainable Development paradigm through Environmental Innovation. provide different definitions of the concept (Table 1). Social Innovation as the generation and implementation of new ideas about how people should organize their interpersonal activities or social interactions to get one or more common goals. That is. Phills et al. Moingeon and Lehmann-Ortega (2010) Dawson. Social innovation as change AUTHOR Lewin (1947) Scherhorn et al. Social Innovation as new technologies and new lifestyle dynamics. social. In contrast. most of which are not created to recover the full cost of their operations (Yunus et al. ways of acting and thinking and institutions. changes in lifestyles or behavior of consumers are often defined 92 . Environmental Innovation. other authors. This emphasis on the social aspect of the term. 2006. Forum on Social Innovation (OECD). even if this does not mean a broader social change.. Following Yunus et al. 2009). This conception does not explicitly links Social Innovation with the idea of change. bottom left). meaning that the Social Innovation fulfill its mission if social needs are met.

Also. Institutional and social nature can be seen in the environmental institutions such as the intergovernmental panel on climate change and in changes in styles and dynamics of life and consumption respectively. Technological nature can be seen in environmental technologies for the prevention of environmental pollution or for the control of the same. from our point of view. Some academics suggest that Environmental Innovation have different natures (Rennings. its determinants and the different types of environmental innovations in order to understand the strategic options in the environmental field. Also emphasizing the idea of change.Social Innovation. its nature can be technological. This social change is expressed through the incorporation of ethical arguments to the products. Mumford (2002) considers the Social Innovation as the generation and implementation of new ideas about how people should organize their interpersonal activities or social interactions to get one or more common goals. however. Environmental Innovation incorporates ethical arguments to products. mention must be made to the definition given by the Centre for Social Innovation. arguing that Environmental Innovation has different natures implies. However. organizational. it’s necessary to specify in more detail its nature. 2008). authentic Social Innovations are the ones that change the system by altering the perceptions. behaviors and structures (Centre for Social Innovation. after consideration of the literature on Social Innovation and the various proposals that are encompassed within it. the social nature of Environmental Innovation would be restricted exclusively to changes in lifestyles and consumption habits. This view is consistent with Martin (2006) who stresses that social experimentation is beneficial for Social Innovation and claims that the biggest obstacle for Social Innovation is the drag created by entrenched interests. Thus. It is therefore considered that the fact of adding a social dimension to the value proposition of the company offers a new frontier in competitive positioning (Porter & Kramer. Therefore. on the same line. (Hamalainen & Heiscala. Therefore. to assume a very limited concept of Social Innovation. DETERMINANTS AND TYPES As a Social Innovation. this orientation is typical of companies that understand the changes as business opportunities. In relation to its organizational nature it includes environmental management tools such as ISO 14001 or EMAS. and Their Effect on Competitive Advantage as Social Innovations (Scherhorn et al.. 1997). cultural and environmental challenges to benefit the planet and the people who inhabit it. Accordingly. commonly called “end of pipe”. 2007) understand Social Innovation as the changes in social structures that enhance the social and economic performance and the collective power of resources. As mentioned above. social. In the same vein. It adds that the Social Innovation can lead to the development of new business practices. 2000). ENVIRONMENTAL INNOVATION: NATURE. understands as Social Innovations those new ideas that address current economic. lacks specificity. processes and procedures. changes within the enterprise and changes in the company’s relationship with the social and natural environment. Thus. Duchin (1999) argues that the idea of Social Innovation is new and requires not only new technologies but also new lifestyle dynamics. institutional or social. that trying to define the concept. processes and organizational modes of the company and results in changes in consumer behavior. 2006). leaving out those changes in behavior and relationships of individuals as a result of the emergence of administrative and technological 93 . we understand Social Innovation as the combination of innovative activities carried out by the company with the potential to promote social change. processes and organizational modes of the company. This statement. Environmental Innovation.

behaviors. according to Chen et al. the literature suggests that these are supply factors. A broader definition of the concept is needed in order to be able to classify as environmental innovations the changes (in behavior and relationships) that occur inside the business when administrative or technological environmental innovations are implemented. the Environmental Innovations (as many innovations) are conditioned by the available technological possibilities of the firm and by the return appropriation of the innovation activities. are characterized by the fact that while the whole society benefits from a technical environmental innovation. Rennings’s definition is the one that fits better to our purposes since it refers not only to environmental product and process innovation but also to ideas and behaviors. We believe. including the innovation in technologies that are involved in energy-saving. systems and products to avoid or reduce environmental damage. techniques.. products and processes that contributes to a reduction of environmental burdens or to ecologically specified sustainability targets. are particularly important to understand environmental organizational innovations like environmental management systems or “green teams”. Thus. under that limited scope of the social nature of the Environmental Innovation. firms may find early movers advantages from adapting to 94 . 2008). pollution prevention. 2000). Environmental Innovations have been defined from different points of view. Note that this definition encompasses technological environmental innovations as well (regarding the changes in behavior and relationships that occur inside the business technological environmental innovations are implemented) as we have highlighted before. which. both the potential market demand and the social awareness can determine the posture of the firm regarding the Environmental Innovations. Kemp et al. 2008). environmental regulation may force firms to realize economically benign Environmental Innovation. therefore. In relation to the institutional and political influences. companies can leverage their reputation for environmental innovation to gain preferential access to new and lucrative businesses like waste management. 1997) and also create a green reputation (Chen. and Their Effect on Competitive Advantage environmental innovations such as environmental management systems or recycling of materials for re-entry into the production process. (2001. the cost have to be borne by a single firm (Rennings. 2008) argues that Environmental Innovations consist of new or modified processes. First. in Horbach.. the double externality problem must be highlighted.Social Innovation. and second. From the demand side. recycling services and environmental impact analysis among others (Nidumolu et al. Environmental Innovations can be defined as the measures of relevant actors consisting in the development.. From the supply side. Furthermore. waste recycling. besides the positive externalities from spillovers which are common to all innovations. through the Environmental Innovation. Environmental Innovation. and according to Rennings (2000). (2006). Environmental Innovations.. from our point of view. that is more appropriate to use a broad definition of Social Innovation. demand factors and institutional and political influences (Horbach. from Business Strategy. In line with the extensive concept of Social Innovation that we are using in this chapter. we are not considering the changes (in behavior and relationships) that occur inside the business when administrative or technological environmental innovations are implemented. firms may have access to those segments of the market willing to pay a premium for green products (Miles et al. application or introduction of new ideas. green product design or corporate environmental management. At this regard. Regarding the determinants of Environmental Innovation. 2009). Thus. Green Innovations are hardware or software innovations related to green products or processes. the role of the environmental regulation should be noted. In other words.

2010). we must refer to the environmental innovation types in order to show a complete picture of the topic. Environmental Innovation. cleaner production technologies emphasize continuous improvement and cost minimization. Among environmental process innovations we can include the reductions in air or water emissions.Social Innovation. adding more detail to the technological environmental innovations typology. the use of environmental friendly materials and the modification of the combustion chamber design. Horbach. water protection. Some authors. reductions in water consumption and switching fossils fuels to bioenergy (Kivimaa & Kautto. 2006). noise abatement or air quality control technologies). 1995.. 2008). Examples of cleaner production technologies are the recirculation of materials. technical environmental innovations are specific kinds of innovations that consist of new or modified products and processes to avoid or reduce the environmental burden. distinguish between end-of-pipe integrated (preventive) and end-of-pipe non integrated (control) depending whether these technologies 95 . following the OECD (1997) Guidelines. Thus. Environmental process innovations can be subdivided into innovations in end-of-pipe technologies and innovations in integrated technologies (also called cleaner production technologies). Finally. selling the waste in those businesses where they could be useful (Porter & Van der Linde. While end-of pipe technologies are oriented to comply with the environmental regulation (waste disposal. (Figure 2) Among technical environmental innovations we can find environmental process innovations and environmental product innovations. Types of environmental innovations regulation before than their rivals (Porter & Van der Linde. improvements in resource and energy efficiency. and environmental organizational innovations include the re-organization of processes and responsibilities within the firm with the objective to reduce environmental impacts (Rennings et al. As process innovations we can include those aimed at reducing energy consumption during the production process or those that convert waste into new ways of creating value. we can distinguish between technical and organizational innovations. and Their Effect on Competitive Advantage Figure 2. 1995). both through its reuse within the enterprise or outside. in addition to the nature and determinants of environmental innovations. Thus.

selling the surpluses of the production process or reducing the control and waste treatment cost (Murillo et al. Among them. in Hemmelskamp. 1995).. can minimize waste disposal costs. Wagner (2005) shows that environmental strategies based on pollution prevention (as opposed to the additive and control strategies or “end of pipe”) result in improved economic performance of the company. the importance of incorporating environmental considerations in strategic decision making is increasing (Sharma and Vredenburg. 1995b).. have a resource base that enhances their ability to generate profits and also makes them able to protect themselves against future risk arising from resource depletion or fluctuating cost of energy (Shrivastava. and Their Effect on Competitive Advantage are integrated in the production process or not Hartie (1990. 1998). achieve significant cost reductions and meet the demands of those consumers especially sensitive to the environmental factor. in turn. in the same vein. Thus. referring to different environmental strategies as mentioned by Hart (1995). can be supporting factors for technical environmental innovations. 2010). Dechant and Altman (1994. in Karagozoglu & Lindell. selection of environmentally less harmful raw materials and removal of hazardous substances (Kivimaa & Kautto. 2009). we can mention as one of the most prominent initiatives the utilization of environmental management systems (EMS) like EMAS (Environmental Management and Auditing Scheme) or ISO 14001 and the “green teams” which are composed of members of the organization from various departments and levels of responsibility whose job is to advise the company on the impact of their activities on the environment. On the other hand. reduce unnecessary steps and optimize the use of inputs in the production process. Environmental Innovation and Firm Performance: An Approach to Direct and Indirect Effects The environmental factor provides opportunities to foster innovation and develop technologies to improve efficiency. This advisory work covers all areas of business activities and includes the development of programs for waste management. 1995). through environmental innovations the firm can improve its efficiency. improvements in the durability of the products. 2008). 2000). raw materials reductions. Firms can save costs through a better use of raw materials and energy.Social Innovation. among the environmental product innovations we have to mention product design innovations like those responding to the concept of “design for disassembly”. dismantling and recycling. Rennings et al. 1997). in López Gamero et al.. idea that is shared by Berrone and Gómez-Mejía (2009. problems associated to industrialization like material consumption. waste and emissions represent an opportunity for companies to develop skills and capabilities in the fields of pollution prevention and ecological efficiency (Nidumolu et al. Environmental organizational innovations. energy and resources conservation or renewable energy sources exploration (Shrivastava & Hart.. 2009) for whom proactive environmental management. Russo and Fouts (1995). (2006) show evidence of the relationship between Environmental Innovation and increased 96 . Klassen and Whybark (1999) relate pollution prevention technologies to the existence of greater opportunities for innovation and improvement in production efficiency. which is based on creating products that are designed for easy recovery. characterized by innovation. which in turn helps them to protect their markets Therefore. thus extending the life of each of the components (Shrivastava. emphasize that companies that carry out pollution prevention strategies (beyond compliance with the law) focusing on process environmental innovation. Environmental Innovation. argue that environmental innovations enables companies to position themselves ahead of their competitors in meeting environmental regulations. In the same line. According to Hart and Milstein (2003).

Environmental innovation: Direct and indirect effects turnover of the plant. Thus. the achievement of some degree of cost reduction. cleaner technologies lead to the optimization processes and result in increased productivity. and Their Effect on Competitive Advantage Figure 3. 1995). attention must be paid to what we call the “indirect effects” (Figure 3).1999) and company growth (Chen et al. 2009). Hamschmidt and Dyllick argued that the market for environmentally innovative products was reduced. In this sense. companies that carry out prevention strategies and reduce waste emissions are able to reduce costs and increase profits (Sharma & Vredenburg.Social Innovation. Therefore. starting from the distinction of Porter (1980) between differentiation and cost leadership and in line with the relationship between strategy and competitive environmental strategy (Shrivastava. Christmann. However. These customers will be willing to pay and additional price for such environmental features (Sharma et al. 2000). Environmental Innovation practices can result in different types of competitive advantage. 1999). increased market share (Cleff & Rennings. 2005. Chen. environmental marketing activities positively affect the business performance of companies (Fraj-Andrés et al. with appropriate skill sets and capabilities.. According to Christmann (2000). cost advantage can result from incorporating best environmental practices on the production process (Hart. 1998. Although by 2001. In short.. the new. 1995). Likewise. These process oriented environmental innovations include the redesign of production processes or the use of 97 . In the same line. Among the beneficial effects of designing new and more sustainable products we can mention increases in sales and corporate image enhancement (Tien et al. (2006) argues that environmental innovation in both product and process is positively related to the achievement of competitive advantage. 2007). if technical and organizational possibilities for sustainable businesses are available for all the firms in the market. competitive advantage can play a mediating role in the achievement of business results and better firm performance. These are what we call the “direct effects” between Environmental Innovation and firm performance. packaging and sustainable forms of business management.. while according to Radonjic and Tominc (2007). the development of new products more “green” or sustainable has been also studied by the researchers. In addition. improved efficiency or product differentiation may not be enough to obtain a significant improvement in the economic performance of the firm.. 2006).. besides the cost factor. Environmental Innovation. Therefore. Chen et al. it may be necessary the existence of competitive advantage in terms of cost or differentiation. the respect for the environment can also be a key element to meet the demands of those conscious customers who specially value the environmental performance of products.

the role of the environmental management systems is not clear yet. In regard to environmental differentiation. also should be noted that this kind of product differentiation will be effective if is adopted by the value chain as a whole. 2007). 1995). other factors such as environmental capacity building (Aragón-Correa & RubioLópez. Rehfeld et al. Ecocentric Management (Shrivastava. 2004. among other measures (Hart. are factors that help the emergence of environmental innovations (Wagner. there are also more critical perspectives in relation to Environmental Innovation in terms of differentiation and cost. the study of the influence of environmental management systems on environmental performance of companies yields inconclusive results. Some authors doubt about the potential of environmental management systems to produce differentiation because not all markets are familiar with and value these certifications and it is also controversial the fact that eco efficient activities are a way to gain cost advantages because firms aren’t punished in proportion to the damage caused (Aragón-Correa & Rubio-López. Such is the case of the Sustainable Management of Product Life Cycle (Hart. In particular. 1997). and Their Effect on Competitive Advantage productive inputs that are less polluting and recycling of byproducts of processes. Raw materials utilization and business process modifications can be used as differentiation factors when selling products and services on the market (Murillo et al. In a similar vein.. 2007.. 1995. do not affect at all to the emergence of environmental innovations (Frondell et al. (2008) there is a negative relationship between cost reductions and the adoption of environmental management systems. Thus. Therefore. the complementary deployment of 98 . Design for Disassembly (Shrivastava. future studies should analyze more in detail the moderating factors in the relationship between Environmental Innovation and business performance. the casual link between environmental management systems and Environmental Innovation is not resolved by the literature and there is no consensus on whether the environmental management systems are key determinants of Environmental Innovation (Ziegler & Rennings. according to Barin and Dirk (2008). 2006). Direct links between Environmental Innovation and firm performance may be valid in some cases but not in others. 2007) (playing a moderating role).. though. 2008). 1995. According to Johnstone and Labonne (2009).Social Innovation. 2007). the debate on the economic effects of environmental innovation is still open. for which the fact of producing according to criteria of social responsibility (in our case by providing an environmental argument to products and processes) may contribute to product differentiation and enhanced reputation. or on the contrary. environmental management systems are very important to send signals to regulators and play a role in differentiation against other competitors from the market. However. 1995) or Design for the Environment (Hart. FUTURE RESEARCH DIRECTIONS As can be seen. This argument is consistent with what has been described by Fombrun and Shanley (1990)... Some studies find no relationship between the certification of environmental management systems and economic performance of companies (Link & Naveh. 1997). innovations related to the packaging design or environmentally friendly product development must be mentioned. 2008). Also playing an important role in terms of differentiation we can find the environmental management systems like ISO 14001 or EMAS. Porter & Van der Linde. As pointed out by Reinhardt (1998) through environmental innovations seeking product differentiation is that consumers pay a higher price because of the ecological attributes of the products sold. 1995). Likewise. Environmental Innovation. 2006). according to Frondel et al. Other broader approaches to environmental management also contribute to the cost advantage. According to Nawrocka and Parker (2009). Rennings et al.

environmental capacity or industry. Wagner. further investigation is needed. types and the relationship between environmental innovations and the economic performance of the firms. may be useful to advance the study of the field. adverbio a. Environmental Innovation. we argue that. else Demand factors like environmentally conscious consumers or general environmental concern. Empirical research regarding these aspects is of great importance for the 99 CONCLUSION This chapter takes a new perspective in the study of Environmental Innovation. conjunción a. promoting the creation of new core competencies and offering a creative and innovative perspective to the organization that can lead to the achievement of sustainable competitive advantages. preposición a. Escuchar Leer fonéticamente Diccionario . 2008. it provides an analysis of Environmental Innovation. 1999) or industry (Horbach. the importance of other factors such as size. 2008) among others are also relevant and must be taken into account in future research.. 3. 2007. that suggest the existence of different natures for Environmental Innovation. Chen. and institutional factors such as regulatory pressure are taken into account. Darnall et al. Therefore. by c. however b. 2000). cum d. 2008. Providing examples of the most cited environmental innovations (organizational.Ver diccionario detallado 1. (Rennings. determinants. Frondel et al. Escuchar Leer fonéticamente Diccionario . it is considered that Environmental Innovation can be explained from the theory of Social Innovation. Thus.Ver diccionario detallado 1. nonetheless Also. product and process) and differentiating environmental process innovations between Innovations in End-of -pipe Technologies and Innovations in Cleaner Production Technologies. notwithstanding d. Environmental Innovation is considered as a kind of Social Innovation. which is very important to classify as environmental innovations the changes (in behavior and relationships) that occur inside the business when administrative or technological environmental innovations are implemented. even 2. in spite of . We argue that Environmental Innovation represents an opportunity for companies. with b. firm size (Ziegler & Nogareda. a typology of environmental innovations in line with OECD guidelines (1997) is presented. Cleff and Rennings. 2008. a complete picture of environmental innovations is offered. Additionally. However. and Their Effect on Competitive Advantage environmental capabilities. in spite of 2. according to our view. Iraldo et al. 2009. preposición a. in order to exploit the full potential of Environmental Innovation. Contrary to other authors. Finally. Environmental Innovation is a Social Innovation in nature. nevertheless c. taking into account its nature. supply factors arising from the technological capabilities of enterprises in relation to environmental innovations. the relationship between Environmental Innovation and business performance is examined. In this regard.. conjunción a. among many others. This approach is justified on the grounds that Environmental Innovation is a way of introducing ethical arguments to the activities of the company within a general context of change towards sustainable development.Social Innovation. 2009. this.

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ch007 Copyright © 2012. Design. environmental and cultural aspects. Implement and Operate: Innovation for Sustainability Javier Alejandro Carvajal Díaz Universidad de los Andes. . Conceive. For this purpose. Colombia Chapter 7 ABSTRACT Innovation within organisations permits the transformation of knowledge into applications for the development of new knowledge and new organisations that are able to respond to the needs and changes of the society. Design. implementation and operation of sustainable engineering systems that take into account the relevant economic. Colombia José Tiberio Hernández Peñaloza Universidad de los Andes. we reviewed examples of innovation in some world class universities. However.105 Observe. how can we establish a framework for acquisition of the skills needed to manage successful initiatives for innovation in organisations and how can we guarantee the sustainability of these innovations? In order to provide an answer to these questions. DOI: 10. The phase of observation allows the professionals facing the challenges of innovation inside organisations to obtain the relevant information for the conception. Colombia María Catalina Ramírez Cajiao Universidad de los Andes. design. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. technical. analized cases of education for innovation and developed a case study. IGI Global. We conclude that the OCDIO cycle was set up in a framework that enables the development of sustainable innovations through a permanent cycle of observation and adjustment of the systems designed to resolve problematic situations. Implement and Operate (OCDIO). social. this chapter presents a proposal for the promotion of sustainable innovation based on the engineering cycle of Observe. Conceive.4018/978-1-61350-165-8.

engineering as a profession has been one of the disciplines in charge of leading the processes of innovation generated in the Academy or in the production sector. Ramírez & Carvajal. we need to develop a way to introduce innovation into the education of the professionals that are going to be part of organisations. Sustainability is achieved through a permanent cycle of observation of the designed systems within a process of constant adjustment (Carvajal. & Nichols. & Plazas. which aims to structure education in engineering based on the cycle of observe. Innovation within organisations permits the transformation of knowledge into applications for the development of new knowledge and new organisations that are able to respond to the needs of the society (Edmondson & Nembhard. so that these skills may be used in the future to create successful projects (Siller. how can we establish a framework for the acquisition of the skills needed to manage successful initiatives for innovation in organisations? In addition. many schools of engineering have highlighted the importance of the development of skills in order to tackle the challenges of innovation in the market. promoting the development of innovative ideas from different fields of action or simply favouring a continuous process of innovation in the daily running of organisations. After several years of research. and obtaining pragmatic innovation results from student teams. Rosales. The aim is that the engineering professionals of the future will have effective communication and teamwork skills and an innovative attitude. Conceive. Parks. it also adds social value. We have to keep in mind that innovation generates value in many different ways. Hernández. 2009). Ramírez. In this sense. and socio-technical problems are abundant” (Steiner. design. technologies. 2010. conceive. & Arias. This proposal is intended to assist the transformation of innovative ideas into real projects using the CDIO cycle (CDIO. This rapid process of change implies that organisations and society in general should be ready to constantly adapt to their changing conditions and evolve in order to survive in their environment. & Hernández. and processes” (Nidumolu. One initiative that had been gaining ground in recent years is the CDIO cycle. 2009). 2010). & Rangaswami. improves the competences of the organisation (not only commercially but in terms of the quality of production) and helps to clearly define the objectives of the organisation (Organisation for Economic Co-operation and Development [OECD]. 2007). “In the future. & Benally. Ramírez. new companies with an innovative spirit are able to take the place of established companies which have become old and tired. 2009. Hernández. creating an innovative attitude that generates a higher level of development (Thurik. Ramírez. 2010. intellectual value. how can we guarantee the sustainability of these innovations? In order to provide an initial answer to these questions. 1). which will allow them to successfully carry out sustainable innovation proposals based on the proposed cycle (Hernández. the advance of science is accelerating. Crawley & Brodeur. Haines.Observe. Implement and Operate INTRODUCTION “…The world is becoming increasingly more complex and connected. However. 2008. 2008). Prhalad. & Plazas. Torres. innovation has become a key element that enables organisations to respond to the increasingly demanding and complex conditions of the market (Evans. 2009). Ramírez. 2004). In order to accomplish this goal. a group of researchers proposed the introduction of an additional initial phase of observation into the CDIO framework (Steiner. p. and not only in terms of the final sale price. These researchers believe that a person (or a group of people) trying to develop an initiative for the purpose of innovation in any context must observe his/her context in order to attempt to 106 . implement and operate. 2010). only companies that make sustainability a goal will achieve competitive advantage. 2008). For this reason. Traditionally. That means rethinking business models as well as products. Carvajal. p 141). Design.

The cycle restarts. p. this chapter presents the results of the application of the OCDIO proposal in specific engineering contexts. it presents the progress of innovations in Colombia such as the framework of the proposed OCDIO cycle. For Chesbrough (2003). Implement and Operate understand it (market needs. his community. but that “we presume that the purpose of introducing something new into a process is to bring about major.Observe. the solution is designed. However. process or production process. Innovation processes are combinations of structures for the development of work oriented towards achieving visible and measurable results with a clear business objective (Davenport. Later. thus making the solution (project) sustainable. It continues by presenting the OCDIO cycle as a framework for the development of sustainable innovation. 10). p. restrictions in the systems. Audretsch and Strom (2009) have stated that an innovative spirit allows new companies to take the place of those companies that are unable to develop innovative activity and promote a higher level of development. 44) of the United States of America (USA) defines innovation as “the transformation of an idea into a marketable product or service. The National Academy of Engineering (NAE) (2000. the proposed definitions allow us to create a framework with which to introduce a concept that is more relevant for us: the innovation process. or even a new method of providing a social service”. his ideas (OECD. this research presents innovations and innovation training initiatives.). INNOVATION IN ENGINEERING Innovation as a Concept The concept of innovation has several interpretations and meanings. market source of offer. 2004). Finally. Although reaching a consensus regarding the definition of innovation is outside of the scope of this chapter. Cozzens and Kaplinsky (2009. Zoltan. economic. etc. Schumpeter (1936) propounded that innovation is the commercial or industrial application of something new: product. a new or improved manufacturing or distribution process. radical change” (Davenport. we will then present the OCDIO cycle with the aim of answering our two questions relating to the necessary skills for innovation processes and the sustainability of innovation. Based on such an understanding. and then the design is implemented and materialised in order to operate it. 1993. taking into account the restrictions and projections for the future. and discusses the particular case of the School of Engineering at the Universidad de los Andes. technical. organisational form. and the project is observed as it runs with the purpose of improving it in each iteration. 58) added to that definition by stating that “innovation provides the private producer with competitive advantage or allows the social producer to better meet the needs of consumers with a given resource cost”. This chapter starts by presenting cases of innovation training initiatives developed by prestigious institutions which operate in this area. In order to innovate you have to know your customer. 107 . the current situation. a solution with which to tackle the observed situation is conceived. environmental and human conditions. Design. Afterwards. Taking into account that it is more important to focus on the processes of innovation than the concept of innovation. innovation is an invention implemented and taken to the market. 1993). We conclude this research suggesting future work in this initiative and presenting some reflections on it. p. Davenport reinforced the idea of innovation processes by stating that it is clear that innovation is the introduction of something new. Conceive.

This innovation is developed within the framework of the five areas of advancement: energy. The students can choose from different education cycles in humanities. education and innovation with a mission to meet the long-term needs from society and industry” (Chalmers. an awareness of the development of the necessary competences for innovation has been developed as one of the pillars of economic development and the growth of society. arts and social sciences. Meanwhile. Therefore. Olin College of Engineering (Olin College). combined with the “…research teams that confront the great scientific challenges that we face today” (MIT. production. Olin College. the students receive specific education in an area of engineering of their choosing. humanities. social sciences and the academic interests of each student (MIT. p. The education model at MIT aims to aims to develop skills which can be integrated with the knowledge the students possess. 2010a). lead the CDIO initiative that had been spreading to several universities around the world (Crawley & Brodeur. They are positioned in the international forefront of research. nanoscience and nanotechnology. which does not belong to the CDIO initiative. Chalmers structures its curricula around a sound education in the basic sciences that provides the students with enough knowledge to build an excellence profile in an active field. 7). MIT. and the prior preparation and aspiration of students” (MIT. Based on these domains. the KTH Royal Institute of Technology (KTH) and Linköping University (Linköping) have developed successful initiatives for the purposes of education in innovation. Conceive. which will include the challenges of engineering in the 21st century as identified by organisations such as the Accreditation Board of Engineering and Technology (ABET). KTH and Linköping. has developed a curricular structure which is consistent with elements of the CDIO framework. 2006. 2010). arts. At the same time. the first three in the USA and the remaining three in Sweden (Bankel et al. the Massachusetts Institute of Technology (MIT). chemistry. as well as being known for their success in the field of innovation. Institutions such as the Franklin W. Chalmers. 2006.Observe. the Chalmers University of Technology (Chalmers). MIT has created a flexible curriculum in which the students receive a solid education in basic sciences (mathematics. 2008). they expect that innovative ideas will emerge as a result of the intersection between science and technology. Chalmers bases its curricula on the “knowledge triangle”. The cases of these universities allow us to understand the role of education (in this case in engineering) as a key element in the development of the competences required for sustainable innovation in organisations. and transport. Design. The objective of these curricula is to respond to the needs and requirements of existing organisations regarding the professional education of engineers in particular. During their education. In order to achieve this goal. 1). p. Implement and Operate Education for Innovation: Several Cases Several schools of engineering across the world are working to structure innovative engineering curricula. These projects are developed based on the CDIO framework guidelines. 108 . “Excellence profiles are areas where we take a national responsibility with the potential to meet the challenges of today and tomorrow. the students apply the concepts and skills they acquire in the different areas of their curriculum in their undergraduate curriculum by developing real engineering projects. the base of which is composed of education and research. the science of materials. which forms a primary objective of education at Chalmers (see Figure 1). On the top of the triangle is innovation. Let us begin with the case of the engineering curricula at MIT that have been structured around three large domains: “science and technology.. biology and physics). culture and society. Alongside these components of the curriculum. 2005).

industry and society. In this sense. Design. to ensure the faculty stay current with the latest developments in their field. They include excellence centers. research programs [sic]. inquiry. design solutions. 31). problem-solving. Chalmers’ knowledge triangle KTH and Linköping. clusters of research groups and international networks. Creativity and Innovation) and by Entrepreneurship (including Philanthropy and Ethics)” (Greis. 109 . 2010b. entrepreneurship. in part. Miller. Meanwhile.. Linköping aims to continue developing its skills as a university which combines basic and applied research in innovative contexts. p. supported by the Arts. accounts for their position as the three universities (along with MIT) leading the development of the CDIO framework. the faculty and the students “…will nurture a culture of innovation. And Chalmers’ researchers are also successful as regards creating a stimulating collaboration between the business world and the university” (Chalmers University of Technology. that they are encouraged to explore interdisciplinary areas. 2009. 25. The research is very often carried out at several departments in joint effort where both applied and basic sciences are vital parts” (Chalmers. Olin College developed the conceptual framework known as the “Olin triangle” (see Figure 2a). In addition. 2).Observe. Olin College does not see itself as a teaching institution where the faculty teaches something new to a group of students who are only going to be in the University for a couple of years (Kerns. These activities are closely connected with government efforts. Figure 1. This model indicates that Chalmers is the leading university in Europe for providing support for the creation of businesses’. 2010c). “KTH is to be positioned as an entrepreneurial university that values innovation and entrepreneurship in education and stimulates the creativity and innovative attitude of students and researchers” (KTH Royal Institute of Technology. 2009.. the business sector and initiatives by the University itself (Chalmers University of Technology. & Kerns. “At the peak of the Triangle was Superb Engineering. Chalmers is well known for the development of systems of innovation based on the creation of companies that exploit research applications in the commercial arena (Chalmers University of Technology. “Chalmers is an open arena in which the forces of innovation are gathered together. 2001). Humanities and Social Sciences (“AHS”) (encompassing Design. Regarding innovation. which. coupled with education and innovation activities in collaboration with research institutes. have structured their curricula in the same fashion as Chalmers.students to become exemplary engineering innovators who recognize [sic] needs. as Swedish universities. and engage in creative enterprises for the good of the world” (Kerns. 2001). Implement and Operate “Active fields on the next level describe research areas within or between excellence profiles. 2010a). 2000). Olin College (USA) was established in the autumn of 2002 as a result of an initiative to prepare “. and that faculty transmit the results of this intellectual vitality to students both in and outside of the classroom” (Kerns. research. [among others]. Kerns. Conceive. p. 2010c). p. 2001).

pairs student teams with businesses to develop a solution that incorporates the students’ specialized [sic] skills and meets the business clients’ requirements and schedules” (Greis. Kerns. p. Design. Conceive. we will present the experience of Colombia regarding the running of its own innovation system.Observe. 25. a third year of specialization in which the student focuses on a particular area of interest and a fourth year (realization) during which the expertise is applied to a project of professional caliber” (Greis. & Kerns. 26). In later sections. Olin College aims to “…prepare leaders who can predict. p. 2009. and manage the technologies of the future” (Kerns. while spaces based only in courses with disciplinary content (traditional spaces) do not necessarily guarantee such innovation. but also can apply these techniques to the solution of real-world problems” (Greis. the “…students not only learn the fundamentals of engineering science. Implement and Operate Figure 2. 2000. In their final year. Olin College considers that the development of competences through the application of content in real projects permits the creation of innovative ideas. large course blocks that combine two areas of study (say. 110 . 2009. effective communication and an innovative attitude. business people. research groups and international networks of innovation have allowed these institutions to generate meaningful contributions to the economic and social development of Sweden and the USA. Another common element in the listed universities is their participation in their innovation systems. engineering and biology) and an interdisciplinary project” (Greis. the students work in projects based around “…integrated course blocks (ICBs). among others) and the incorporation of spaces in the development of projects. p. 26). 105). Through this curriculum structure. Miller. 2000). local and national governments. Olin College has presented a second triangle in which the courses are related (in terms of curricular content) with competences (skills such as team work. Miller. create. p. “The ICB…provides teamwork opportunities for faculty and students…the fourth-year senior capstone project. as follows: “…two-year foundation course and project work. 2009. & Kerns. In the first two years. 26). Olin college has designed an engineering curriculum structured around four years of education. These tight links with companies. 2009. This relationship among the actors in their innovation systems has resulted in the success of innovative projects that have become productive organisations with a direct impact on the economic indicators in these countries. p. Olin College’s triangles Based on the “Olin triangle” framework.

2009. The leading team of universities in terms of the CDIO have structured their educational programmes around the integration of areas of knowledge such as the arts. with the purpose of educating the engineers who will face the challenges of this particular discipline in the 21st century (Siller. the teaching-learning of these skills is difficult. Haines. These skills are acquired by the students through their study programme and used by them throughout their entire professional career. 2006).. This is because CDIO is the framework for the development of competences that will allow workers to conceive. At the intersection of these areas is where these universities have managed to capitalise on opportunities for the development of innovative projects that include engineering as a basis for their development. Siller et al. humanities. Examples of these changes have been reviewed by various global institutions such as the NAE (Siller et al. 2004). 2008).. Herrero. the development of innovative ideas is based on the framework of CDIO that began in courses included in the engineering curricula. Chalmers. 2002).. In this way. Regarding our second question. a group of globally renowned institutions (MIT. Implement and Operate We have presented the innovation process as raised by Davenport (1993). 2009) and the formation of engineers who are able to apply such content and acquire new skills through what is known as lifelong learning (McCowan. Design. OCDIO AS A PILLAR OF SUSTAINABLE INNOVATION: A MODEL OF EDUCATION IN THE FIELD OF INNOVATION IN ENGINEERING Engineering as a profession has been experimenting with changes in its education-learning models. we can start to form an answer to the question regarding the creation of a framework for the acquisition of skills for the successful development of initiatives for innovation in organisations. & Benalli. this concept is tightly linked with the idea of educating professionals and developing their competences in order to develop innovation processes. and (3) the skills and attitudes of first-year students of engineering. especially for faculties that are looking to find a balance between the need to include or increase the technical content in the curriculum (Siller et al. At the same time. Alabart.Observe. 2004. Rosales. Nonetheless. Scientific breakthroughs and technological developments: With regard to technological developments. Giralt. Vernis. 2009) and the ABET in the USA. Conceive. Lately. & Gómez. Duque. (2) internationalisation. One of the most relevant changes has been moving from the knowledge transfer paradigm to the development of professional skills paradigm (Hernández. design. 2009. This stage has been proposed by the research team of Universidad de los Andes in order to guarantee the sustainability over time of the innovations achieved through the OCDIO framework. or if there is a way to 111 . implement and operate systems (projects) for innovation in their organisations. The proposal has three main principles: (i) scientific breakthroughs and technological developments. In response to the new challenges involved in education in the field of engineering. KTH and Linköping) developed a proposal based on the CDIO cycle for engineering projects (Crawley & Brodeur. Caicedo. social sciences and exact sciences. & Medir. we will propose an initial stage in the CDIO framework: observation. these universities have begun to hope that their alumni develop similar processes in the organisations that they go on to work for. The core of the CDIO framework is the development of skills to be used at each of the stages of the proposed cycle. ABET. Witt. the question is whether schools of engineering have enough resources to be able to develop applied research.

engineers are being drawn to developing countries other than their own. enterprise strategy. the School of Engineering at the Universidad de los Andes has proposed a curricular space which is designed to develop some of the skills proposed by the ABET together with students. p. In this stage. opportunities for innovation are identified. we have proposed an additional initial phase of observation. as. Implement and Operate integrate engineering programmes into industry developments. The CDIO initiative allows students to experience learning in pragmatic terms in the midst of a social context in which engineering can add value (Cutkosky & Fukuda. Conceive. Lloyd et al. the same thing happens with Chinese and Indian students (CDIO. This phase allows a careful investigation process based on a literature review and creativity workshops that allow us to explore the technological conditions that surround us and to approach potentially problematic situations that could be addressed from the point of view of different fields of engineering. Carvajal & Hernández. This first phase of what we have decided to call the OCDIO cycle provides the necessary information to start the conception of ideas as proposed in the CDIO cycle. 2004). ACOFI). technical. additional efforts should be made in order to include analyses of different contexts as an integral component of their training. a rigorous observation stage is required (Ramírez. and business plans” (Crawley & Brodeur. and developing conceptual. Design. a research group of Universidad de los Andes proposed that before an idea can be conceived. implemented and operated through a project. and the principles of the CDIO cycle.. we can understand the different complexities that surround us and we can propose mechanisms (solutions) that could absorb part of that complexity (innovations) (Vest. which have been discussed in multiple schools of engineering throughout the world. 2008. For this reason. professors and businessmen. 2010). the CDIO initiative promotes the development of hands-on activities that allow the integration and implementation of a scientific basis into real projects. where professionals with the ability to adapt to different environments are sought after.Observe. undergraduate and postgraduate). Taking into account the challenges highlighted by the NAE and the ABET. and regulations. by observing the world around us. The skills and attitudes of first-year students of engineering: One of the main concerns of schools of engineering is the level of knowledge in basic sciences which is applied in projects developed by engineering students (Cutkosky & Fukuda. 2005. 2010). 2004). As a contribution to the CDIO framework. 2004. its agents and the iteration among them. It is necessary to generate curricular processes in which knowledge of engineering and basic sciences is integrated into the development of real projects. “The Conceive stage includes defining customer needs. considering technology. arts and humanities lies opportunities for the 112 . Froyd & Ohland. In this sense. we believe that the first stage in the OCDIO cycle should be the observation stage. This requires a widespread effort at every educational level (school. In the USA and Canada. Internationalisation: Globalisation demands that engineers have the capacity to adapt very quickly to contexts that are different from their own. it is possible to argue that in the crossover between the social sciences. With this in mind. Connecting these ideas with the proposals of the CDIO leadership team. According to the Asociación Colombiana de Facultades de Ingeniería (Colombian Association of Engineering Faculties. its variables. These activities are important immediately prior to the design of a solution and are the basis for the structure of a project that executes the design. However. 138). Such is the case in European student exchange programmes such as the Erasmus European programme and the Socrates programme. The CDIO framework starts with the conception of an idea that will later be designed. The closeness between engineering programmes and the industry is fundamental to a country’s technological development. 2000).

increased slowly. once again. challenges and requirements identified in the observation process.96%). THE INNOVATION SYSTEM IN COLOMBIA There are plenty of opportunities to develop sustainable ideas for innovation in countries with the current characteristics of Colombia. the development of the observation processes we have previously discussed is absolutely necessary. a rapid and sustained increase in the number of publications emerged. we will present the details of the educational contexts in which we used the OCDIO framework for the development of sustainable innovative ideas. we will carry on building an answer to the two questions that guide this chapter. Figure 3 shows the increase in the Thomson Scientific (ISI) publications in Colombia between 1975 and 2005. México (18. & Salazar.85%) and Uruguay (1. such as Brazil. From then on. Ecuador (0. by finding the shortcomings and obstacles that can then be overcome in new versions of the OCDIO cycle. with the appearance of science and technology policies and investment in international cooperation (see Figure 4). If we move to the final stage of the cycle (operate). for the identification of such ideas to be possible. design. the Colombian participation in bibliographical production in Latin America relating to publications in indexed journals was 2. It seems that the country reached its peak in terms of production capacity. This stage of the initial-final observation process allows us to ensure the sustainability of the solutions developed in the CDIO framework. we have established that the CDIO cycle is an adequate framework for the acquisition of the skills required for successful innovative ideas. similar patterns are found but with significant 113 . Implement and Operate development of innovative ideas. Costa Rica (0. which is higher than that of Bolivia (0.45%). Conceive. Figure 3 shows that between 1980 and 1995. there is the possibility and opportunity to improve with each iteration. implemented and is now operating.35%) (Jaramillo. Between 1997 and 2002. and does not have the institutional infrastructure to support any further increase in new knowledge production. When comparing the results for Colombia with those of more developed countries. Chile (7. We will present the main reasons for this fact in the following section.99%). 2003).33%). Since 1995. we can guarantee that over time. Paraguay (0. Therefore. However. In this way. Colombia ranked below the production of countries such as Argentina (18. we will present elements of the Colombian innovation system as the environment of the School of Engineering of the Universidad de los Andes. innovative engineering solutions will adapt to these new conditions.54%) and Venezuela (4. We have included an initial stage of observation that guarantees the sustainability of those innovations over time. implement and operate new solutions or improvements to the same solutions in the OCDIO cycle. Based on these new observations. Brazil (43.10%). Peru (0.42%.77%). we find that it is necessary to develop a new process of observation of that solution (or system) which has been designed. In this way. we could conceive. as is usual in a developing country. However. the question remains of why this is so. Design. the increase inclines. 2003). The question that arises is why the behaviour of Colombian publications changed after 2005.Observe. One indicator of a country’s competitiveness in terms of research and development is the publication of scholarly articles as a measure of scientific activity and knowledge production (Jaramillo. Therefore. 2001). The reason is that in a constant and systematic process of observing the results and the behaviour of implemented and operating solutions.08%) (Jaramillo.11%). Lugones. we believe it to be important to present the context in which these education spaces are developed. the number of publications in Colombia. However. towards moderation. For this. In the next section.

a National Trust for the Funding of Science. Technology and Innovation. but in Brazil the growth in faster than in Colombia. which demonstrate their efforts to develop social. For the resolution of collective problems. technology and innovation. public health. their capacity to solve individual problems and. These indicators show that Colombia is on the right track but lacks the driving force required to boost its economic growth. as a result of the relations between the different actors that participate in it. there is a clear need for engineering and other disciplines to immerse themselves in topics such as security. In this manner. The academic development of Brazil is closely related with its innovation system that.03 patents per 100. with the aim of supporting and improving knowledge production and its subsequent application in order to foster economic growth. an average of 0. There is an initiative for the creation of a Ministry of Science. Conceive. The relevance of Brazil is based on two reasons: (i) Brazil is the most developed country in the region (South America). Figure 2 shows the milestones that allowed Colombia to advance towards its incorporation into the knowledge society. These initiatives ratify the clear need for Colombia to be introduced into the knowledge society and to improve its position in the regional context and worldwide. and increasing the ability of Colombians to work in teams. and knowledge. With regard to the first challenge.8% and 39. among others. Implement and Operate differences in the number of publications. 114 . Public goods related to knowledge are those that “are most urgently needed in Colombia. These assessments by Gomez pose two challenges: increasing the investment in knowledge development so as to enhance competitiveness. In the period 2002-2004 in Colombia. however. infrastructure. while in Chile the same indicator was 0. whereas in countries such as Mexico and Brazil that percentage in 2003 was 29. Two characteristics of the incipient Colombian innovation system in terms of human capital are presented by Gómez (1999) as the common aspect for Colombians: on one hand.8% respectively.53. Examples of these efforts include several bills that are being discussed in the Colombian Congress and which aim to improve the institutional infrastructure regarding science. Design. generates a high level of knowledge and sustained economic growth. Colombia has been advancing in terms of the structure and consolidation of its innovation system since the nineties. The latter issue is aggravated because of a lack of resources and investment. This lack makes extremely expensive the production of private goods” (Gómez. the National System of Science and Technology (SNCyT) and the National Innovation System (SIN) have been consolidated. on the other hand. Technology and Innovation and a National System of Science. their incapacity to solve collective problems. institutional. environment.13 and in Argentina it was 0. oscillates between 15% and 20% of the national budget. The total expenditure on investigation and research as a percentage of the Gross Domestic Product GDP in 2004 in Colombia was 0. according to the National Planning Department. 1999). Colombia has made new efforts via legislative initiatives to foster scientific and technological innovation. Technology and Innovation. and (ii) economically speaking. both countries have a growing number of publications.Observe.000 inhabitants in Colombia was 109 in 2003. private investment in technology in Colombia.000 inhabitants were issued. The number of researchers per 100.37%. this initiative has not yet been as successful as the Brazilian equivalent. human and financial capital. Brazil is one of the strongest countries in the world (it is a member of the G20). aiming towards the same collective goal. Furthermore. These initiatives are aligned with Colombian history regarding the creation of an innovation system which will be consolidated in the coming years. which in the case of Colombia is in the hundreds whereas in Brazil it is in the thousands (see Figure 5).

Observe. Milestones in the creation of the Colombian innovation system 115 . Design. Increase in Colombian ISI publications (Source: General Research Office of the Universidad de los Andes) Figure 4. Conceive. Implement and Operate Figure 3.

These principles are based on the University’s interest in participating in the Colombian innovation system and becoming a relevant actor in the transferral of knowledge from the academy to the production sector. This will allow the national industry to participate to a greater extent in the international market. and to adding value to companies as one of the focal points of the School of Engineering. Design.Observe. The strategic postulates (mission and vision) of the School Development Plan 2002–2005 refer to innovation capacity based on technology as one of the core characteristics that its undergraduate alumni must have. companies should coordinate with national research groups and universities in order to find sources of proposals for new products. Implement and Operate Figure 5. processes and services (National Research Council. among others). Regarding the second challenge. fostering a culture of innovation in new generations of professionals as an essential practice for the economic development of their country. we will present the generalities of the OCDIO proposal and contextualise it with an example of its application in the School of Engineering at the Universidad de los Andes. This has a huge impact on the competitiveness of companies. Brazilian ISI publications In countries such as Colombia. observation and conception in constantly changing scenarios (negotiation processes and technology. . the University of Los Andes has been a key actor. For the period 2006–2010. proposals like the one set out by the School of Engineering at the Universidad de los Andes seek to strengthen the competences of teamwork. 116 THE CASE OF THE SCHOOL OF ENGINEERING AT THE UNIVERSIDAD DE LOS ANDES In the aforementioned scenario. The School of Engineering has made explicit its aim of contributing to the country’s competitiveness through innovation. 2007) which would reduce the gap between these organisations and multinational companies with specialised departments and a budget for research and development. Conceive. but introduced an additional element: the level of participation that it must have in the technological renovation processes in national industry. It also express it intention to have a positive impact on the competitiveness of the country through research. This joint work may be modelled on the processes developed by the universities presented above. the School kept on track in terms of the previous plan concerning innovation. Taking this into account.

subscribing to international scientific databases. Conceive.45 and 0.Observe. the Universidad de los Andes has experienced a sustainable growth in indicators such as the number of ISI publications (see Figure 6). both in an alliance with the Business Management School. The Universidad de los Andes (and particularly the School of Engineering) had been working to reinforce the activities of teaching and investigation related to innovation. the university created the Vice Rector’s Office of Investigations. which means producing its own knowledge about relevant problems. with the aim of solving the relevant problems in the field of Colombian engineering. Implement and Operate There are several diverse initiatives created by the School with the objective of developing its capacity to promote and support innovation in national industry. In 2007. As a result of these initiatives. the newly available infrastructure of facilities and laboratories and the realisation of the importance of working closely with the production sector motivated the School to reflect on how to formally incorporate the innovation process into the institutional dynamic. the School focussed on activities such as strengthening its master’s and doctorate programmes. Design. The University cited conducting high level research as one of its institutional aims. In 2000. it participated in the establishment and direction of INNOVAR. 0. The CITEC established its objective as the execution of projects with a high component of innovation. equipping its laboratories with the latest technology and educating and assigning its professors staff for research purposes.36. also tried to offer the participating companies a way to resolve their management and competitiveness problems through the transfer of the appropriate technology. placing itself in 5th place in the ranking of Ibero-American research institutions. The results presented in Figure 6 accompanied a significant growth in the rate of production of ISI articles per professor: 0. 117 . In the same way. at the end of 1993. In the 1990s. With this objective in mind. upgrading its infrastructure. Other initiatives such as the Centro Guía (Guidance Centre) or the Red de Empresas Asociadas a la Universidad de los Andes (Network of Companies Associated with the Universidad de los Andes). the School of Engineering has been consolidating a space for the development of engineering projects from the first semester until the end of the undergraduate programme (see Figure 7). it created the Innovation and Technological Development Centre (CITEC) with the expectation of helping to increase the welfare of citizens through its participation in the industrial development of the country. 2008 and 2009 respectively. an institution dedicated to the incubation of businesses with the potential to succeed. In the same decade. 20 of the 130 research groups at the University are in the highest category of the National Administrative Department for Science and Technology (Colciencias) in terms of the quality and frequency of their publications and researches results. oriented towards the solution of problems in the field of engineering. which was focussed on managing the accomplishment of these objectives. The idea was to open spaces up for effective interaction among research groups and companies. Model of Education in Innovation in the Field of Engineering: The OCDIO Cycle in the Context of Undergraduate Students of Engineering at the Universidad de los Andes Taking into account the national context and the context of the Universidad de los Andes. a proposal was prepared for the creation of an innovation centre building upon the experiences gained through the CITEC.59 for 2007. Under the name of InnovAndes. using its own resources for research. with the aim of boosting the development of the graduate School through applied investigation.

and general engineering. The identification and resolution of the problems being addressed showed that knowledge from each discipline was necessary. This process required a complete integration of the students with the group and with the professors in charge. The a priori hypothesis of the research team is that these were the students that first had the opportunity to work in interdisciplinary teams. the most positive opinions regarding teamwork belonged to the students in the final semesters of their undergraduate programmes. we will develop two of these points in the course as part of the OCDIO model of education for innovation. This was the first phase of change for ExpoAndes. Conceive. These projects are developed across the curriculum and aim to be a way of integrating the students into the curriculum. It is noticeable that the teams (both the ones composed of students from the programme as well as those 118 . Without a doubt. Another interesting result concerns the development of the students’ communication skills. First Semester In the first semester. chemical engineering. This phase of the undergraduate programme is intended to start the development of an innovative attitude through activities with an emphasis on the observation and conception of engineering projects. although with less emphasis. At the end of the semester.Observe. the main strength of ExpoAndes is its capacity to generate in the students the ability to come up with teamwork solutions. around 150 groups of students present projects that aim to provide an initial approach to innovation in engineering with regard to a specific problem (Ramírez & Hernández. the students of all of the engineering programmes undertake a project which is based around a specific topic that is defined according to the context of the different introductory courses to the engineering programme. Implement and Operate Figure 6. This active learning scheme is called ExpoAndes. There are some very interesting issues concerning this matter. due to the interdisciplinary nature of the teams. Activities intended to foster the design of these projects are also supported. Growth of the number of ISI publications of the Universidad de los Andes Figure 7 presents the undergraduate engineering programme and the points in the course at which certain projects are developed. in which engineering projects were undertaken by teams composed of students of industrial engineering. 2008). In the following sections. In the evaluation of the ExpoAndes process. computing and systems engineering. Design.

The students who had just gone through ExpoAndes had contrasting opinions. The researchers relate this to the fact that the students presented their projects only once. but should be explored in future research. in a very demanding and pressure-filled open exhibition with more than 2000 guests (including parents. A learning process such as ExpoAndes aims to develop an innovative attitude in the engineering students from the first semester. engineers and professors). These preliminary results may indicate that this is in fact the case. This may lead us to assume that. identification and design using an engineering approach. In this way. permanent systematic training of this skill would be guaranteed. for example. In this way. ExpoAndes presents itself as an opportunity for professors to guide the students in the process of observation. One hypothesis (which may be too strong) is that these contradictory results may be associated with the different approaches that ExpoAndes has employed in recent years. The new students had to design their solutions using only their knowledge of their own engineering discipline. Even though the students have shown some resourcefulness in presenting their projects in the proper way. ExpoAndes is an initial opportunity for students to develop their capacities as entrepreneurs. This result is interesting if we take into account that in the industrial engineering department. because they had more opportunities to develop opportunities for entrepreneurship. 119 . Regardless of its limitations. at least initially. we want to them to experience what they will be doing in their professional lives. There is a significant and potentially big research opportunity in exploring whether or not this competence develops in the same way for the students of each different engineering programme. business people. so that the students will be able to identify opportunities to add real value to their society. Although it is clear that the students will be unable to solve a problem like engineers in the first semester. The results show that there are good perceptions of different relevant actors regarding this matter. The preliminary results show. In that sense. it would be sensible to create opportunities for smaller oral presentations during the semester. the industrial engineering students were more critical of what they did in the first semester. The senior students perceived that the greatest strength of ExpoAndes is the development of the capacity for innovation applied to the resolution of a problematic situation. Implement and Operate Figure 7. that the perceptions of students regarding their innovative attitudes were more positive for chemical engineering students than industrial engineering students.Observe. Design. it is important to explore in depth such a strong asseveration in the middle of a learning process. the students have more courses in which to develop an entrepreneurial attitude. Conceive. This discussion is important. Projects in the education of engineers at the Universidad de los Andes composed of students of different engineering programmes) were unable to develop their oral expression skills. The question that arises is whether or not interdisciplinary teamwork promotes innovation in the design of an engineering solution.

we will present the details of the process developed by the students in each of the stages of the OCDIO cycle in the “middle study programme project”. the teams engage in four activities that require the participants to develop observation skills. In this process. Ramírez & Carvajal. Observation: Conception Over a period of six weeks. In the following section. the aim of this project is for students to develop the first activities relating to the implementation of the prototype they have developed (see Figure 8). the project is intended to foster attitudes which are conducive to teamwork. The students make a presentation referring to the technological changes in the world and the central role of information technologies. among other aspects. This is the reason why the CDIO framework with the proposed additional observation phase forms a good context for the design of these projects (Hernández. the design of engineering solutions and effective communication. Application of the OCDIO proposal in the middle of study programme course with ICT 120 . This course is taken by students in the fifth and sixth semester of the study programme. the students work on problems related to information and communication technologies (ICT). and the research teams make presentations on tendencies and opportunities. 2010). In particular.Observe. For this purpose. In this course. conception and design. there are videoconferences with project development experts in Figure 8. Implement and Operate The Middle of the Study Programme The next point at which the students engaged in the elaboration of an engineering project with a special emphasis is called the intermediate project. the activities for the elaboration of their projects are defined with a strong emphasis on observation. Design. in recent years the OCDIO framework has been used in the course known as the “middle study programme project”. a panel of engineer-entrepreneurs is assembled. Conceive. In this project (like in ExpoAndes) the students work in teams to develop more compelling projects than those they made in the first semester. Parallel to these national interventions. In addition. Both in the first semester and in the middle of the study programme.

The entire process of observation for the innovation workshop is repeated. on an individual basis. with each team choosing a different situation. Implement and Operate other parts of the world.Observe. Once the situation is identified. Design. writing a text on a mobile phone. defines the field of technological relevance and determines the niche in the market in which the proposal would have a potential impact. photographs from magazines. In the next step. At the end of this observation stage. they must make an audiovisual record of the different behaviours at different times during the week. the students receive feedback on their reports from their professors. This phase ends with the presentation of ideas for the conception stage of the project. During the first three hours of the workshop. but also start to make connections with entrepreneurs who could eventually become their mentors. Based on a communication-feedback process. the students not only begin to visualise potential areas for their engineering proposals both nationally and internationally. essentially because it refers to the behaviour of a representative sample of people in the communities that surround them. During the third and fourth weeks of the semester. The team should construct their presentation using materials such as paper. cardboard. It must be presented in a written report that identifies the problematic situation in which the students intend to intervene using engineering tools. This second activity seeks to strengthen their research skills through a systematic review of the relevant texts. For three hours. the students begin. each team must integrate the result of their proposal with the information gathered in the bibliographical research. After one week of work. teams of five students are drawn up. inside the classroom. the students observe and make comments on images of projects that have been acknowledged for their creative content and innovation. After this. For that purpose. a proposal with the initial project requirements must be generated. This stage. like all of the following ones. who have to identify during the following week a situation that has attracted their attention. feedback and coaching sessions with an engineer-entrepreneur and the professors. each group produces a visual 3D presentation and an intervention proposal for the selected situation. This process is repeated several times during the semester. as well as strengthening their written communication skills. stressing the added value supplied by information technologies. Teamwork plays a fundamental role in this process of helping students to reach their learning goals. With these presentations. in an lift. etc. Conceive. With the audiovisual material obtained by each team. establishes the objectives of the project. At the end of the session. professors and students. Conception: Design In this stage (during four weeks). a bibliographical research process. is characterised by cycles of teamwork. each team shares their proposal with the rest of the students. the students attend a presentation of the advanced projects of teams that are one semester ahead. The following week. a full session (poster-session) is held with the 121 . The situations may be as commonplace as the behaviour of people riding on public transport. in which they produce written technical reports about engineering proposals that may or may not have been particularly innovative. The goal of this final activity of the observation stage is that the students who are beginning their projects observe and analyse the work of other teams that are ahead in their innovation proposals with information technologies. The intention of the workshop is that the student will sharpen his/her observation skills and start to work successfully with other students in a team. all of the students get together and the chosen situations are presented. etc. the groups must capture their observations and produce a project proposal that must be presented and refined based on the critique and contributions made by entrepreneurs. the students participate actively in an observation for innovation workshop.

Ideally. 2000. oral expression. Two-week cycles are defined by meetings with the engineer-entrepreneur who is assessing the project. this time more specialised. knowledge and technologies involved. knowledge development and the capacity to work in teams increases considerably (Evans. in which 1 means that the student has not developed the skill and that he/she may still improve.Observe. 2007. & Leifer. 2009). Skogstad. Currano. Parks. each entrepreneur follows their two chosen projects. 2008. the project will have its first prototype to illustrate the proposal and a defined implementation programme. Successful cases such as the ones presented by the University of Texas at Austin. At this point. and. which must be focussed on the results of their observations and the initial conception phase of their proposal. The development of innovation abilities is evaluated according to criteria which are related to: project content. Each group has seven minutes for its oral presentation. At the end of the poster-session. deliverable definition of the innovation with an information technologies showcase. 122 . The engineer-entrepreneur assists the team in the strengthening of their communication. This phase is the last one of the first semester in the teamwork and innovation learning period. the professors and the students. & Nichols. each group presents its proposal orally and exhibits a poster with the main features of the proposal displayed on it. This is followed by immediate feedback (three minutes of questions and commentaries). provides oral and written expression tools to the students. and an evaluation given by the engineer-entrepreneurs and the professors based on effectiveness of the teamwork and the development of their innovation abilities. and work schedule. After the first two weeks of the cycle. The efficiency of the teamwork is evaluated according to criteria which are related to the oral and written presentations. From the sixth week onwards. These skills are assessed based on numerical criteria. effective communication. NAE. & de Blas. the engineerentrepreneurs offer another round of questions. Implement and Operate participation of the engineer-entrepreneurs. UPC and Stanford University. as follows: support material. Conceive. at the end. there is a Public Showcase of Innovation with Informatics Technology in which the first results of the implementation of the proposal are displayed. to each group. teachers and students generates value within the learning process in the sense that each member brings the expertise and perspective of his or her own field to the collaborative task (Edmondson & Nembhard. encourages teamwork. each entrepreneur chooses the two projects that captured their attention the most. the design phase becomes more relevant in the development project. state of the existing prototype. At the end of the presentations. Design. Design: Implementation Over a period of four weeks. by the end of this phase. de la Hoz. and proper use of the bibliography. The public display lasts for one day. structure of the document. time management. In this session. 2009). the potential for innovation. From then on. project objective. The purpose at this stage is to make progress in terms of the relationship between the requirements of the selected situation and potential alternative solutions derived from the application of information technology. The entrepreneur helps to analyse the project. teamwork and innovation with information technologies skills. the design must be consolidated. written expression. and assists them so that the prototype has a concrete application that generates value in a determined area. based on teamwork and assistance from the professors and entrepreneurs. Entrepreneurs may choose the groups that are of the most interest to them. there is a presentation and feedback session with the group of professors. This teamwork between businessmen. with students and professors from the university attending. the coaching process begins. projects referred to. provide evidence that if a couching process is conducted by entrepreneurs.

the groups have to explain criteria such as “sustainability” which are very important in an education in engineering. another group. During the next year. SIRT): The intensification of urban development in cities during the twentieth century. each of which culminates in a communication-feedback activity. Science and Innovation 2010”). formed a company and recently became one of the five winners of the Ventures 2010 national contest. in which there are four phases. politicians and economists think about what the formula could be for building viable cities and making them sustainable over time. which had more than 1200 participants. If they pass. The winners of the contest receive incentives to put their proposed prototype into operation. caused by rapid population growth and the concentration of people in urban areas in search of opportunities. endeavour (planning. and received $10 million COP in shares granted by the Colombian Stock Exchange.Observe. because we are at a critical 123 . innovation (design. The projects summarised below were developed with the aim of providing innovative ICT solutions in the context of transportation in big cities. During public presentations. DataTraffic received the award for the project with the greatest potential for growth. architects. they enter the second semester of the third year. Information System of Routs and Transportation (Sistema de Información de Rutas y Transporte. price. course projects. Design. made engineers. laboratories. RESULTS OF THE IMPLEMENTATION OF THE OCDIO PROPOSAL AT THE SCHOOL OF ENGINERING (UNIVERSIDAD DE LOS ANDES) Through the aforementioned methodology for learning and developing engineering projects. The process described above takes place during the first semester of the third year of study in the engineering course. this issue is a priority in Bogota (Colombia). thus attaining a very high level for competing in international contests of innovation using information technology and endeavour. Such sustainability would largely depend on mobility. economic resources (1500 US dollars) and the coaching of a board of directors made up of two entrepreneurs and a professor. coaching from entrepreneurs and their graduation project). they have access to a space in one of the faculty laboratories. as well as making those innovations sustainable over time. During the fourth year of the course. technology). which had more than 400 contestants. understanding the solution). Operation The best projects participate in the Innovation Contest that takes place at the end of the semester. understanding the problem. Nowadays. the teams can strengthen their proposals and plans using the academic resources that are at their disposal (courses. One of the groups which formed during this learning process was among the top four in a national entrepreneurship award (“Santander Award: Entrepreneurship. target market determination. whose members are now graduates from the engineering programme. Implement and Operate along with entrepreneurs invited by the School of Engineering and the engineer-entrepreneurs who have assisted with the projects. it is intended that students will develop the necessary skills for eventually becoming innovators in their own organisations. sustainability analysis (economic and technological). precision in the presentation of the solution design. Similarly. The jury for this contest is made up of entrepreneurs who evaluate the students’ development in terms of teamwork and innovation skills using criteria such as the establishment of an objective. The teams can either pass or fail the semester. Conceive.

company-building talents and skills of our students. where to take the bus and where to get off. and therefore its users cannot easily find answers for questions such as which bus to take. using public transportation should be an enjoyable experience. ployees. In this phase. The current synergy between professors and students shows a high level of connection between the courses. The first one was developed in the second semester of 2008. There are several results which appear to show that the students’ and professors’ attitudes to innovation were strengthened through the elaboration of projects in the first semester and in the middle of the study programme. a prototype was designed which informed the user of the estimated time of bus arrival using a Java based simulator. maintenance and marketing. Both groups have been acknowledged by academic and business entities as projects with a high potential for sustainability. The user tells SIRT where he/she is located and which route he/she wants to take. among others. DataTraffic has participated actively in the development of solutions for the Urban Development Institute. which exists in order to promote an innovative attitude in engineering students. From this perspective. Design. These projects are examples of the results of the sustainability of the OCDIO learning proposal for developing the innovation. In its short trajectory. The information travelled across the cellular network (GSM) and text messages (SMS). and therefore the passengers should have access to all available information regarding routes. Bogota’s Master Plan for Mobility proposes that it is necessary to integrate different forms of public transportation. Implement and Operate point at which the decisions made today will have a major impact on the future. through the development of solutions which are focussed on the areas of logistics.Observe. stations and times of arrival. and the Bogota Emergency Telephone Number. In order to achieve this. around 300 Figure 9. supervise their functions and increase their efficiency. such information is not available for the public bus system (excluding Transmilenio). by enabling people to better organise their time. this group is proposing a solution that informs users of the estimated time of arrival of the next bus in two ways: 1. the Transportation Secretary Office. This sustainability has been conceived in the learning model comprised of the OCDIO cycle. The preliminary model of the prototype is presented in Figure 9. and of the mentoring and advisory work carried out by teachers and businessmen who are interested in technology and encourage the building of knowledge. Every year. Conceive. SIRT was born with the intention of intention of making a contribution to the city. 2. SIRT’s project DataTraffic This project develops innovative solutions using digital maps which generate value within the processes of its clients. The user tells SIRT where he/she is located and where he/she wants to go. in order to increase control over the em124 . or where to walk in order to reach their final destination. From the perspective of a city in the not too distant future. The project is being carried out in phases. Currently.

Results of the OCDIO cycle in the Middle Study Programme Project with ICT 125 . Some of these projects are reinforced later on thanks to the knowledge of basic sciences acquired later on by the students. with the participation of 1. the people who attended the Innovation Showcase (businessmen. “2010 Computer Society Student Competition” and “Calling All Innovators”.Observe. their innovative attitudes. we have managed to develop 40 projects annually with the participation of 10 business leaders. Conceive. MSc students and PhD students) evaluated different aspects of the activity. Implement and Operate projects are developed. With these results. The results are motivating and confirm those mentioned before. In order to evaluate the development of competences in the engineering students who participate in the Middle Study Programme Project with ICT. one big achievement has been the consolidation of an educational space where students from several study programmes are in constant communication with one another in order to identify problems that can be addressed using engineering and to share multidisciplinary knowledge to facilitate the design of solutions. In addition. Figure 10. Design. and the quality of the proposed solutions among others.500 students and 20 professors from all of the engineering programmes. 5% of these projects have transformed into final study programme projects.Colombia”. its environment and other universities in the country. some groups have achieved important positions in competitions such as “Imagine Cup 2009 . particularly students of Computing and Systems Engineering and Industrial Engineering. professors and students from several study programmes. Without a doubt. In the last years.ECO CHALLENGE 2010”. Some of them are resumed in the middle of the study programme. These results show favourable and sustained evaluations in areas such as the capacity of the students to identify problems. researchers. where we have been able to strengthen the synergy between the professors involved. Regarding with Innovation Projects with ICT course. The professors have written nearly 10 articles about this subject and presented them in congresses and national and international magazines. professors. “TIC Americas 2010 . Figure 10 shows the average perception of the different evaluators of the work done by the students who had been part of the education space during the last three semesters. we are starting to generate a mass of criticism that is having an impact on the Universidad de los Andes.

where projects have an increasingly short lifecycle and where it is necessary to have a significant capacity for observation. technology and innovation in Colombia. companies. Colombia. environmental and cultural aspects. is that its alumni may develop innovative attitudes and the capacity to work in teams through effective processes of communication. The OCDIO proposal was set up in a framework that enables the development of sustainable innovations. and in general in the interdisciplinary work which has become a motif in society. These institutions have successfully incorporated themselves into the innovation systems of developed countries and of others that are searching for economic development. technical. social sciences. it is very important to observe in detail the 126 . This school intends to achieve this objective through the undertaking of curricular activities framed in the CDIO cycle with an initial phase of observation that guarantees the conception of ideas as proposed by the CDIO framework and warrants the sustainability in the time of the innovations which are developed. implementation and operation of sustainable engineering systems that take into account the relevant economic. the OCDIO proposal can become a point of reference for other professions. Implement and Operate CONCLUSION AND FUTURE WORK A diverse range of engineering education institutions across the world has developed initiatives for the education of professionals in the field of innovation. science. The purpose of the School of Engineering. social. the School of Engineering at the Universidad de los Andes seeks to educate engineers so that they may be able to face the challenges of innovation and transfer their knowledge later on to the market in the shape of products. services and business models. Design. with the aim of it becoming a successful and replicable model that results in a positive impact on the performance indicators relating to the development of the economy. This intended alliance requires certain characteristics and competences for the fundamental players of an innovation system: the engineers. we intend to refine our instruments of evaluation and the ways in which the innovation projects that arise in the proposed context of engineers’ education are monitored. as part of the innovation system in Colombia. This is achieved through a permanent cycle of observation and adjustment of the systems (solutions) designed to resolve problematic situations in a particular society. In this way.Observe. which would allow us to continue the development of this initiative in other universities. business people. they contribute to the development of favourable conditions for the development of innovative ideas that have a positive impact on society. the OCDIO cycle has established itself as a framework with which to educate the engineers of the future to face not only the challenges of the engineering as a profession. but of society in general. In order to consolidate this investigation. The additional phase of observation that has been proposed as a complementary initial stage of the CDIO framework allows the professionals facing the challenges of innovation inside organisations to obtain the relevant information for the conception. Conceive. not only with engineers from several disciplines but with professionals from other areas. but the researcher team believes that the proposal can be replicated in other areas such as basic sciences. particularly for engineers. is working to consolidate an innovation system with the participation of the government. research centres and society in general. learning and change in order to respond to these challenges. In this sense. design. being a country that is seeking to move from a feudal-capitalist economy to a knowledge-based economy. In this way. In this way. We may be able to argue that we obtained incipient results from this education proposal. For future investigations. The OCDIO framework has been examined during this chapter which has focused on the education of engineers. adaptation.

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Organizational Networks and Innovation Section 2 .

with the intention that adherence to such factors may have a positive influence on the effectiveness and future sustainability of Open Innovation. the integration of independent inventors. data DOI: 10. which are intended to positively contribute towards independent inventors becoming more successful suppliers of new product ideas to businesses operating an open innovation model. has been fruitful. are sustainable. driven by current academic literature. IGI Global. There is little evidence however. intended to positively contribute towards Copyright © 2012. to suggest that the practical integration of independent inventors as suppliers. . to businesses operating an Open Innovation mechanism. UK Chapter 8 ABSTRACT Whilst current academic literature points to the growing importance of Open Innovation as a means of companies capturing new products from sources other than internal R & D facilities. UK & Caparo Innovation Centre. within Open Innovation has proven challenging. at a theoretical level.7% of new product ideas supplied by independent inventors resulted in the business launching a new product on to the market. a source of innovative new products. UK Andrew Pollard University of Wolverhampton. Indeed.131 The Integration of Independent Inventors in Open Innovation Gavin Smeilus University of Wolverhampton. This chapter presents a series of preliminary Critical Success Factors. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. driven by academic literature. This statistic raises concerns as to whether open innovation models operated by companies. which rely on inputs from independent inventors. allows for independent inventors to become suppliers of new product ideas to companies.4018/978-1-61350-165-8.ch008 from an existing open innovation centre suggests that just 0. UK & Caparo Innovation Centre. INTRODUCTION The Open Innovation model. The chapter will present a series of preliminary Critical Success Factors. UK Robert Harris University of Wolverhampton.

The identification of Critical Success Factors will guide independent inventors to operate as successful suppliers of new product ideas to businesses following an Open Innovation model. firstly a summary of the key principles behind Open Innovation is outlined. Vanhaverbeke & West (2006.1) “Open Innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation. regarding the innovation process. As such. p. research and develop innovations. Open Innovation Principles A formal definition of Open Innovation is suggested by Chesbrough. which is historically prevalent amongst large innovative companies. 2003) independent inventors becoming more successful suppliers of new product ideas to businesses operating an open innovation model. respectively. underpinned by current academic literature. 2003). a series of preliminary critical success factors are proposed. a discussion suggests what is currently understood about independent inventors and then finally. and expand the markets for external use of innovation. the critical aspect is research investigations and development projects reside within non-permeable firm boundaries. 2003). the Open Innovation model provides a relatively new and contrasting approach to the Closed Innovation model. The figure illustrates the funnelling effect experienced as research investigations are filtered down in number as go/no-go decisions are reached. The closed innovation model (Chesbrough. regarding in- 132 . The traditional Closed Innovation model relies heavily upon the internal capabilities of businesses to develop and commercialise a new product or service with little or no input. with the intention that adherence to such factors may have a positive influence on the future sustainability of such operations. coming from external sources.The Integration of Independent Inventors in Open Innovation Figure 1.” Essentially a mechanism for organising innovation related activity within large R&D led busi- nesses (Chesbrough. The chapter is structured as follows. Secondly. businesses typically generate the innovative concepts. then complete commercialisation related activity in the form of marketing through to distribution (Chesbrough. Within the Closed Innovation model. The diagram in Figure 1 proposed by Chesbrough (2003) summarises this process very effectively: In interpreting Figure 1. there is a heavy reliance upon the company’s internal science and technology base to originate. perform R&D related activities that facilitate the metamorphosis from concept to innovative product.

The Open Innovation model allows inter-industry exploration and collaboration to take place. 2003) dividual projects. The open innovation model (Chesbrough. reliance upon the company’s internal science and technology base to originate. In terms of outputs. 2003). As such. It can be argued that a useful source of innovations for a business is through researching best practice in industries and markets outside of its own. as proposed by Chesbrough (2003) has two distinct elements: “Inbound Open Innovation” and “Outbound Open Innovation”. and potentially still is. In interpreting Figure 2. usually relatively small businesses that 133 . including: an increase in the number of and quality of external suppliers. The diagram in Figure 2 proposed by Chesbrough (2003) provides an effective illustration of this opportunity. undergoing a “…paradigm shift from a closed to an open model” (Chesbrough & Crowther. p. Outbound Open Innovation is concerned with using external routes to commercialisation (Chesbrough. since innovation is never homogenous. the growth and apparent success of the venture capital sector.The Integration of Independent Inventors in Open Innovation Figure 2. although some acknowledgement should be made that there is the potential for huge variation across industry sectors. The contention is made that innovation has. 2006. Inbound Open Innovation is directly related to the aspect of the model that allows the company to search for and integrate innovative concepts and products from sources outside of the company (Chesbrough. which has facilitated the development of new.229). Open Innovation The Open Innovation model. In terms of outputs. form spin-out companies to carry the technology into a new market or license the intellectual property rights to a third party company who subsequently launches it into the market. the company is constrained to direct commercialisation of its development projects. research and develop innovations is reduced as input can be taken from external sources. the important point is research investigations and development may originate within the company or be in-sourced through permeable firm boundaries. potentially through a stage-gate process. 2003). A number of environmental factors have contributed to this alleged paradigm shift. the company can launch new products directly into current markets.

skilled and farmer occupations were represented to a greater degree in the sample of 141 independent inventors used for the study conducted by Parker et al. (1996) for example. 2009.4% undertook post-graduate training and 16. Secondly. 68% of those independent inventors studied by Parker et al. Whilst the definition of independent inventors does not prescribe an autonomous approach to working. strengthening of international patent law and globalisation may be contributory. In terms of profession. than the general public (Parker et al. 11. 1996). Weick and Eakin (2005) conclude an average age of 50-years and Albaum (1975) 54 years of age. p.5% held a post-graduate degree. 2005). makes the result too broad to be helpful.The Integration of Independent Inventors in Open Innovation hold the intellectual property rights to innovative technology and the increased freedom enjoyed by knowledge workers (Christensen et al. firstly identifying problems and then developing an inventive solution. Firstly. independent inventors have a particular skill in the identification of problems (Weick and Martin. 2006). 2005) make an attempt to identify the typical age of an independent inventor. the ability to work alone when required appears to be important to this group. independent inventors place a significant importance on both “…autonomy and individuality. 1990. there is an expectation that the average age of independent inventors will increase as more retired people take up inventing (Richards. Hisrich. Thirdly. 1975.. In terms of future demographic trends within the independent inventor community. Parker et al. 1987. however those in technical.. surprisingly few independent inventors aspire to be an entrepreneur (Parker et al. independent inventors are not heavily concentrated in any particular occupational classification.. (1996) than they were in the general population. (1996) had been in receipt of college training.1996).1% had some Higher Education experience.. as determined by the Statistical Abstract of the United States.” (Weick & Martin. This suggests that independent inventors may be well equipped to operate a market pull. based on a sample of 103 independent inventors who had approached the Experimental Center for the Advancement of Invention and Innovation at the University of Oregon between 1974-1975. Weick and Eakin. 134 . the results of three studies suggest that independent inventors are likely to be in their late forties to early fifties.7% had an undergraduate degree. A Profile of Independent Inventors Independent inventors are characterised by two factors. A number of studies (Albaum.10). independent inventors appear to be more educated.. specifically independent inventors.. in a formal sense at least. 2006. Sirilli (1987) suggests an average age of 46. Whilst the age categories used in some studies. 1996).. Whalley. 1985. 1996. the current body of literature on independent inventors suggest a number of other interesting characteristics. This appears to reinforce Albaum’s (1975) research which. as suppliers of new product ideas. as opposed to technology push strategy for invention. In addition to demographic characteristics. It is also possible to suggest that factors such as: a general trend towards outsourcing. suggested that female inventors were responsible for just 10-11% of invention.5 years. the independent inventor has no formal obligation to invent (Lettl et al. This view is supported by Albaum (1975) who suggests that of respondents to his study 30. firstly their inventive activity is conducted outside the confines of an established business and secondly. This chapter focuses on the inbound element of the Open Innovation model that facilitates the use of external parties. 18. 2002) With regard to educational attainment. Parker et al. 1991) From a demographic perspective independent inventors have historically tended to be male rather than female (Parker et al. Sirilli..

(Weick & Eakin. 2000): patent applications often originate from a small number of companies that 135 . Dahlin et al. it is easy to see how independent inventors could stem from both the “Inventor-entrepreneur” and “Licensing/transfer inventors” group. 115). often referred to as “Creative Destruction” or “Widening” (Breschi et al. the industries where fewer inventions were developed by independent inventors. in the case of the “Inventor-entrepreneur” it could be that inventing is not part of the job role. produced a number of interesting findings. 3%. to imagine that inventors categorised as “Academic Inventors” or “Proprietor-Inventors” have the corporate independence necessary to be classed as independent inventors. Their study. although not impossible. which denotes an inventor that attempts to use their invention in an entrepreneurial sense by setting up a startup company as a vehicle to commercialisation. The second category: “Proprietor-inventors” are inventors that already operate a company and are seeking to exploit the invention through this company. 3%. 2 and 1 respectively. firstly they noted that an average independent inventor had progressed six inventions to the stage of having a working prototype.The Integration of Independent Inventors in Open Innovation Types of Independent Inventors Meyer (2005) illustrates the diversity of inventors by suggesting that there may be as many as four different types. however they acknowledged that the median and modal average was considerably lower. In terms of the nature of the inventions developed. 2005 p.. The first category identified is: “Inventor-Entrepreneurs”. 2%. Marine/ocean technology. Weick and Eakin (2005) identified that the most common areas for inventions were: • • • • Hardware/Tools (23%) Household Products (23%) Novelty Items (15%) Toys/Games and Hobbies (15%) The nature of these innovations is consistent with the view of Astebro (1998) who made the assertion that independent inventors were most likely to develop inventions that are technically uncomplicated and demanded relatively lower financial investment. The third category: “Licensing/transfer inventors” relates to inventors that opt to either license the intellectual property behind their invention to a third party or sell the intellectual property to a third party. In reflecting upon the definition of the independent inventor provided by Whalley (1991) and its emphasis on the inventor being external to a corporate institution. 2005. The findings of Weick and Eakin (2005). 2000). but the inventor chooses to commercialise the invention via his or her existing company. in its entirety. include: Mineral recovery/processing. based on a sample of 351 questionnaires from full-time and part-time independent inventors. It is slightly more difficult. 2%. The final category: “Academic Inventors” denotes inventions developed by academics within the HE sector (Mayer. Biological/ microbiological. Telecommunications. Conversely. Clearly.. (2000) and Astebro (1998) seem to suggest that independent inventors are most likely to concentrate their efforts in industries that follow the Schumpeterian type I pattern of innovation. Likewise in some parts of the world academics have no obligation to invent but do assume the full rights to intellectual property they develop and as such could be classified as an independent inventor.10) appear to fit the characteristics of the Schumpeterian type II pattern of innovation (Breschi et al. p. Inventive Activity Weick and Eakin (2005) present an insight into the activity undertaken by independent inventors.

p. investment of significant sums of money is no guarantee of developing an innovative new product. In analysing the degree to which these potential routes to market are utilised by independent inventors. A start-up business maybe formed specifically to act as a vehicle to carry a new innovation to market. the knowledge upon which innovations are developed is likely to be strongly rooted in scientific principles. 3. whilst Mayer (2005) found that commercial success was not the objective of all independent inventors with some inventors believing that their efforts are validated by non-commercial success such as: placing the invention in the public domain to enhance accessibility. Typical Commercialisation Paths Used by Independent Inventors Weick and Eakin (2005) found that in their survey of independent inventors. but outsources the manufacturing element to a third party. Weick and Eakin (2005. consideration also needs to be given as to the extent to which the various commercialisation paths yield sales. 2005). Weick and Eakin (2005) suggest that there are potentially four commercialisation paths that can be utilised by independent inventors: 1. typically in return for a royalty on sales. 2000). Of those independent inventors that responded to the survey. This strategy was utilised by 29% of the independent inventors surveyed by Weick and Eakin (2005). None the less. The inventor chooses to license the intellectual property rights behind their innovation to a third party company. Almost as frequently used was commercialisation through a company inventor that undertakes both the manufacturing and distribution of the innovation.. The inventor decides to sell the intellectual property rights behind the innovation outright to a third party organisation. Whilst the licensing of the intellectual property behind an invention is the most commonly used commercialisation path by independent inventors. 2. Weick and Eakin (2005) make the assertion that those independent inventors that employed a licensing strategy were more inclined to achieve a higher level of sales than inventors that engaged with one of the other commercialisation paths: commercialisation via their own company or selling the rights to the innovation to another company outright.11) identified that licensing the intellectual property rights behind an innovation to a third party company was the most frequently used route to market with 44% of the 351 respondents to their study having employed this strategy. commercialisation remains the intention of the majority of independent inventors (Weick & Eakin. 4. 16% made no attempt to take their innovation to market. however for new ideas that are developed they are likely to be patentable and founded on knowledge developed through prior innovations (Breschi et al. improving public wealth or pursuing an innovation because it was interesting from a technical perspective. selling the innovation to another company in its entirety was the least utilised strategy with just 16% of respondents indicating that they had pursued this option.The Integration of Independent Inventors in Open Innovation already hold a significant number of patents and hold established market leading positions. 26% of respondents to the survey conducted by Weick and Eakin (2005) indicated that they had employed this commercialisation strategy. The inventor is already the proprietor of a business that will be used to carry the innovation to market. The second most popular commercialisation path was via a company inventor that distributes the innovation. 136 .

at a business level. We acknowledge the omission of factors relating directly to the product/innovation under development as these reside outside of the scope of this particular study. 2006). Moving away from literature relating directly to independent inventors. p. Thus. This led Weick and Martin (2006.The Integration of Independent Inventors in Open Innovation PROPOSED CRITICAL SUCCESS FACTORS Central to this chapter is the notion that independent inventors can enhance the prospect of achieving commercial success and become more effective suppliers of innovations to businesses. support and guidance received Timing of approach Access to resources Access to formal and informal social support networks Ability to adopt a credible business persona Willingness to share information Ability to identify and gain access to potential commercial partners Ability to select an appropriate commercialisation path Alignment of inventor and corporate objectives Experience of the inventor 1. Poolton and Barclay (1998) identify the need for long-term commitment to innovation projects as a critical factor in achieving new product introduction success at company level. Whalley (1991) notes that family commitments can impact upon the effectiveness of independent inventors. Time Commitment There is a small portion of academic literature that discusses the extent to which the time commitment made by independent inventors to inventive activity impacts upon the level of commercial success achieved. by paying heed to critical success factors. family issues may create an obstacle to committing time to an innovation. are hampered by a lack of time available to perform key tasks properly. achieve sales and make a profit than part-time inventors (Weick & Martin. Cooper and Kleinschmidt (2007) reinforce the importance of time commitment by suggest that many new product introduction attempts. Indeed Dahlin. Table 1. In terms of commercialisation. full-time inventors are more likely to take a product to market. (1991) are in agreement that the commercial success achieved by independent inventors 137 . Weick and Martin (2006) suggest a positive correlation between the time an independent inventor commits to inventing and the potential for commercial success. Proposed critical success factors 1 2 3 4 5 6 7 8 9 10 11 12 Time commitment Use of intellectual property protection Advice. Weick and Martin (2006) note the importance of independent inventors being willing to invest in patents. which is often the case (Mayer. the availability of time is viewed as potentially critical to successful new product introduction. Taylor & Finchman (2000). In the first instance.10) to conclude that the “…level of sales was a function of making a full-time commitment to inventing…” In a similar vein. Use of Intellectual Property Protection In addition to the time committed to invention. The 12 critical success factors proposed are driven by current academic literature and represent our view of the key factors that emerge across multiple published texts (see Table 1). via an Open Innovation model. For those independent inventors that do have a family and invent in their spare time. In addition. 2. full-time inventors are more productive when it comes to developing prototypes when compared to their part-time equivalent. 2005). Khan and Sokoloff (1992) and Dagenais et al.

Parker et al. 3. Bakos and Nowotarski (2003) suggest that a credible patent application is one which under review of a professional Patent Agent would be expected to be granted with the majority of its original claims still in place. Mayer (2005) also suggests that commercialisation of innovations is hampered by the skills set that many independent inventors actually possess. from an intellectual property perspective. Without a patent. within a specified territory. market and technical assessments and clear 138 . In identifying the types of advice. so the basis of the exchange breaks down and a commercial deal is unlikely to be brokered. Whilst we believe that this is a reasonable statement to an extent. Perhaps more importantly. in return for a predetermined royalty on sales. Support and Guidance Received Meyer (2005) suggests that the social and business skills possessed by an independent inventor have a considerable bearing on whether that individual is able to successfully commercialise their innovation. in this instance. it does suppose that the originally drafted claims were of a reasonable scope to begin with. are more able to select the most commercially relevant invention from their invention portfolio and as a result pursue the development and commercialisation of fewer ideas that are flawed. As a result of this apparent deficiency in skills. advice and mentoring that they receive. For example. enough to ensure a licensing deal because the patent still needs to be viewed as being credible in the eyes of the potential licensee. if it is patented. the inventor has little to exchange in return for a royalty. support and guidance required to negotiate the new product introduction process. in particular for this research inquiry is the pivotal role patent protection plays in new product introduction via a licensing deal. as a means of ensuring they pay closer attention to financial and market factors during the development and commercialisation phase. for a given period of time. but the innovation only has commercial value. This is an important issue when seeking investment in the new business. support and guidance received by independent inventors from third party sources becomes critically important to the prospect of commercialisation.223) claims that patent protection “…turns the use value of the idea into something that has commercial possibility. In discussing credibility. if an independent inventor sought to commercialise their innovation via a start-up company then a patent adds to the commercial legitimacy of the business case by providing a legally founded mechanism for restricting competing products that infringe upon the technology outlined in the patent. in that it attempts to mitigate against patents that become very narrow as claims get removed and amalgamated. p. Cooper and Kleinschmidt (2007) suggest that.The Integration of Independent Inventors in Open Innovation is closely coupled with their use of the patenting system. the innovation developed by the inventor may have intrinsic value in so much that it resolves an acknowledged problem. early in the development process. As Whalley (1991) suggests. the advice. This is true in so much that a licensing deal works on the basis that the inventor agrees to allow a third party manufacturer to utilise their intellectual property (patent).” Reflecting on this statement there certainly appears some logic. Weick and Martin (2006) suggest that independent inventors should engage with the growing support structure and resource pool accessible via the Internet. For example. (1996) make an assertion that the progress made by independent inventors towards commercialisation of their innovation is positively influenced by the business. Bakos and Nowotarski (2003) add to the debate by suggesting that the existence of a patent for an innovation is not. Unfortunately. Mayer (2005) suggests that independent inventors in receipt of intellectual property guidance and advice. from the outset. Advice. at company level at least. in itself. including marketing. Whalley (1991.

raw materials and appropriate tools is also identified by Whalley (1991) as an important resource requirement. and those that access and utilise knowledge from published sources. Access to inventive space. independent inventors would appear to have a more difficult job satisfying the criteria than commercial inventors. conference papers and academic journals should be better placed to generate innovative ideas in the first place (Coe & Bunnell. 2003). independent inventors that interact with corporations: businesses. those that can strike up social relationships with knowledgeable individuals. With regard to timing. Indeed. This would appear to be particularly appropriate when considering physical.452). Timing of Approach In addition to the time commitment allocated to the invention process. In the first instance. Whilst independent inventors may have difficulty in knowing what the current state of technological development is in an industry and the types of new innovations that are being sought. (1999) who emphasise the need for a clear appreciation of the market and it dynamic characteristics. 2007) 6. particularly given that they are by definition inventing outside of a corporate structure.The Integration of Independent Inventors in Open Innovation product definition are essential to success. As such. commercial inventors may have cues as to what type of innovations are required and will almost certainly be aware of the current state of technological development in their industry much of which development is hidden. mechanical innovations. evidence at company level suggests that a lack of resources is the scourge of new product introduction projects and often results in inadequately executed commercialisation attempts (Cooper and Kleinschmidt. such as patent databases. Access to Formal and Informal Social Support Networks If innovation networks theory is applied at independent inventor level then those individuals with enhanced network linkages would appear to benefit. Sun and Wing (2005) in their review of critical success factors for new product development in the Hong Kong toy industry identified the need to make innovations accessible to customers at the right time. 2003 p. newspapers. 4. Indeed. government and research institutes. independent of spatial definitions. This is reinforced by Lynn et al. 1991). Access to Resources The capacity for an independent inventor to commercialise their innovation appears to be influenced by the resources they have available to them. if successful negotiation of the new product introduction process is to be achieved. universities. Whalley (1991) proposes that the effectiveness of independent 5. whereby said knowledge is either utilised in its original form or reapplied in a new innovative way (Coe & Bunnell. inventors are reliant upon their own personal funds or the financial support of their family to finance the development and commercialisation of their innovations. both prior to invention conceptualisation and during the new product introduction process. whilst those innovations that are too late are unlikely to appeal to potential investors or licensees. Whalley (1991) claims that the majority of independent 139 .. Mayer (2005) suggests that the innovations developed by independent inventors are susceptible to the issue of timing. where the absence of these resources and manufacturing equipment may prevent the invention being developed (Whalley. Post innovation origination. Innovations that are ahead of their time are likely to suffer at the hands of conservative or unconvinced investors or potential licensees. From a financial perspective. the act of innovation arguably occurs as the result of knowledge being transferred or shared through networks.

in their paper on critical success factors for businesses introducing new products. the Black Country. If we are to make the assertion that independent inventors should behave in a more business like fashion when presenting their innovation to potential licensees then extant best practice literature surrounding successful new product introduction becomes pertinent. 7. family and friends aside. partially because of their need for feedback on their inventions and social confirmation that what they are doing is useful. Ability to Adopt a Credible Business Persona A potentially significant obstacle for independent inventors to overcome. Sheffield. identify a number of constructs under their “A high-quality new product process” Critical Success Factor that are potentially valuable 140 .7) makes the following statement: “The independent inventor has often been portrayed as something of a mad scientisttype individual or an uneducated dreamer in search of the holy-grail.” Whalley (1991 p.The Integration of Independent Inventors in Open Innovation inventors is influenced by the degree of social support they receive. as it allows a group of independent inventors to operate as a collective with enough critical mass to enlist the assistance of an Intellectual Property Rights specialist at favourable rates. regarding the product and associated opportunity. speaking the language of business. it would appear that the more capable an independent inventor is at adopting appropriate business etiquette. At a basic level there is a need for good communication skills. 1991. (1996 p. 1991). is the negative perception held by industry and potential investors. potential licensees in many cases. Birmingham.” (Whalley. In this respect. In addition. do not adopt accepted business conventions and “…do not want to play by the rules that manufacturers think are appropriate. The result of this perception is that the independent inventor no longer is viewed as a serious source of product innovation. through mechanisms such as open innovation. Parker et al. using the correct terminology and following modern business practice. Whilst this was perhaps a valid assertion to make in 1991. Von Hippel (2005) argues that the trend towards making innovation more democratic. which certainly points to this issue being addressed. indeed Lester (1998) highlights the ability to effectively communicate information. Interestingly. the Black Country Inventors Club in the UK is a good example of this. although not resolved. are all too willing to believe the negative image of inventors as “…odd. which should positively influence the ability of independent inventors to develop commercially successful innovations. Whalley (1991) suggests that this may not be intentionally contrary behaviour on the part of independent inventors. London. to management is a critical element of successful new product introduction. individual inventors lack the mutual support groups that can be found in other creative disciplines. the role of family and friends in providing a social support network can be viewed as essential (Whalley. has resulted in a rapid increase in the number of support communities.225) suggests that manufacturers.. but perhaps more importantly. Whalley (1991) suggests that. Indeed. Interestingly. Indeed. Wessex. the greater the potential for commercial success. p.(2009) points to the fact that independent inventors who actively engage with social support networks and communities are more able to access resources that are usually reserved for corporate inventors.225). Although speculative at this point. simply the result of many years of segregation from the commercial world of inventing and the socially accepted norms that are associated with it. a simple Google Search of the term “UK Inventor Clubs” yields a list of organisations in East London. Malvern. the work of Lettl et al. when attempting to commercialise their innovation. Kingston and Liverpool. Cooper and Kleinschmidt (2007). even crazy…” A view which is corroborated when inventors not only lack business expertise.

1991). At a more advanced stage. timescale and resource requirements. (2007) note companies are increasingly moving away from centralised research and development decisions 8. namely: “…the product – its target market. 1991) and those that are open to external ideas will not deal with independent inventors because of the associated costs of administering the enquiries when compared to the probability of successfully launching and generating profit from an innovation brought into the company via this source (Whalley. benefits and positioning. Those independent inventors that are able to identify a commercial partner that has access to manufacturing methods appropriate to the requirements of the innovation. In addition to the restricting force of intellectual property legislation (Whalley. 1991). Mayer (2005 p. Firstly they suggest that assessments are made of the technical and market potential for the proposed innovation. Willingness to Share Information The ability to share information concerning an innovation may aid the early stages of the development. features and specs…” Although purely conjecture at this point. Key components in these assessments. The problem is that independent inventors often feel unable to share information concerning 141 . include: market research with potential end-users focussing on the identification of customer needs. and its requirements. Interestingly. 7) also identify the importance of being able to precisely define key aspects of the business case. 2005) and then is able to identify and gain access to key decision makers in that organisation are likely to fare well commercially. Kotabe et al. regardless of their origin (Whalley. costs associated with production. businesses often do not welcome new ideas. whether to enable a new business to be formed or at the point of negotiating a licensing agreement or outright sale of the intellectual property rights. Cooper and Kleinschmidt (2007 p. the degree of trust between the independent inventor and the third party is seemingly central to the prospect of invention commercialisation.The Integration of Independent Inventors in Open Innovation to this research inquiry. with potential licensees. their innovation. in terms they are familiar with. desires and requirement. it would appear that independent inventors who have a working knowledge of the early stages of the new product introduction processes that businesses are accustomed to will be able to talk about their project and the introduction process. 2007) In addition to providing documented evidence of market and technical assessments of the innovation. the concept. These assessments may move from preliminary overviews of potential into increasingly detailed insights. is able to provide a route to market that allows penetration of domestic and international markets (Mayer. As such they may be viewed as more credible.115) notes that: “Inventors have developed a mistrust towards manufacturers and innovation professionals partly because of bad experiences with the world of business professionals and also fraudulent support services. analysis of the financial case at different levels of sensitivity (Cooper & Kleinschmidt. the sharing of information is critical to obtaining investment in the innovation. technical viability of proposition.. Ability to Identify and Gain Access to Potential Commercial Partners Appropriate selection of commercial partners is by no means an easy task. This is presumably a reference to the notion that in order to obtain patent protection the intellectual property behind an idea cannot be in the public domain. prior to its development. hampering the independent inventor’s ability to disclose details of their innovation. Firstly.” 9. assessment of technical requirements: possible manufacturing methods. Whalley (1991) suggests that the legislation governing intellectual property protection acts as a constraint.

for example. rather than inventing for disparate industries.. 75% of new patents emanate from independent inventors with the vast proportion specialists in that field: Actuaries. (2009) in their study of 1681. Indeed.The Integration of Independent Inventors in Open Innovation towards a decentralised approach. (1999). Alignment of Inventor and Corporate Objectives The degree to which the independent inventor and commercial partner have aligned commercial objectives is a potentially important success factor. in the form of a start-up company. In the US Insurance industry. patent families from the Derwent World Patent Index filed between 1980 and 2005. Von Hippel (1988) and Henderson and Clark (1990) make the assertion that inventors with direct experience of the industry in which they are inventing in are more likely to achieve commercialisation. From a UK independent inventor perspective this may be critical. The effect of previous experience is also evident when consideration is given to new product introduction at company level. face the full complexity of the business world. 2003). Experience of the Inventor The extant literature points to the fact that independent inventors with greater experience of the development and commercialisation of innovations are more likely to have commercial success than inexperienced inventors. 2003). since it would theoretically provide access to a larger base of potential licensees. 11. Ability to Select an Appropriate Commercialisation Path Mayer (2005. whilst a business may be heavily biased towards income generation. especially since a modest fee reduces the probability that the potential licensee will seek to challenge or infringe upon the patent (Bakos and Nowotarski. Starting up a business is a challenging endeavour requiring different skills at different times. Whalley (1991) notes that independent inventors and businesses often have divergent opinions concerning commercialisation and that. p. 10. Whilst not all impactful technologies go on to become a commercial success there is certainly grounds to argue that commercial success appears more probable in this instance. Those that do this most successfully would appear to stand a better chance of realising commercial success. income generation may not be central to the wishes of the independent inventor. 142 . found evidence that focussing inventive efforts in an industry where the independent inventor has some specialist knowledge. for example. identify the need for relevant experience and the ability to learn lessons from previous projects as fundamental to new product introduction success.” This appears to imply that the independent inventor needs to carefully align his or her skills set and willingness to commit time against the requirements for each of the potential commercialisation paths open to them. Lynn et al. Lettl et al. medical equipment. 12. who choose to commercialise their inventions on their own. independent inventors need to have some appreciation that the spectre of failure looms large over potential licensees and as such independent inventors should be modest in their expectations over the licence fee. With regard to expectations over the financial rewards for the innovative endeavour.114) points to the fact that: “Those inventors. and programmers (Bakos and Nowotarski. underwriters. Whilst Eakin and Martin (2006) suggest that experienced inventors are more likely to have access to the informal networks that enable commercialisation and experience of attempting to take a previous product to market is beneficial in later attempts. is very beneficial to the prospect of an impactful technology being developed.

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Vanhaverbeke & West. 2006: p.The Integration of Independent Inventors in Open Innovation KEY TERMS AND DEFINITIONS Independent Inventors: Independent inventors are characterised by two factors. the independent inventor has no formal obligation to invent (Lettl et al.. respectively” (Chesbrough. Open Innovation: “Open Innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation. and expand the markets for external use of innovation. 2009). firstly their inventive activity is conducted outside the confines of an established business and secondly.1) 145 .

Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. This chapter will take the preliminary critical success factors proposed in the previous chapter and utilise them as priori constructs (Eisenhardt. Preliminary Critical Success Factors proposed in the previous chapter seek to improve the ability of independent inventors to operate as effective suppliers of new product ideas to businesses through Open Innovation. at the time of writing. The figure for the Caparo Innovation Centre open innovation programme. stands at 0. UK Chapter 9 ABSTRACT Open Innovation allows independent inventors to become suppliers of new product ideas to businesses. only a small percentage of independent inventor approaches to Open Innovation schemes result in a DOI: 10. Copyright © 2012. to companies operating Open Innovation mechanisms. only a small percentage of independent inventor approaches. 1989) as evidence is sought through case study for their presence or non-presence in a practical context. INTRODUCTION Open Innovation provides a mechanism for independent inventors to become suppliers of new product ideas to businesses. result in a commercialised product.4018/978-1-61350-165-8. Unfortunately. Unfortunately. UK Andrew Pollard University of Wolverhampton & Caparo Innovation Centre.146 An Examination of Independent Inventor Integration in Open Innovation Gavin Smeilus University of Wolverhampton & Caparo Innovation Centre. . IGI Global. an automotive device originating from an independent inventor and commercialised through an Open Innovation model. forms the basis of this chapter. Preliminary Critical Success Factors proposed in the previous chapter seek to improve the ability of independent inventors to operate as effective suppliers of new product ideas to businesses through Open Innovation.7%. A case study on the Caparo RightFuel. UK Robert Harris University of Wolverhampton.ch009 commercialised product.

either through exploitation by Caparo directly or as a revenue stream from a license with an alternative commercial enterprise. which was launched in 2003. the identification and sourcing of innovative new products. p. 1989). at the time of writing. which will form the basis of this case study. METHODOLOGY One of the innovations successfully commercialised via the Open Innovation model employed by the Caparo Innovation Centre is the Caparo RightFuel. Of particular interest to Caparo were mechanically engineered products that have a good synergy with manufacturing processes conducted within the organisation or the markets they currently address: • • • • • • • • • • • • • Aerospace Agriculture Automotive Commercial Vehicles Construction Defence Furniture Industry Leisure Marine Oil and Gas Power Generation Railways The physical manifestation of the strategic move towards product ownership was the formation of the Caparo Innovation Centre (CIC). as priori constructs (Eisenhardt. BACKGROUND Caparo is a multinational manufacturer of steel. By supplementing traditional sources of innovative new products. received 805 approaches since inception. A case study approach was selected for this exploratory research because it is an effective method of developing 147 . typically of a mechanical or engineered nature. that display commercial potential. and continues to be. The Caparo RightFuel. Caparo have implemented an Open Innovation strategy skewed towards inbound open innovation (Chesbrough & Crowther. In 2002. In particular. in a “reallife” Open Innovation setting.The Caparo RightFuel. and commercialised through an Open Innovation model. The CIC source innovative ideas exclusively from independent inventors and have. a collaboration between Caparo and the University of Wolverhampton.An Examination of Independent Inventor Integration in Open Innovation This chapter reinforces the previous chapter by focusing on a case study . automotive and general engineering products. Martin White. in response to increased competitive pressure from low-cost Far-East manufacturers. an automotive device originating from an independent inventor and commercialised through Open Innovation. as evidence is sought through case study for their presence or non-presence in a practical context (see Table 1). This chapter utilises the preliminary critical success factors proposed in the previous chapter. is used as a case study to contextualise twelve critical success factors (identified through current academic literature). with an external source of innovation. The CIC’s remit was. With its headquarters in London. an automotive device originating from an independent inventor. England Caparo was founded in 1968 by the industrialist the Lord Paul of Marylebone. the organisation were keen to introduce a portfolio of technically innovative new products that benefited from patent protection. through internal R&D teams. The case study examines the presence or non-presence of the proposed critical success factors in an actual open innovation context. Caparo took a strategic decision to supplement its steel processing and manufacturing activity with product ownership. as a means of generating alternative higher-margin income streams. 229). 2006.

An Examination of Independent Inventor Integration in Open Innovation Table 1. observations and interviews (Eisenhardt. 1989 p. 148 . 1967) that emphasises the examination of ‘polar types’ (Eisenhardt. Given the reliance on a single case study. Reference is. was also used as a guide to the amount of coverage the act of “Misfuelling” received in UK Newspapers. This data included: the initial PowerPoint presentation of the opportunity associated with the innovation and a formal Business Plan detailing the technical and commercial case for the innovation. including secondary data from archival sources and data emanating from primary data collection methods. Secondary data on diesel car registrations in the UK obtained from The Society of Motor Manufacturers and Traders Ltd and details of the inventor’s intellectual property position at the point of approaching the Caparo Innovation Centre. since the qualitative paradigm does not subscribe to the link between sample sizes and generalisability. selected through a theoretical sampling method (Glaser & Strauss. which enables quantification of the number of times a particular search term is mentioned in Newspapers. Indeed. Each respondent was given the opportunity to review and comment upon the transcribed interviews prior to their utilisation. made to the work of Flyvbjerg (2006) who lends support to the notion that generalisations are permissible from even a single case study. therefore. via an open innovation model. The interviewees1 were selected to provide a multi-perspective view of the integration of independent inventors in open innovation. were also considered. Each interview lasted on average 61 minutes. Semi-Structured. Case Studies allow for a variety of data collection methods. Yin (1994) argues that the number of case studies completed is not in itself important. 1989). such as: questionnaires. This particular case was hand-picked because it provides a good example of how an independent inventor can achieve commercial success through the licensing of their intellectual property rights to a company. This primary data was supplemented with secondary data in the form of the written documentation provided by Martin White to the Caparo Innovation Centre at their initial meeting. For this particular research inquiry a series of three in-depth interviews with four key participants in the new product introduction process were undertaken. In-Depth Interviews The interviews conducted as part of the case study approach to this research inquiry were semi-structured and based on a series of interview prompts. Critical Success Factors enabling independent inventors to becoming more successful suppliers of new product ideas to businesses operating an open innovation model 1 2 3 4 5 6 7 8 9 10 11 12 Time commitment Use of intellectual property protection Advice. The Proquest database. 1991) The Caparo RightFuel case is one of four planned cases. support and guidance received Timing of approach Access to resources Access to formal and informal social support networks Ability to adopt a credible business persona Willingness to share information Ability to identify and gain access to potential commercial partners Ability to select an appropriate commercialisation path Alignment of inventor and corporate objectives Experience of the inventor new theoretical notions that ultimately provide direction to future research inquiries (Dyer & Wilkins. the question of whether it is appropriate to make generalisations is pertinent.537). accessed via the UK Intellectual Property Office website and original patent documentation.

With sales of new diesel cars increasing yearon-year. which prevents motorists putting petrol in diesel powered cars. Misfuelling Prevention Devices were being introduced as Original Equipment on the Ford Mondeo. The Inventor The Caparo RightFuel device was invented by Martin White. The effects of such action can be both far reaching and expensive. Martin is a retired Royal Navy Commander with a career that spanned 37-years. up to tens of thousands of pounds for replacement parts for a sophisticated engine. Misfuelling a petrol car with diesel is very difficult because a diesel nozzle on a garage forecourt is too large to fit into the filling aperture on a petrol car. Vixen and Hunter Jets and Wasp and Sea King Helicopters.An Examination of Independent Inventor Integration in Open Innovation CASE STUDY BACKGROUND: THE CAPARO RIGHTFUEL The Problem In relation to this chapter. however the smaller petrol nozzle can easily be inserted into the filling aperture on a diesel car. The device replaces the filler cap on the vehicles and is designed so that when a diesel fuel filler nozzle is inserted. in the event of petrol being added and the engine being started. Since the process of fuelling a vehicle usually involves little conscious thought and combined petrol//diesel pumps are commonplace the high incidence of misfuelling is understandable. contributing further engine damage. The device can distinguish between petrol and diesel fuelling nozzles and will not open when someone attempts to insert the smaller diameter petrol nozzle. a physical barrier incorporated within the device swings out of the way allowing fuel to be added to the vehicle. This situation changed during the development programme when the inventor and licensee became aware of two competing development projects: SoloDiesel and the Fuel Angel. The Product The Caparo RightFuel is a retro-fit device. Upon joining the Royal Navy in 1967. both within the UK and parts of Western Europe. which causes them to soften. It was in this role that Martin developed his mechanical engineering The Market According to the AA Motoring Trust. however there was no evidence of competing retro-fit devices.000 times a year2 with the average repair costs standing at £70003. or primed.000 as a result of 750 misfuelling incidents in first 8-months of 20064 149 . the seals within a diesel engine are adversely affected by petrol. Martin was employed as an Airframes and Engines Artificer where his duties included the maintenance of Phantom. the potential for serious engine damage is considerable due to the lack of lubrication. the term misfuelling relates specifically to incidents of drivers incorrectly putting petrol into diesel powered cars. therefore preventing the wrong fuel being added to the vehicle (see Figures 1 and 2). Fleet and Lease Vehicle operators are the most heavily affected by misfuelling incidents with data from Lloyds TSB Autolease indicating costs of £250. misfuelling diesel vehicles occurs in the UK approximately 120. He lives in Somerset. The cost of rectifying this mistake can vary from less than one hundred pounds to have the fuel tank drained. In most modern diesel engines the oil content within the diesel is essential to lubricate the engine. In addition. England with his wife Teresa. there is acknowledgment that misfuelling is becoming an increasingly common problem5 At the time the Caparo RightFuel device was initially presented to the Caparo Innovation Centre.

Martin makes use of the additional spare time he has in retirement by undertaking building design and construction tasks and developing innovations and fabrications in metal. Belgium where he was responsible for transformation of intelligence organisation within the new NATO Findings Time Commitment The Caparo RightFuel case provides support for the notion that time commitment plays an important part in the capacity of independent inventors to act as effective suppliers of innovations to businesses through Open Innovation. Republic of Ireland. wood and Glass Reinforced Plastic. providing military advice to NATO HQ (Brussels) and the nations and the production of directives and plans for current military operations. Martin is a member of the South West Inventors Club. The Caparo RightFuel Device (1) Figure 2. Martin had been appointed into his first Air Traffic Control position and by 1998 he had risen up the ranks to Senior Royal Navy staff officer for Aviation Operations Support and Head of the Royal Navy Air Traffic Control Branch. Martin served within Strategic HQ Allied Powers Europe (SHAPE) in Mons. In terms of formal education Martin has an ONC in Aeronautical Engineering from Dundrum Technical College. concepts and detailed requirements for the future of intelligence within NATO. skills that he later applied to the Caparo RightFuel innovation. The Caparo RightFuel Device (2) Command Structure. His duties included creating the vision. UK. Dublin. By 1975.An Examination of Independent Inventor Integration in Open Innovation Figure 1. In 2001. The concept of an independent inventor operating as a supplier is reliant upon the inventor having something to 150 .

Use of Intellectual Property Protection The inventor of the Caparo RightFuel demonstrated a willingness to invest in intellectual property protection. A UK patent application. the inventor reveals that devoting time to selecting a single innovation to pursue and then focussing fully on that innovation is more advantageous.2. Under questioning as to why he chose to file for patent without Patent Agent involvement the inventor revealed that five factors were influential. I decided to dedicate quite a bit of time to it. I had several ideas in the past that I never had time to work on. M. The inventor’s views on patent utilisation are particularly interesting. so this approach minimised cost. M.” White. 14th January. than pursuing multiple innovations with less focus. GB0524168. “I had plenty of time having recently retired and I had always had an interest in innovation. Secondly. (2010) Personal Interview (Caparo RightFuel). Whilst conventional wisdom may suggest that independent inventors are best served by having their patent application drafted by a professional Patent Agent. 14th January. the inventor expressed a view that having filed for a patent he felt more able to disclose details of the product to third parties enabling progress towards commercialisation. whilst the initial approach to the Caparo Innovation Centre was made on the 29th August 2006. so available time and dedication are quite important.” White.” White. “When I decided to run with this project. without professional assistance. the financial cost of filing a patent application. just over 9-months later. but here was an ideal problem that needed a solution and because I thought the solution lay within my sphere of experience.An Examination of Independent Inventor Integration in Open Innovation supply. Thirdly. Without the time and importantly dedication to inventing this particular inventor would not have had a product with which to approach Caparo. Firstly. In addition to both having free-time and the dedication to spend that time on innovation. 151 .” White. in his eyes. 14th January. is notably more expensive than the inventor drafting a submission himself. (2010) Personal Interview (Caparo RightFuel). (2010) Personal Interview (Caparo RightFuel). this course of action was not pursued by the inventor. I did become quite single minded about dedicating a lot of time to it and there was one particular winter where I was quite happy to spend 10 hours at a stretch in a cold workshop cutting metal when I got to that phase. prior to engaging with the Open Innovation programme operated by Caparo. M. M. 14th January. was filed by the inventor on the 26th November 2005 carrying the title of: “Diesel Vehicle Misfuelling Preventer”. so. in the form of a Patent. “…an individual can’t have lots of great ideas that they’ve really worked through and can offer them as being of significant potential. (2010) Personal Interview (Caparo RightFuel). “First of all I could easily decipher that this sort of product needed to be protected by patenting rather than any other form of protection and having spent a lot of time researching alternative prior art out there it seemed to me that it wasn’t that hugely difficult to put together some sort of a patent. the time is very important and to be focussed on a project I think is quite important. he was confident in his ability to draft an application that covered the critical technical aspects of the innovation. you need a huge amount of research and time dedicated to this sort of endeavour to decide that the one project is worth proceeding with. via a patent agent. Instead he chose to draft the patent application to the UK Intellectual Property Office himself.

just 2-months before the inventor filed his UK patent application. the existence of a patent application was seen as adding credibility to the business case around the innovation. “I would rather spend a lot of time acquiring the machinery so that I could do it with my own hands rather than entrusting anything to a third party. 14th January. people who had succeeded and people who were struggling. 14th January. Indeed the inventor only sought a professional opinion of his patent application after submission. before another party lay claim to a similar innovation. enabling the inventor to place a stake in the ground and secure a priority date at an early stage in the development process. “Fortunately I had identified an inventors club and joined that about the same time as I made the prototypes and found that there was a mine of information there. about the requirement to patent. This was particularly important given that diesel misfuelling was becoming a nationally recognised issue. but my counsellor was of the opinion that private inventors very rarely break into the motor trade because the motor industry has huge amounts of R & D capacity and it’s quite difficult for an individual outside of that business to bring anything new to the party. “The one negative aspect in all this was that I was appointed an Innovation Counsellor who supported our Inventors Club and that linkage was quite useful. M. The tone and enthusiasm evident when discussing the advice he received from members of the South-West Inventors Club was in stark contrast to the air of disappointment articulated when discussing the views expressed by his appointed professional Innovation Councillor. and although he was interacting with an Innovation Councillor from a public-sector advice provider 152 . (2010) Personal Interview (Caparo RightFuel). but there were people here with lots of advice about non disclosure agreements. filing of a UK Patent acted as a holding mechanism. Fourthly. (2010) Personal Interview (Caparo RightFuel). during the R&D process. M. making it more appealing to potential investors.An Examination of Independent Inventor Integration in Open Innovation “There was no point in having a prototype and exposing it to other people unless I could also say that I had some form of protection in place…” White. he appeared to find this experience less rewarding than it might have been. This fact is pertinent in so much as the inventor rarely sought advice. when he received a free 30 minute consultation. illustrated by the Telegraph newspaper article entitled “A Costly Mistake” published on the 27th August 2005. A feature of the interview conducted with the independent inventor of RightFuel was the degree to which he was aware of the various organisations responsible for innovation within the UK. 14th January. first-hand experience of other inventors more than that offered by professional innovation experts. Advice. support or guidance from third party organisations.” White. about the limitations on the protection provided by patenting. M. (2010) Personal Interview (Caparo RightFuel). But nevertheless I was undeterred because I still felt that the weight of evidence said there was a market there.” White. (2010) Personal Interview (Caparo RightFuel). M. 14th January. A fascinating feature of this particular case is the extent to which the inventor appears to value the practical. Support and Guidance Received The inventor had benefitted from particularly wide-ranging experience and was equipped to develop a credible technical and commercial case for the innovation in his own right.” White. Finally.

was made on the 29th August 2006. As an automotive accessory. Whilst there appears scope to argue that the new car registration figures for the year 2000 may still have provided enough of an incentive for a prospective licensee to show interest in the product. 153 . in the UK in the year 2006. suggesting recognition of the misfuelling problem was growing. Timing of the Approach The Caparo RightFuel case does little to dispel the proposal that timing plays an important role in the effectiveness of independent inventors to act as suppliers of new products to businesses through Open Innovation. Consideration is given to the following.” Sarel-Cooke. it’s strategically driven where the business is looking at entering a market or entering a product range and financial yes. By the 17th October 2007. the fact that an automotive device. designed to fit exclusively on diesel cars. 14th January. Caparo AP Braking. there were double the number of newspaper articles containing the term misfuelling than the previous year. it floundered for lack of finance I guess and then later our own regional development agency in the South West instituted a study. (2010) Personal Interview (experiences from the Caparo RightFuel programme). who revealed that the decision to take on a new product was primarily data-driven. was critical to the positive view taken of this innovation. To this end there is very little evidence to suggest that the inventor’s limited use of third party advice was attributable to a general lack of awareness over available support. lots of public money expended on revisiting work and brain storming with people in business and Universities and. the case study provides evidence that the timing of the approach from the inventor to Caparo was advantageous. “Its data driven.3%. was introduced to Caparo at a point in time when the number of newly registered diesel cars were at an all time high. the initial approach made by the inventor. for use exclusively on diesel powered cars. was significantly greater at 38. H. At the point when the inventor filed his UK Patent application in 2005. 7th January. the number of newspaper articles containing the term “misfuelling” had again doubled from 10 articles in 2005 to 20 articles in 2007. the market potential for this innovation is intrinsically linked to the number of diesel cars on the road. (2010) Personal Interview (Caparo RightFuel). they put together a new document which was called ‘The Strategy for Supporting Invention’but again it came to a full stop when it got beyond the concept…” White. The data contained in Table 3 illustrates the extent to which the act of misfuelling gained prominence in UK newspapers between the year 2000 and 2007. Secondary data in the form of New Car Registration figures for the UK provided by The Society of Motor Manufacturers and Traders Ltd suggests that whilst diesel powered cars held a market share of just 14.An Examination of Independent Inventor Integration in Open Innovation “Nesta produced quite a good paper about 8 years ago which talked about a strategy for invention. This suggests that either by luck or judgement the inventors timing in seeking to commercialise this innovation was impeccable. when the commercialisation attempt was made.1% over the 7-year period. This assertion is reinforced by the comments of the eventual licensee. when the Collaboration Agreement was signed between the inventor Martin White.1% of all new car registrations in the year 2000. between the year 2000 and 2006 (see Table 2). the Caparo Innovation Centre and the eventual licensee. In volume terms this equates to an increase in the registration of new diesel powered cars of 65. M. to the Caparo Innovation Centre. Whilst it is not possible to form an accurate judgement as to whether the inventor would have been more or less successful had his approach been made at a different point in time. the market share held by newly registered diesel powered cars.

not a significant barrier to the inventor’s ability to negotiate the early stages of the new product introduction process. draw and craft in metal. Indeed. financed his own patent application and purchased the raw material and components required for several iterations of the prototype using his own money. you had companies saying how much they were spending on misfuelling and putting equipment right. at least part of which was spent in senior positions.smmt. 7th January. which provided him with space in which to develop his innovation in private. summarises the degree to which the inventor introduced the product at an appropriate point in time and the impact it had: “…at the time there was a screaming demand for something. I have got a reasonable size garage and I just found a home for the lathe. was a most significant resource. It was a key thing in a lot of the newspapers ‘what can we do to overcome this problem. Available at: http://www.637 835.5 27.8 23.8 38. in the form of a workshop at his home.3 Source: The Society of Motor Manufacturers and Traders Ltd (2008) SMMT New Car Registrations 2003-2008 [online]. the inventor had purchased machining equipment. “…I just created a small workshop. New Diesel Car Registrations UK: Year 2000 . M.” White.521 Market Share (%) 14. but I had various other little machine tools. In addition to traditional non-financial resources. giving him the ability to design. Access to Formal and Informal Social Support Networks Whilst extant literature points to the family being the primary source of social support for independent inventors (Whalley.887 898. 14th January. Having recently retired from a military career spanning 37-years. the inventor’s mechanical engineering knowledge garnered as a Royal Navy Aircraft Artificer between 1967-73. Seemingly more integral to his success was his involvement with the South-West Inventors Club. who took the license for this technology.1 17.2006 Year 2000 2001 2002 2003 2004 2005 2006 Volume (cars) 313. (2010) Personal Interview (Caparo RightFuel).uk/search/searchresults2.192 436. The following comment by the Managing Director of the Caparo AP Braking. cfm?fid=2&stid=1 [accessed 11th January 2010]. This organisation provided a formal social support network where the inventor could discuss his innovation with other inventors under the protection of a Non-Disclosure Access to Resources The inventor of the Caparo RightFuel benefitted from access to potentially critical resources.591 602. in the form of a lathe.3 32. In terms of non-financial resources. financial constraints were 154 .An Examination of Independent Inventor Integration in Open Innovation Table 2. There was a very clear demand and as I said diesel market. to support his progress towards developing a working prototype. (2010) Personal Interview (experiences from the Caparo RightFuel programme).334 897.623 704. it’s quite a large machine. how big is it?” Geldard-Williams. 1991) it is notable that no direct mention was made of the inventor relying on his family for support during the development of this innovation. the inventor divulged during interview that he had access to a concrete resource.’You remember Top Gear playing around with different scenarios and then slating the simple solution or what was classed as rubbish solutions.5 36.

An Examination of Independent Inventor Integration in Open Innovation Table 3. (2010) Personal Interview (Caparo RightFuel). Agreement. that is potentially important to future commercial success. Ability to Adopt a Credible Business Persona This case provides evidence of the importance of adopting a credible business persona. There needs to be some manipulation of that first. the inventor of the Caparo 155 . “Right from the outset they appeared to be a good group to expose ideas to because each meeting is proceeded by a non disclosure agreement where everyone around the table agrees not to discuss what has been exposed and usually new members will come to the club and they won’t say anything for the first time round. so I talked about my idea quite openly at the second meeting and people made various suggestions and I learnt a little bit more about patent protection and the forms of non disclosure agreements. “Martin came to us face-to-face and he had come especially well prepared really for an inventor.” Lester. Consideration is given to the following two excerpts from the interview with a Caparo Innovation Centre representative: “…I think inventors are quite poor at presenting ideas and it is difficult to directly transfer the knowledge the inventor has derived straight into a company. was highly valued by the inventor. M.” Lester. This is an intriguing consideration. 13th January. Interestingly. whilst it might be assumed that the primary function of a social support network is to provide encouragement and morale support for the inventor in what has the potential to be an isolating activity. J.” White. 14th January. 13th January. so yes I found it was a an extremely beneficial environment to be involved in. combined with the absence of commercial business representation. regarding an innovation. Just by coming so prepared is refreshing really because so many inventors come to us with little supporting evidence that to actually have this presented to us was a positive thing in terms of where Martin is concerned and we obviously sat and listened a little bit more. whilst family members and friends may contribute positive and reassuring comments out of a close personal bond with the inventor. (2010) Personal Interview (views on the Caparo RightFuel programme). J. The shared practical experience of individuals in this network. He had produced a well thought out business case and a written description and he had also produced a PowerPoint pitch presentation and really good prototypes. the formal structure of the inventor club environment coupled with looser personal ties appears to allow a frank exchange of views. there are no poachers. (2010) Personal Interview (views on the Caparo RightFuel programme). but very quickly they realise that it’s a friendly environment. Number of ProQuest Newspaper articles containing the term “Misfuelling” 2000-2007 (UK) Year 2000 2001 2002 2003 2004 2005 2006 2007 Number of articles containing the word “misfuelling” 1 0 1 1 5 10 4 20 RightFuel appeared to place greater importance on the frankness of the discussions that took place at the inventor club meetings.

it is possible to draw a contrast between the almost formal business approach adopted by the inventor of the Caparo RightFuel. broad experience and exposure to both technical and business functions appeared to have been pivotal to the inventor’s ability to come across as credible to the licensee and product assessment team at the Caparo Innovation Centre. This appears to have benefitted the inventor in so much as it made him easier to work with and ensured the licensee and assessment team fully understood the nature of his pitch and the advantages brought about by his innovation. (2006) Personal Communication (Business Plan). by MEP Liz Lynne …” White. 156 . It was a good written document. In addition to competence across engineering and business functions and adherence to formal business practices. commercial and legal competence of the inventor: “These rely upon the lubricating properties of diesel oil to maintain the pumps and metering devices in the vehicle fuel system. “The main impediment to marketing is the belief by many owners that it will never happen to them. formal training. J. In forming a view as to how the inventor was able to achieve such a formalised business approach. there is a 1 in 5 chance the average UK diesel user will misfuel…” White. 22nd September. The following excerpts illustrate the technical.An Examination of Independent Inventor Integration in Open Innovation In considering the statements above. If these are contaminated with petrol. (2006) Personal Communication (Business Plan). with the relatively ill considered and amateurish approach apparently taken by some independent inventors. for a one off payment the owner of an expensive product (diesel car) is insured for the lifetime of the vehicle from misfuelling repairs well over £1000 (Daily Telegraph average = £7000). Certainly. producing fine swarf that can destroy components. the ability to speak the language of business was also evident in the case. metal-to-metal contact will quickly occur.” White.6 million cars (diesels under 6-years old) divided by 120. (2010) Personal Interview (views on the Caparo RightFuel programme). it also demonstrated Martins technical competence because he was a recognised engineer in the navy and it added to his case really and it left us some real good evidence to take away and to just check up on certain elements. which would have assisted with developing business acumen and the ability to adhere to common business etiquette. 13th January. M. The excerpts also provide a clue as to how much simpler it is for a receiving company to have information presented to them that requires little manipulation before use.” Lester. The device is a form of insurance and its retail pricing maybe influenced by the insurance analogy. 22nd September. M. M. In other words. “It was a brief business plan with the expected headings that you would generally see in a standard type of layout and it addressed a lot of the marketing type of qualification and justification issues. which contained a Business Plan. consideration is given to the time the inventor spent as an aviation engineer in the military. “The issue has been raised at EU Commission level. However. (2006) Personal Communication (Business Plan). 22nd September. which would have fostered a reasonable understanding of engineering principles and subsequent administrative duties undertaken as his naval career developed.33% over a period of 6-years of ownership = 20%. formal presentation and demonstration of prototypes.000 (incidents per year) = 3. the following logic indicates otherwise. Now consider the UK Statistical likelihood of misfuelling taking the 3.

the lower levels of trust were mitigated by the presence of formal legal agreements that helped ensure confidentiality and facilitated a willingness to share information. (2010) Personal Interview (Caparo RightFuel). “…having been in the Royal Navy for 37 years but within that 37 years I had done so many different things from engineering in terms of actually cutting metal and making things. M.An Examination of Independent Inventor Integration in Open Innovation “I think given his background as a Naval Commander he has always been used to having structure. Willingness to Share Information This case provides evidence of an inventor that was willing to share information concerning his innovation with others in a formal setting. Whilst it may be assumed that trust is a critical ingredient in the willingness to share information concerning an innovation. Companies that might be partners. but always under the protection of a Non-Disclosure Agreement or filed UK Patent Application. Ability to Identify and Gain Access to Potential Commercial Partners “The ideal prime licensee will be experienced in the automotive industry. about the difficulties of delivering services. 22nd September. However. Again referring to Caparo’s reliance upon data to inform the decision to take on a new product. The provision of a written Business Plan and a formal pitch presentation provides evidence that the inventor was willing to share considerable amounts of information in order to convince potential licensees of the innovations value. H. This statement made by the inventor in his initial business plan demonstrates that he had little problem in identifying the characteristics he desired in a potential commercial partner. it seems inconceivable that the inventor would have been successful had he not been willing to share information. Understanding a little bit about contracts. but also in my years as a Staff Officer framing arguments and putting together arguments in a fairly concise fashion. “Whilst I was waiting for a response from them I had prepared documents. so I felt that I had the administrative skills as well as the engineering background and then in the middle the aviation industry appreciation of safety factors. the inventor took the view that he became more trusting of the licensee as time passed and their contact levels grew. right the way through to dealing with an Industry and procurement. having not worked in an abstract environment that probably some of the other inventors have had…” Sarel-Cooke. 157 . understanding that for every modification you make to something there will be negative aspects as well as positive aspects…” White. managed to have interviews with about four Companies under non disclosure agreements and I started to realise that this was the real difficulty. (2006) Personal Communication (Business Plan). 14th January. written to a number of people and had lengthy conversations.” White. M. PowerPoint presentation. the importance of presentation. This suggests that in the early stages of the new product introduction process. the inventor also expressed a view that identifying the right people in an organisation and gaining an invitation to present to organisations is challenging. 7th January. a brief on the basic invention without disclosing too much and started short listing Industries. be seeking a new marketleading product and will possess: The expertise to deal with the legal and business aspects Manufacturing capability or the experience and connections to source more effective production abroad. (2010) Personal Interview (experiences from the Caparo RightFuel programme). engineering out problems.

prior to prototype production. 22nd September. the inventor felt that early decision making. “…I never wanted to invest a lot of time without reward” White. the inventor’s expectations and aspirations for the project were not onerous. “I think his expectations of the product in terms of volume movement are certainly higher than where it is at the moment and so was ours. “The inventor desires to be involved in the further development of this project only in so far as the licensee considers his services to be beneficial. The inventor of the Caparo RightFuel identified his preference for commercialisation. Firstly. “…I really wanted to concentrate on engineering and for me the licensing route was always the natural choice.” White. concerning a suitable commercial route. A key driver behind the decision to pursue commercialisation via a licensing agreement was the inventors desire to concentrate on aspects of the new product introduction process that he enjoyed. at a relatively early stage in the development process. M.” Sarel-Cooke. as such there was a good synergy between the inventor and corporate objectives.An Examination of Independent Inventor Integration in Open Innovation this was the most difficult area for my invention. was critical to avoiding costly and unnecessary Alignment of Inventor and Corporate Objectives Whilst developing a solution to a problem he had personally experienced was a satisfying process for the inventor. depending on the planned commercialisation path.” White. was always one of income generation. 14th January. (2006) Personal Communication (Business Plan). M. from the inventor’s perspective. the inventor displayed a willingness to compromise and be flexible with his expectations as the development process progressed 158 . (2010) Personal Interview (Caparo RightFuel). H. 14th January. (2010) Personal Interview (Caparo RightFuel). the focus of the RightFuel project. M. Secondly. 14th January. In considering the expectations of the inventor towards the product commercialisation process. to convince people that the idea had a commercial future and that it was worth investing in at some risk. Ability to Select an Appropriate Commercialisation Path “The aim of this plan is to seek a licensing agreement with a capable firm …” White. where he argued that such protection was not always essential for success.” White. (2010) Personal Interview (experiences from the Caparo RightFuel programme). three important issues are illustrated by this particular case. 22nd September. 14th January. In commenting upon the selection of a commercialisation path. 7th January. (2010) Personal Interview (Caparo RightFuel). and occasionally a poor investment. M.” White. (2010) Personal Interview (Caparo RightFuel). (2006) Personal Communication (Business Plan). M. M. probably for most inventors. expenditure. via a licensing arrangement. “…it goes back to the desire to use my engineering skills rather than spending a lot of time running a business… for me the passion of being involved in design. taking something from a concept through to a prototype was much more important than the administration of running the business. especially in the area of intellectual property protection.

(2010) Personal Interview (experiences from the Caparo RightFuel programme). he had significant experience of operating within a technical field closely aligned with his innovation. which aided him in developing a relevant innovation and in supporting the development and commercialisation of the product. (2010) Personal Interview (experiences from the Caparo RightFuel programme). mainly to do with air and aviation but also to do with liquid fluid systems. 13th January. M. prior to his attempts with the Caparo RightFuel.d. certainly a gift.” Lester. the inventor was professional in his conduct in instances when his expectations were not met. we had spent an awful lot of time in the classroom dealing with fluid dynamics. how they would be employed in an aircraft system so it was a joy to go back to my engineering days and to become familiar again with things I had known so many years earlier. “…I think sometimes he is a little frustrated with the speed of progress but he is professional through and through and he doesn’t rant and rave at the Company which would be detrimental and he always provides his services if they need assistance with certain technical points. H. about fluid systems involved in those platforms. “He is not just a guy who has come in with an idea off the street.” Sarel-Cooke. “He hasn’t gone up in the air and said you’re doing it wrong…” Sarel-Cooke. but would be content to meet every 6-months. H. he’s a guy who has lived in the real world and he has obviously been to meetings where he has had to behave in that forum. Finally. “…going back to my early days as an artificer. (2010) Personal Interview (Caparo RightFuel). to control valves and a lot of the bits of metal that I was making I had some familiarity with. M. (2010) Personal Interview (views on the Caparo RightFuel programme). 1989) suggests three emergent critical success factors. 7th January. The case provides evidence that the inventor’s previous employment experience was important to the process of commercialisation and his ability to convince the eventual licensee as to the merits of the innovation. H. to our assignment agreement. that knowing his background was as a Naval Commander they listened to him more …” Sarel-Cooke.” White. J.” White. air being a fluid as well. (2010) Personal Interview (experiences from the Caparo RightFuel programme). 4th October. “withincase analysis” (Eisenhardt.An Examination of Independent Inventor Integration in Open Innovation “I would appreciate the opportunity to discuss your quarterly reports in accordance with Clause 3. 7th January. Experience of the Inventor Whilst the inventor revealed that he had no personal experience of new product introduction. (2008) Personal Communication (Meeting review schedule). 14th January. so in a way this particular project was a bit of a gift because again it was down to fluid dynamics. “I think that subconsciously that some of the guys when they talk to him out there and whatever. but to do with hydraulic systems and fuel systems but I had spent a lot of time setting engines and gearboxes to helicopters and jet aircrafts so I knew quite a lot Emergent Critical Success Factors In addition to the proposed critical success factors presented in the previous chapter. 7th January. Ability to Operate within a Partnership Both the Caparo Innovation Centre and Caparo AP Braking identified the need for independent inventors to act as a partner to the commercialis- 159 .

” White. I can see that other inventors who haven’t 160 . As such accepting that the receiving company will have certain areas of expertise and putting faith in that expertise appears important. N.” Sarel-Cooke. “…I didn’t have too much difficulty with the idea of them owning the project. Other people have to buy into it and you have got to be prepared to be sidelined and to relinquish a lot of control. got a definite view on the licensing route might find that process difficult. (2010) Personal Interview (experiences from the Caparo RightFuel programme). (2010) Personal Interview (experiences from the Caparo RightFuel programme). 7th January. Ability to Relinquish Control This case provides evidence that a critical factor in the inventor’s success was his ability to relinquish total control of the innovation and not hold on too tightly. (2010) Personal Interview (Caparo RightFuel). but rather an entity that is invested in and committed to progressing and evolving an innovation is critical. Ability to Filter Out Unviable Innovations An apparently important factor for independent inventors seeking to become recognised as a viable supplier of new products is their ability to filter-out weak and unviable innovations to allow them to dedicate their resources effectively. (2010) Personal Interview (views on the Caparo RightFuel programme). “I started drawing and over a very long period of time dismissed lots of ideas …” White. M. 14th January. The ownership was different. instances where the inventor trialled ideas before discarding those that were deemed unviable. “I think where Martin worked and I think as a general for inventors is that they have to understand that when they are bringing this to somebody. 14th January. M. in particular.” Lester.” White. If they had a mind perhaps to manufacture themselves or to set up a business or to be a partner within a business then they might find that detachment a little bit difficult. 13th January. This case provides a number of pieces of evidence to support this. rather than us do work on a project that belonged to an inventor. His whole approach was different from the outset. like any partnership. they are going to be working as a partnership and that partnership. 7th January. The ability to understand that the potential licensee is not a contract manufacturer producing a product to specification. That’s a fairly necessary part of the licensing route and I suppose a lot of inventors find that very difficult to live with.An Examination of Independent Inventor Integration in Open Innovation ing company. 14th January. it’s more like I have got this to share and we can take it together to get it commercialised. “Martin came to the table wanting to work with us rather than us to do some work for him. taking it forward and taking a back seat because I suppose from the outset I had always had the view that concept to prototype and a bit of admin to convince other people to come on board was what I really wanted to do. J. M. “…he has been pretty smart and took the back seat at times and been very supportive. “…it is very important for them (the licensee) to start to view the project as their project and this business of relinquishing your control or ownership is very important for the overall success of the project. H. (2010) Personal Interview (Caparo RightFuel). whether it be person or business will go through rough stages and you will have to be able to bare your soul and be able to take on criticism when it’s intended to be from a positive point of view. (2010) Personal Interview (Caparo RightFuel).” GeldardWilliams.

this is on the market. proposed in the previous chapter. The importance of advice. independent inventors will find it difficult to firstly develop the innovations they wish to supply businesses with and secondly provide the level of data required to mitigate the increased risk associated with taking on externally generated innovations. by making it more difficult to circumvent. 14th January. became obsessed with a view that they were right when patently they were wrong and no one ever really had the guts to stand up to them and say you need to look at this there is plenty prior art. In our opinion independent inventors must make every effort to familiarise themselves with the Intellectual Property Protection mechanisms open to them.An Examination of Independent Inventor Integration in Open Innovation The dangers of not filtering out innovations effectively lies in the misplaced allocation of resources. In addition. (2010) Personal Interview (Caparo RightFuel). “One of the most difficult things I guess is to tell people that actually their idea is rubbish and they need to go back to the drawing board. which covers a multitude of technical solutions to the problem in question. We find support for the twelve critical success factors.” White. think long and hard before you proceed any further. given the proposed mode of commercialisation. In terms of Time Commitment both having time available and making a decision to commit that available time to innovation is important. how they are utilised in a commercial sense and whether investment in intellectual property is appropriate for their particular innovation. which are present within the Caparo RightFuel case study. it may be difficult for independent inventors who propose products that speculate heavily on what the market may need in the future. There is reasonable evidence from the case study to suggest that the timing of the innovation approach is important. as the associated risks in this situation are considerable and are likely to deter businesses. In considering the Use of Intellectual Property a willingness to invest in Intellectual Property Protection is important. 161 . As such. DISCOURSE This work acknowledges twelve critical success factors. It is our view that without the necessary time commitment made to inventing and developing the business case. This perhaps reinforces the need for inventors to look for solutions to current problems and avoid the situation where they continue to invest in and promote an innovation that no longer meets need. potentially via Inventor Clubs. a patent application. We have met individuals in our own Inventors Club who have invested a huge amount of money on ideas that are never going to return any of that money. In considering the type of advice. but I guess a lot of people have got to realise that. M. certainly appears to enhance the commercial value of the inventor’s business proposition. the industry sector they are hoping to enter and their available financial resource to both take out IP Protection and pursue those that infringe their rights. in some instances support maybe vital whilst in other cases the inventor maybe able to fair well without additional assistance. because they missed a few steps at the outset. guidance and support appears to be influenced by the extent of the inventor’s technical and commercial competence or previous experience of negotiating the new product introduction process. often in support of new product ideas that are flawed from the outset. Conversely. guidance and support provided for independent inventors it is important to note that reliance on professional innovation practitioners is not always desirable and that much can be gained from engaging the assistance of peers with practical experience of innovation and new product introduction.

Whilst inventors maybe able to take a view as to whether a business is operating in a suitable industrial sector it is much more difficult to identify the manufacturing capability. Inventors need to be aware of this from the outset and understand that many of the decisions regarding the product 162 . formal support networks. Whilst the inventor’s family maybe critical in providing support. To a degree. we would advocate the that the inventor appraise their skills-set and as such their ability to run a business. The provision of community based inventor groups that provide the physical resources for inventors may therefore be worth considering. the extent to which they want to risk personal wealth. if any. Disclosure of information should be restricted to those instances where either a Non-Disclosure Agreement or Patent application is in place.An Examination of Independent Inventor Integration in Open Innovation Access to resources whether financial. The credibility of independent inventors is an important consideration in the review process undertaken for new products originating from outside a company. in the guise of inventors clubs. we believe that there continues to be a large number of businesses that are receptive to external ideas from inventors that do not make this known to the independent inventor community. The ability to select a commercialisation path early in the new product development process is beneficial in terms of providing focus to the new product introduction process and minimising the number of blind alleys the inventor travels down. Close alignment of inventor and corporate objectives seems beneficial to the chances of inventors operating effectively as suppliers of new products to business. raw materials or suitable tools are critical to the inventors ability to prove the concept and produce a functioning prototype. their desire to control and be involved in commercialisation and their expectations over financial reward. A willingness to share information is critical because of the effect good quality information has on the perceived risk associated with an externally generated innovation. but not in the way extant literature seemed to indicate. Whilst those companies that operate a formal Open Innovation Strategy may make this process less demanding. At present independent inventors are overly reliant on their own ability to acquire these resources. constructive criticism offered by a formal support network provides a good counterbalance to the subjective support of family members and helps prevent inventors pursuing inventions that are commercially or technically unviable. The ability to talk the language of business. motivation and reassurance to independent inventors. In deciding upon a preferred commercialisation path. Consideration should also be given as to why there is so little financial support available to independent inventors. when there is so much available to SME’s. operate in a formal business environment and present data in a fashion that facilitates understanding and minimises the need for excessive manipulation adds credibility to both the inventor and the business case. The corporate objective of introducing a new product is biased towards generating a financial return. Access to formal and informal social support networks appears important. The ability to identify and gain access to potential commercial partners is both important and challenging for independent inventors. It would appear that previous experience of operating in a formal business context is advantageous or alternatively it would be helpful for independent inventors to undergo training in business practice and conventions. concrete. The ability to convey a credible business persona is central to the success of independent inventors. the objective. provide a platform for a frank exchange of views regarding innovation. desire for new products and appropriate internal point of contact within a company. In addition. selection of a commercialisation path early in the process can inform the degree to which IP protection is required and as such prevent unnecessary costs from being accumulated.

An ability to operate within a partnership is therefore critical. Within this chapter we find support for the twelve critical success factors proposed in the previous chapter. management may wish to consider how they can improve their visibility as an organisation operating Open Innovation. Whilst this chapter is geared towards the steps that independent inventors should take to become more effective suppliers. From how the product is manufactured. where it’s manufactured. Despite originating the innovation. For independent inventors to supply the most commercially and technically viable product solutions to businesses they must make frequent assessments of their innovation and take on-board external input. for independent inventors. are to be maintained then inventors must become more successful suppliers. by paying heed to these factors independent inventors should become more effective suppliers to companies operating Open Innovation and enhance the sustainability of such operations. what material it’s made from. Emergent critical success factors Additional proposed critical success factors 13 14 15 Ability to operate within a partnership Ability to relinquish total control Ability to filter out unviable innovations 163 . If the commercialisation opportunities presented by Open Innovation. Experience in a formal business context would appear be more useful in adding credibility to a business proposal. through to the market it’s targeted at. garner specialist industry insight and minimise divertive actions. The findings from this research inquiry suggest a further three emergent critical success factors (see Table 4). there are some important implications for those individuals responsible for the management of Open Innovation. Firstly. If after research and consultation innovations appear flawed they should be filtered out and attention should switch to an alternative solution or project. A further three emergent critical success factors are acknowledged and we will continue to investigate the significance of these as this research inquiry progresses. We believe that the biggest contribution made by these two chapters is the amalgamation and communication of critical success factors. Independent inventors should view commercialisation of new products via Open Innovation as a partnership arrangement. in a format that independent inventors and those businesses operating open innovation will find usable in a practical sense. The experience of the inventor is critical to the extent that specialist knowledge in a certain industry may be viewed as positive by potential commercial partners and in addition improves the potential that an innovation is market driven and relevant. from disparate academic literature. Independent inventors find it difficult to identify companies to approach with their innovations and within those companies Table 4. The ability to relinquish total control of an innovation is essential if independent inventors are to become effective suppliers of new products to businesses through Open Innovation. It is fundamentally important that the receiving company buys-in to the innovation. As such it is necessary for independent inventors to take a back-seat on occasion and allow the collective expertise of the business to add to the project. independent inventors need to acknowledge that the success of the project is often contingent upon the receiving company and inventor working together to fully understand the legacy of the product. CONCLUSION Independent inventors have the potential to be effective suppliers of new product ideas to businesses operating Open Innovation.An Examination of Independent Inventor Integration in Open Innovation development and introduction will be governed by this objective.

It is important to acknowledge that the critical success factors identified in this chapter are intentionally focussed on improving the ability of independent inventors to become successful suppliers of innovative product ideas to businesses operating open innovation. ACKNOWLEDGMENT The authors wish to thank Caparo for allowing us access to their facilities during this research inquiry. studies that test the boundaries of the identified critical success factors by focussing on potential regional variations or variations across industry sectors would be valuable. managers may wish to consider identifying themselves as being open to approaches from independent inventors. LIMITATIONS AND FUTURE RESEARCH This work identifies the preliminary findings of an exploratory larger scale research inquiry and as such should be viewed in the context of work-in progress. This is of course one-side of the coin. 1991). Open Innovation Managers may also wish to consider the proposed Critical Success Factors and determine how they can encourage independent inventors that want to engage with their business to operate accordingly. It is envisaged that through the examination of further cases. Whilst smaller companies may feel able to sign up to NDA and adhere to the principles of this arrangement. the knowledge relating to this field of research will be extended. In addition we wish to extend our thanks 164 . licensee. Consideration should be given as to how administrative hurdles can be utilised to deter approaches from those that do not have the capacity or desire to see-out a potentially long development programme. to discover if critical success factors relating to their involvement in the integration of independent inventors in open innovation can be established. Importantly. As a general rule independent inventors are unlikely to disclose information concerning a proposed new product without either having filed a patent application or completed a Non-Disclosure Agreement (NDA). A prescriptive process that requires independent inventors to submit specific written details as part of the initial approach would help to ensure that inventors have given due consideration to key factors in advance of the first meeting. there is potential for shifting the research focus away from the independent inventor and on to the receiving company. A potential concern of management operating Open Innovation models that allow independent inventors to act as suppliers is the cost of handling the high quantity of inquiries. As such.An Examination of Independent Inventor Integration in Open Innovation identify who the key contact is. the value of the case study approach is in the formation of new insights that drive future research inquiries (Dyer and Wilkins. As such we would advocate that managers operating Open Innovation request a face-to-face meeting with independent inventors early in their process. the degree to which an independent inventor and business can work together is critical to success. Although it represents a narrow view of a complex subject we believe that the case study approach to this inquiry has added valuable evidence in support of twelve critical success factors. As mentioned earlier in the chapter. As such independent inventors will need to file for patent. In terms of future research. and has identified three emergent critical success factors. A final consideration for those managers wishing to encourage independent inventors to act as suppliers is the stance they propose to take over confidential information. many larger businesses feel this is practically impossible. Whilst much can be learnt about a proposed innovation from reading documentation prepared by an independent inventor.

Open Innovation: Researching a new paradigm. (2009). H. The interviewees were: Martin White (Independent Inventor). 613–620. Case study research. Rost. R & D Management.: Caparo AP Braking. G. B. K. Academy of Management Review. (2006). & Strauss.1177/1077800405284363 Geldard-Williams. 14(4). Research Policy. KEY TERMS AND DEFINITIONS Independent Inventors: Independent inventors are characterised by two factors. M.: University of Wolverhampton. Yin. 12(2). M. Better stories. K. Flyvbjerg. Qualitative Inquiry. firstly their inventive activity is conducted outside the confines of an established business and secondly. K. London. K. Caparo RightFuel. Lester.. Wolverhampton. 219–245. Oxford. 2006: p. Jr. UK: Wledenfeld & Nicholson. 232–256.. 36(3). W. C.12. Why are some independent inventors ‘heroes’ and others ‘hobbyists’? The moderating role of technological diversity and specialization. Lettl.1111/j. the independent inventor has no formal obligation to invent (Lettl et al. not better constructs. & Wilkins. K. Interviewed by: Smeilus. R. & Von Wartberg. Interviewed by: Smeilus. Open Innovation: “Open Innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation. (1984). Interviewed by: Smeilus. 38(2). Vanhaverbeke & West. Science. Wolverhampton. A. A. 2009). Vanhaverbeke. H. I. & West. Dyer. the open innovation contact team and the eventual company licensee. 229–236. Jonathan Lester (Caparo Innovation Centre – open innovation contact team). (2006). UK: Oxford University Press.1177/016224399101600205 White.2008. New Dehli: Sage. A.. 532–550. U. G.An Examination of Independent Inventor Integration in Open Innovation to Martin White the independent inventor behind the Caparo RightFuel. respectively” (Chesbrough. Yin. U.x Chesbrough. (2010). G.. Case study research: Design and methods. (2010).. U.. Views on the Caparo RightFuel programme. ENDNOTES 1 The interviewees were selected as they provided insight from three critical vantagepoints: the independent inventor.1467-9310. (1991). & Crowther. Academy of Management Review. to generate better theory: A rejoinder to Eisenhardt. REFERENCES Chesbrough. (2006).. Building theories from case study research. Five misunderstandings about case-study research. K. B. Neil Geldard-Williams (Managing Director Caparo AP Braking – company licensee) and 165 . H. J. doi:10. London. doi:10. 16 (2). 243–254. Technology & Human Values ..004 Whalley. N. The discovery of grounded theory: Strategies of qualitative research.00428. Experiences from the Caparo RightFuel Programme.1016/j. G. Eisenhardt. UK: Sage Publications. London. (2010). P. Beyond high tech: Early adopters of open innovation in other industries. respol.2006. (1991). Leamington Spa. (1967). J. (1989). and expand the markets for external use of innovation.: University of Wolverhampton.1). K.. (1994). & Sarel-Cooke. doi:10. Glaser. W. 16(1). K. doi:10. The social practice of independent inventing. R.

An Examination of Independent Inventor Integration in Open Innovation 2 3 Henry Sarel-Cooke (Sales Director Caparo AP Braking) AA Motoring Trust Report (Feb 2004) – Misfuelling: Don’t get caught out! Telegraph Motoring Section (27th Aug’05) – A costly mistake 4 5 Fleet News Magazine (5th Sep’06) – Misfuelling hits new record level AA Motoring Trust Report (Feb 2004) – Misfuelling: Don’t get caught out! 166 .

driven by the idea that these factors could explain or. this chapter sheds light on the many different ways in which companies open their innovation processes. which are identifiable in terms of organisational form of acquisition or commercialization. these are not the only two possible models. INTRODUCTION The concept of “Open Innovation” (OI) is often studied supposing an artificial dichotomy between closed and open approaches. IGI Global. the direction of opennes (inbound and/or outbound) and governance (hierarchical or flat). Italy Chapter 10 ABSTRACT This chapter investigates the topic of how open innovation is actually implemented by companies. number and typologies of partners. previous research has also attempted to study the relationships among different OI models and several contextual factors. Italy Raffaella Manzini Carlo Cattaneo University. which are investigated in depth in order to understand the relationship between a set of firm-specific factors (such as size. Four main models emerge from the empirical study. company organization) and the specific open innovation model adopted by a company. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. though. according to a conceptual approach in which open and closed models of innovation represent the two extremes of a continuum of different openness degrees. . By means of a survey conducted among Italian manufacturing companies.4018/978-1-61350-165-8. 2003b). R&D intensity.ch010 be pursued in different ways. Moreover. sector of activity. Copyright © 2012. phases of the innovation process that are actually open.167 Firm-Specific Factors and the Degree of Innovation Openness Valentina Lazzarotti Carlo Cattaneo University. whilst the idea of exploring different degrees and types of openness in a sort of continuum seems to provide a more interesting avenue (Chesbrough. Italy Luisa Pellegrini University of Pisa. Prior research has highlighted that open innovation may DOI: 10.

for the identification of the potential intermediate states in the OI Continuum. Lastly. the main research results. but rather need to engage in alternative innovation practices. abundant venture capital and widely dispersed knowledge across multiple public and private organizations and the need for specialisation in knowledge production. arising from institutions. The following sections are divided into subtopics: a description of the pertinent literature (so as to better understand the research questions we posed). or otherwise it can be better understood in light of the concept of openness suggested here. conclusions and future research. engineering (transforming the prototype into an industrial project). the current innovation landscape has changed. Our investigation was carried out in Italy. characterize the companies’ choices in terms of degree of openness. manufacturing (defining and organising the “plant”). Thus. We would also like to emphasize that our endeavour to identify any in-between states along the Open Innovation Continuum is the first attempt to research this topic and that the subject indeed requires further research in order to better characterise such intermediate states. However. to identify the contextual factors that affect the choices firms make along the Open Innovation Continuum. In this regard. THEORETICAL BACKGROUND The Theoretical Framework and the Research Questions Traditionally. different OI models.and.Firm-Specific Factors and the Degree of Innovation Openness at least. how and with what results companies work together becomes a relevant issue for both Italian scholars and practitioners. second. 2010). It should be noted that we assume that the innovation process is composed of different phases: idea generation (identification of a technology opportunity through scouting. Open Innovation (OI) represents an important innovation practice that can help firms to innovate without having to rely only on their inhouse strengths. The choices in terms of OI will be investigated in terms of those contextual factors whose role is still controversial (Lichtenthaler. in many industries. there are many pressures. 2008). defined according to this concept (i. trends analysis). increasing R&D costs. market analysis. large internal R&D labs were a strategic asset and firms could internally discover. monitoring. In particular. develop and commercialize technologies. too. The objective of this chapter is thus threefold: first. have been analysed in some preliminary work in terms of their performance (Lichtenthaler. through the use of extensive study. This approach has been labelled the “closed innovation model” (Chesbrough. commercialisation (planning of commercialisation and promotional activities). a description of the empirical study we carried out and the methodology used. we focalized on two variables representing the openness degree. Although it worked well for quite some time.Open and Closed Innovators . enterprises can no longer afford to innovate on their own. Due to labour mobility. to provide evidence in support of Chesbrough’s (2003b) theoretical proposition that businesses may be located along an Open Innovation Continuum. which are not still deeply investigated: (1) the number and type of partners (partners variety) and (2) the number and type of phases of the innovation process open to external contributions in and/or out (innovation phase variety). investigating if. to identify any potential intermediate states between the extreme points of the Continuum . 2008. third. towards the establishment of collaborative models (Global Business Summit. degree of openness and models within their specific context). large firms relied on internal research and development (R&D) to innovate and. 2009).e. Since Chesbrough published his 168 . experimentation (from the idea to the prototype). where empirical evidence about OI is still poor. 2003a). a discussion of the results.

Through the inside-out process. suggesting that innovators use ideas and knowledge of external actors in their innovation processes: firms rely heavily on their interaction with lead users. 2009). 2009). 2003b. On the other hand.e. this view allows for a deeper and more real investigation into company behaviour and into the particular nature and context of innovation sources (Chesbrough. suppliers. it is possible to define different open innovation models depending on both breadth (i. and the organisational forms chosen to define the links among partners (high vs. As regards the perspective connected with the “types of partners” (Enkel et al. 2007. Lundvall. As regards the perspective connected with the “direction of openness”.e. the idea of exploring different degrees and types of openness in a sort of continuum (i. 2009. other approaches have also been investigated. selling IP.... Although the perspective that has received most of the attention in the literature is undoubtedly the direction of openness. (Chesbrough. Indeed. Enkel. a large number of involved partners and hierarchy. the era of open innovation has begun and many firms are opening their innovation process to the outside world (Enkel et al. While contributions are still growing (Gassmann. 1988. 2006. A large number of studies are adopting this term to describe the phenomenon where firms rely increasingly on external sources of innovation.e.. 2008): openness. 2009). 1995. 2009. Trott and Hartmann. resources and individuals flow in and out of organizations (Chesbrough. Keupp & Gassman 2009). The way the innovation process can be opened has been studied in management literature from a variety of perspectives. Enkel et al. Hence. i. the number of sources used for innovation activities) and depth (i.e. literature has highlighted the interactive character of the innovation process. in order to bring ideas to market faster than they could through internal development (Enkel et al. 2003b. In particular. Dahlander & Gann. 2009). the debate on innovation management is enriched by studies that critically examine the Open Innovation concept by exposing its weakness and limitations (Dahlander & Gann. As regards the perspective connected with the “kind of governance” in the innovation networks. With each innovation source. four open innovation models emerge: (1) the open/ 169 . 2006. 1992. the openness degree concept) seems to provide a more interesting and richer avenue to investigate. 2007). the kind of governance in the innovation networks. Enkel et al. Lichtentaler. firms aim at earning profits by bringing ideas to market. firms aim at enriching the company’s own knowledge base through the integration of external knowledge sourcing.e. i.Firm-Specific Factors and the Degree of Innovation Openness book in 2003. 1996). an organization can achieve different intensity levels of collaboration (Laursen & Salter 2006. three models of open innovation can be observed: the inbound. there are two dimensions which need to be considered (Pisano & Verganti. exploration or outside-in process. 2007). which means that ideas. exploitation or inside-out process. the concept of Open Innovation is criticized because of the widespread view that the concept highlights an artificial dichotomy between closed and open approaches. and the coupled process (Keupp & Gassman. Thanks to the outsidein process. the concept of “Open Innovation” has received a considerable amount of attention from practitioners and researchers. low integration level). and a range of institutions inside the innovation system (von Hippel... 2009). the outbound. Dahlander & Gann. 2003a). The coupled process combines the two abovementioned processes to simultaneously gain external knowledge and bring ideas to market. Brown & Eisenhardt.. On the basis of two such aspects. and multiplying technology by transferring ideas to the outside environment.. et al. Szulanski. these look at the number and types of partners. and hence increase their innovativeness (Enkel et al. In any case. Gassmann. 2008. the intensity of collaboration with each source). 2009). the level of ‘democracy’ in decision making. More specifically. 2010)..

there are four technology sourcing modes that firms can adopt: corporate Venture Capital investments. between the two pure models – open or closed. Hence.. With regards to weakness. the dichotomy between open vs.e. the literature does not address the question whether some firms conduct open innovation in many phases of their innovation funnel and if others focus only on a very few of them. 2003b). (4) the closed/flat model. closed is artificial and it is necessary to explore different degrees and types of openness: this can yield more insight in understanding openness. (3) the closed/hierarchical model.. to the best of our knowledge. Each form carries with it different implications in terms of the investing company’s reversibility and commitment (Chiesa & Manzini. non-equity alliances. For instance. (2) the open/flat model. De Backer et al. all these contributions share the understanding that the open innovation models which the firms follow are not exclusively open or closed. Indeed. and no one has the authority to decide what is or is not a valid innovation. while equity alliances and acquisitions require a high level of commitment and are hardly reversible. on the other. while making critical decisions together.Firm-Specific Factors and the Degree of Innovation Openness hierarchical model. all these contributions share two aspects: on one hand. but on companies that invest simultaneously in closed as well as in open innovation activities (Enkel et al. our objective is to contribute to the literature which sustains that business reality is not based on pure open innovation. in which anyone can offer ideas but only one company defines the problem and chooses the solution. according to Dahlaner and Gann (2007). but rather show varying degrees of openness: i. In our opinion. we will introduce a new perspective that considers both the number/typology of partners and the number/ typology of phases. Indeed. On the basis of these premises. especially regarding more upstream/ research activities. if this is the case. With few exceptions. corporate Venture Capital investments and non-equity alliances are reversible to some extent and involve a relatively low level of commitment from the investing company. in which a selected group offers ideas. while. As regards the “organisational forms” chosen to define the links among partners (high vs. in which anyone can generate ideas. In other words. Hence. equity alliances and acquisitions. the perspectives used in the previous contributions are not exhaus- tive in explaining the open innovation models followed by firms. low integration level). Neither is it clear if the phases of the innovation funnel that are permeable are open to many or just a few partners. literature does not help companies to find the right balance between closed and open phases of the innovation funnel. 2006). Regarding common interpretation. which represent the two extremes of a continuum – there are many shades of grey (Chesbrough. in which a company selects certain participants and decides which ideas are to be developed. More precisely. in order to understand if such a perspective can confirm the existence of different models of open innovation. they have a weakness. (2008) analyzed such a problem and found that universities and government research institutes are generally considered to be an important source of knowledge transfer for the innovation activities of companies. Within this context we will try to answer the following specific research questions: • • Do different firm-specific factors characterize the models of open innovation? Do such different models show a different level of innovative performance? 170 . the latest literature still does not fully explain in what ways the degree of openness can happen. 2009) throughout the innovation funnel with different partners. van de Vrande et al. they have a common interpretation of open innovation. it is not even clear if the involved partners are different in terms of typologies or not. 1998. we must consider which phases of the innovation funnel are open or closed.

an analysis of the relationships between the firmspecific factors and the open innovation models will be made. Specifically. Before characterizing them by means of our empirical analysis. Theoretical framework 171 . size. and will therefore be more likely to seek out outside expertise. R&D intensity. the main objective of the chapter is to provide empirical evidence to the notion of OI as a continuum. with 1 = disagreement and 4 = agreement). company’s objectives for collaboration. given the high costs for developing specialized structures. The operationalisation of each construct is reported in detail in the Appendix (all questions were measured on a four-point Likert scale to indicate the frequency of use. Figure 1. approach to innovation. Lichtenthater and Ernst (2009). The Firm-Specific Factors and Open innovation Relationship between R&D Intensity and Open Innovation Models As regards the role played by R&D intensity. by highlighting areas that are lacking which justify our subsequent empirical analysis. As explained in the introduction. they state that firms performing a great deal of in-house exploratory research are likely to be led by this exploration away from their competencies. managerialorganizational actions supporting open innovation) and OI models and their performance. an analysis of the impact of the open innovation models on innovative performance will follow. This provides support for the assumption that firms pursue external technology acquisition as a complement to internal R&D and not as a substitute (Cohen & Levinthal.Firm-Specific Factors and the Degree of Innovation Openness Figure 1 depicts the constructs of our theoretical framework. what is lacking in the literature has been highlighted for each of the relationships studied. that is to say that different OI models may exist. Moreover. Calantone and Stanko (2007) and Sofka and Grimpe (2008) investigated this role from different viewpoints. Zahra & George. First. Lichtenthaler (2008). Calantone and Stanko (2007) underpin that firms’ exploration activities cannot occur frequently: therefore. Then. 1990. Lichtenthaler (2008) and Lichtenthater and Ernst (2009) analysed the effect of R&D intensity and found that the greater the level of R&D intensity the greater the technological exploration. in the following we will analyze what the literature says about the relationships between some contextual factors (i. type of industry.e. firms are more likely to resort to outside expertise. 2002).

De Backer et al.e. larger firms do not seem to be able to completely rely on internal activities due to the diversity of the technological knowledge that they use. 2008. in that commercialization is rather a newer phenomena than acquisition. Hence. On the one hand. it is still driven by large pioneering firms.. the fact that larger firms seem to drive the opening of the innovation process can be justified by the more systematic approach they have in their innovation processes (Lichtentaler. van de Vrande et al. 2009). Indeed. Hence.e. literature lacks the investigation of the role that R&D intensity plays with regards to the perspective offered in this chapter. committing internal resources to in-house labs and specialized scientists and engineers is therefore the primary path for innovation managers to achieve more depth in their search strategies.. In general. Empirical investigations show that size impacts on two variables representing the openness degree: the extent of both technology exploitation and exploration (Lichtenthaler. it is possible to draw considerations similar to those regarding the role played by R&D intensity. empirical literature suggests that open innovation is mainly driven by larger companies. the breath of OI) and the intensity of collaboration with each source (i. the depth of OI) and show that there is a positive and significant effect of firm size on both the breadth and the depth of OI. it should be noted that the effect of size seems to be stronger in the case of technology commercialization than in technology exploration. would have great benefits from exploiting the OI model. which will consider both the variety of partners involved and the variety of stages in which companies collaborate. through which it is possible to investigate how the innovation process can be opened: the perspective connected with the “direction of openness” and the perspective connected with the “types of partners”. SME are increasingly adopting OI practices (van deVrande et al. larger companies seem to have a bigger technology portfolio than smaller companies and hence have wider technological knowledge that is potentially suitable for commercialization. as regards technology exploitation. 2008. In addition. They hypothesize that internal R&D investments lead to deep research strategies rather than broad ones. according to Lichtentaler (2008). on the basis of these contributions. 2008). However.e. 2008). As regards technology exploration. Indeed.e. which involved firms from twelve European countries. With their survey. On the other hand. some literature emphasises that especially small companies. Lichtenthaler & Ernst. Thus. the effect on depth is stronger than the effect on breadth. As the external mode of technology exploitation has become a broader trend only in recent years. Relationship between Size and Open Innovation Models Size is one of the most investigated of the contextual factors and it is still a controversial subject. they argue that firms building absorptive capacities through internal R&D have both broader and deeper research strategies. on the basis of these contributions. extent of partner typology) and “depth” (i.. the role played by R&D intensity is studied in relation to two of the abovementioned perspectives. In fact. Keupp and Gassman (2009) analyse the effect of size on two different variables representing the openness degree: the number of knowledge sources used for OI activities (i. the role of size is studied in relation to the same two abovementioned perspectives: the perspective connected with the direction of openness and the perspective connected with the types 172 . In other words.Firm-Specific Factors and the Degree of Innovation Openness Sofka and Grimpe (2008) studied the effect of internal R&D investments on “breadth” (i. intensity of collaboration for each partner) of research strategies. 2008. while the acquisition of external technology is distributed more evenly across firms of different sizes. 2008) and the larger resources they possess with respect to small and medium enterprises (Lichtentaler. often lacking resources and competence to innovate by themselves.

Also in this case. In addition. Lichtenthaler (2008) also finds that firms which emphasize radical innovation are obviously not able to develop all knowledge internally. the openness of the innovation process does not seem to be determined principally by industry characteristics. More in particular. find important differences among industries.Firm-Specific Factors and the Degree of Innovation Openness of partners. entering into new markets. the same Lichtenthaler in different publications (Lichtenthaler. the possibility to facilitate acceptance on the market and the creation of a standard. Hence we can draw even more restrictive considerations than those regarding R&D intensity: technological aggressiveness is studied in the literature in relation only with the perspective connected with the direction of openness. the studies by Gassman and Enkel (2004) and De Backer et al. the opportunity to commercialize knowledge which. Lichtenthaler (2008) studies the implications connected with firms’ emphasis on radical innovation and finds that the degree of openness seems to rise with the degree of emphasis on radical innovation. and realizing learning effects. especially concerning the degree of external technology commercialization. its role is still controversial. 2009). electronic/ electrical/semiconductors and machinery/equipment/computers as the industries where licensing deals take place more frequently than in others. Relationship between Approach to Innovation and OI Models A relevant concept investigated in the literature is that of “technology aggressiveness” (measured by three items. In another publication. while referring to the same sample. Lichtenthaler and Ernst (2009) find that technology aggressiveness is negatively related to the extent of external technology acquisition and is positively related to external technology exploitation. Lichtenthaler and Ernst (2009) show that a firm belonging to a particular industry does not produce any impact either on the external technology acquisition or on external technology exploitation. There are two reasons for this: first. In fact. with chemical/drugs. although focusing on particular aspects. Thus. when not applied in the organization. If we add that this factor’s role is still controversial. Relationship between Type of Industry and Open Innovation Models Some authors investigate the impact that industry exerts on OI. such as patent licensing. turns out to be residual. Lichtenthaler (2008) states that his findings demonstrate the insignificant effect which industry differences have across the clusters. (2008) demonstrate the opposite. among them “the emphasis on radical innovation rather than incremental innovation”)1. De Backer et al. on the one hand. it emerges that new empirical investigation is needed to analyze the impact exerted by technological aggressiveness on OI models. but they have to strongly rely on complementary external sources and thus they use technology acquisition (Perrons et al. Gassman and Enkel (2004) state that the relative importance of internal and external sources varies across different industries. 173 . 2005). Similarly.. (2008). On the other hand. in that commercialization nurtures benefits in terms of setting industry standards. As a consequence. literature is not unidirectional in that empirical findings show contrasting results. second. finds different results. it is possible to assert that literature lacks the investigation of the role that size plays with regard to the perspective offered in this chapter (number/typology of partners and number/typology of phases). 2008 and Lichtenthaler & Ernst. interpreting industry as the typology of sector in which firms operate. What’s more.

Slowinsky & Zerby. even if this strategy has drawbacks in terms of opening the market to new entrants (Porter. the objectives of collaboration are studied in the literature even more restrictively. the need to extend skills. 2006. Huston & Sakkab. Chesbrough & Crowther. 2005). i. there is a gap in the research literature which needs to be filled. Lynch. Sofka & Grimpe. As regards the objective of diminishing costs and risks. on the one hand. it should be noted that the analysis of the company’s financial 174 . 1996. regarding performance.. the exploitation of the personal relationship of the R&D managers for starting technological collaborations. 2008. 2004. A widely accepted assumption is that the relations between openness degree and performance must be analyzed considering the moderator role of external environmental moderators (e. but also mainly in relation to one of the two directions. and on the other. Another main reason for firms to undertake R&D outsourcing includes accessing specialized skill sets and creativity. Chesbrough and Teece. 2006. 2007. Although the works cited have shed light on how organizational and managerial factors facilitate the implementation of open models. Chiaroni et al. Chiesa and Frattini (2009) state that the reason for accessing external sources is the willingness to minimize risk by investing in technologies that are already proven in other applications. Managerial-Organizational Actions Supporting Open Innovation and OI Models Managerial-organisational actions allow open innovation to be pursued easily and more deeply. MacCormack & Iansiti. Some of these actions include the commitment of top management to promote the transition towards an open innovation approach (Vanhaverbeke. and organizational development processes (Catalone & Stanko. competences and creativity (Huang et al. 2008). 2007. 2010) shed more light on the topic. as well as the analysis and selection of the potential partners with a formal and explicit process (Sakkab. The results are still quite limited and contradictory. although very recent contributions (Chiang & Hung. Pisano & Verganti. not only are they studied in relation to the perspective connected with the direction of openness. the formal evaluation of collaboration objectives and risks. Calantone and Stanko (2007) analyze outsourcing as a tool for increasing staffing efficiency measured in terms of employee sales efficiency.e. 2004). we believe that enriching this line of inquiry with new empirical evidence is in any case quite important. which exposes the internal development staff to new knowledge. technology. 2009. patent protection status: Lichtentaler. vandeMeer. for this firmspecific variable. 2009). Linder. too. In comparison with the other firm-specific variables. 2009). with the inbound process. 2009. The Impact on Performance The debate is still open on whether and how openness degree and contextual factors impact on innovative and economic performance. 2010. 2006). 2006). that being an analysis of the impact exerted by collaboration objectives on the open innovation models. Hence. 2002. Gassmann and Enkel (2004) state that research-driven companies usually aim at reducing the R&D’s fixed costs and sharing risk.Firm-Specific Factors and the Degree of Innovation Openness Company Collaboration Objectives and OI Models The main reasons that push firms towards choices of open innovation are. the need to reduce innovation costs and business risks. 1980) and exposing core competencies to imitation and substitution (Piachaud. Indeed.. the need for a champion supporting the integration of external technology into an existing product development phase–gate process (Chesbrough.g. They infer that the decision to reduce the number of employees is related to the outsourcing of innovation in the short run but not over the long term. Chiaroni.

2008) make them very interesting topics of innovation study. development costs. in 2008 the companies had applied for funding from the Chamber of Commerce to conduct innovative activities within different manufacturing sectors. Dahlaner & Gann. plastic. 2010) is more understandable. metallurgy. the concept of innovative performance (Chiang & Hung. 2007) show that relationships with other actors help firms to increase the level of innovativeness. certain relationships between the selected firm-specific variables and the openness degree are still controversial or lacking in depth. Probably. though the issue is still poorly studied. pharmaceuticals. with particular reference to Italy. Gassmann and Enkel (2004) state that the benefits of co-operation are seen in an improvement in the competitive position and in risk minimisation. size). are represented by lower response rate as compared to other methods. combined with the fact that Lombardy is marked by a particular propensity for innovation (if measured by the number of patents. The impact of open innovation models on innovative performance has been analysed in terms of a company’s competence base. collaborations and innovative performance. literature results are not unidirectional as far as the reduction of development time is considered: for instance. In summary. 2010. time to market and the level of innovation of new products/processes. chemicals.g. wood and wood products (NACE rev. organization for innovation. innovation strategy. guarantee of anonymity and reduction of interviewer bias (Forza. electronics. 2002). The survey tool was conducted as a questionnaire whose items regarded company characteristics (sector. on the other hand. including the mechanical and machinery sectors. but not in a reduction of development time. absence of time constraints. RESEARCH DESIGN AND METHODOLOGY Survey Design The empirical study has focused on companies located in Lombardy. rubber. 2004).2 codes). longer completion times and greater effects due to the lack of both interviewer involvement and open-ended questions. we suggest improving the empirical evidence available by adopting a perspective based on number/typology of partners and the number/ typology of phases. a Northern Italian region. textiles. completion at the respondent’s convenience. The data was collected by means of questionnaires distributed by email to participants. Its shortcomings. Instead. on the other hand. food. Lombardy ranks first among the Italian regions according to the European Patent Office data for Italy elaborated by the Unioncamere Observatory of Patents and Brands. including institutional ones. as suggested by the literature listed above. publishing and printing. where partnerships are desired by many subjects. as well as in sectors dealing with automotive. 175 . as rising development costs and shorter product life cycles make it increasingly difficult to justify investments in innovation. according to Kolk and Püümann (2008) firms not concentrating on Open Innovation strategies fail. paper and paperboard. on one hand. This engagement in innovation by such companies.Firm-Specific Factors and the Degree of Innovation Openness performance is a complex topic due to the fact it can be explained only by considering a wide set of factors that can have contrasting effects. Below. Other studies (e. Literature is unidirectional in showing the impact of the outside-in process on the access and integration of internal company capabilities with new and complementary knowledge of external firms (Gassmann and Enkel. Sofka & Grimpe. The advantages of such a method include low cost. as will be clarified in more detail below.

. 2006. In addition. the resulting questionnaire was sent to the key informants of the companies that we identified as the R&D manager (if present in the company) or the company owner. This imbalance can hardly be avoided because it is due to the intrinsic major sectoral composition in Lombardia. However.50 (Hair et al. These were saved as variables and employed in the subsequent analysis. The items were tested by a group of senior managers and academics with working experience in innovation. with a response rate equal to 20%). the size of the studied companies can be classified as middle/small2. After this stage. The factors/ firm-specific variables were the following (see the Appendix for detail): 176 . this is the typical situation in Lombardia as well as in Italy. As clarified above in the theoretical background. If. concerning the firm-specific variables. 2006. Barbaranelli. The study of correlations between these two variables allowed us to understand which are the most typical combination partner/phase and thus to characterize the innovation process in practice. thus indicating the unidimensionality of the various factors. Secondly. A general premise should be made as concerns company size (in terms of number of employees and revenues): except for few big subjects.e. An evaluation of the Eigenvalues and the Scree plot were used to identify the number of factors to retain. They were asked to analyze the questionnaire in order to eliminate items not having strong content validity. a pilot test was conducted to assess the quality of the measure items. from the one hand. Items of the questionnaire were defined on the basis of scales already used in previous works or coming from partial reworking of such scales (still Likert-type). we used subjective measures based on four-point Likert-type scales (1=strongly disagree.Firm-Specific Factors and the Degree of Innovation Openness Before sending the questionnaire to the companies. it is also found in non-respondents and thus it protects against the potential non-response bias. 2006) based on the partner variety and the phase variety. Cheng and Shiu. Regarding their operation- alization. In order to better specify the partner variety and the phase variety we introduced the variables: intensity of collaboration with partner and intensity of collaboration on phases that make up the innovation funnel (measures also based on the Likert-type scale). recommended when researcher wants to identify groups which are distinct from each other as much as possible. if deeply involved in the definition of the company’s innovation strategy (as is very common in Italian companies). Statistical Analysis Among the companies that have applied for funding (about 500) 99 firms have responded during a four-months period in 2009 (i. we applied to the gathered data an exploratory factor analysis (principal axis factoring as extraction method and promax rotation in the case of initially unclear solution) in order to delete weakly related items and to understand the factor structure and the measurement quality. 4 = strongly agree) as given in the Appendix. on the other hand it may prevent capture size differences when we will analyze firms characterized by different openness degrees. with which we intended to describe the companies belonging to different clusters. where the small size plays an important role. 2008). Barbaranelli. all factor loadings were above the acceptance level of 0. To study firms’ approaches to open innovation. Anyway. we adopt the partner variety and the phase variety as relevant variables to represent and to investigate the degree of openness. we carried out the following procedure. we firstly carried out a cluster analysis (“complete linkage method”. We must therefore bear in mind that this cannot make next comparisons between companies significant because of the intrinsic nature of the sample.

82). a questionnaire sponsored by Industrial Research Institute. 2009. inspired by Lichtenthaler and Ernst. (2002). 2007. small intermediate clusters . which suggests that most firms adopt open or closed innovation approach on both dimensions. dummy variables were included for: the type of industry. Finally. to operazionalize size) Indicators of company’s performance (ROA – Return On Assets .e. We re-adapted the scale also on SURVEY TOOL 2. RESULTS Figure 2 illustrates the results of cluster analysis based on the partner variety and the phase variety. 2001). to operazionalize size) Number of employees (i. competences and creativity (three items. they open their innovation process more strongly in one direction rather than in the other) and thus they are worth to be analyzed although they only provide clues for further analysis. Cronbach’s α: 0. ANOVA).1 basis. customers.. our scale based on Calantone et al.1. such as: • • • • R&D intensity (i. matrix. technical and scientific service companies.e. output-oriented. aims to extend skills.exist (i. 2009.71) Organizational and managerial actions for open innovation (five items. the variance inside clusters is about 21% whereas the variance among clusters is about 72% (F-tests sig. Cronbach’s α: 0.and ROS – Return On Sales). From data about partner and phase variety variables (reported in Table 1). universities. and Chi-square test to compare the frequency on nominal variables. 177 . After all. Cronbach’s α: 0. <. that impact on the whole innovation funnel and involve a wide set of different partners.85) Some other variables. were measured directly (and eventually transformed in logarithmic scale to improve normality). in order to appreciate differences among clusters in terms of scale variables.e. Cronbach’s α: 0. that use suggestion by Brockoff and Pearson. The decision on the number of clusters has been determined by the criterion that suggests of stopping the aggregation process at the stage that precedes the one with the highest increase in the coefficient of agglomeration (Barbaranelli. governmental institutions) are involved at different stages (especially in the idea generation. many other types of partners (particularly. based on Calantone and Stanko. inspired by the work of Huang et al. Despite the quite high correlation between partner variety and phase variety variables.e. Approach to innovation: technological aggressiveness with emphasis on radical innovation (five items. percentage of R&D expenses/sales) Revenues (i. the existence of organizational unit specifically devoted to support collaboration. 1992. as concerns data analysis.71). In the four-cluster solution. the type of organizational structure used by companies for innovation activities (inputoriented. Although the open innovators strongly collaborate especially with the supplier in the engineering and experimentation phases3. also a factor representing innovative performance was defined (five items reported in the Appendix. Cronbach’s α: 0. we applied the one-way variance analysis (i. As concerns company’s results. Chiesa. 2006). This has resulted in a solution with four groups of firms.2 and 3 . not presented in Appendix. we found that these companies are really able to manage a wide set of technological relationships.84). companies that make up the largest group.001).e. aims to share risks and costs (two items. firms operating in different sectors of activity. scale based on SURVEY TOOL 2. Cluster 1 refers to the open innovators.Firm-Specific Factors and the Degree of Innovation Openness Objectives of collaborations classified in two factors: 1. 2.

An example is a medium-sized company from the machinery industry that conceptualizes and produces boilers for industrial use. types of objectives. existence of organizational units supporting collaborations). Already found in the evidence emerged by a multiple case-study in a previous work (Lazzarotti & Manzini. in particular the open and closed ones. Cluster 4 refers to the closed innovators. approach to innovation. governmental institutions) but they concentrate their collaborations in a single/few points of the innovation funnel (typically the idea generation and the experimentation). support it through the whole process of innovation. single phase of the innovation funnel and typically in dyadic collaborations. organizational and managerial actions for open innovation. companies in the other small cluster 4 can be classified as specialized collaborators. they form a group similar to open innovators regarding the variety of partners (suppliers.e. From data in Table 1. To analyze differences across clusters. R&D intensity. From the follow-up interviews.Firm-Specific Factors and the Degree of Innovation Openness Figure 2. An example here is a mediumsized company in the electronics industry that open to many partners (universities and governmental institutions as well as the traditional customers and suppliers) the idea generation phase. these companies are the most similar to the closed ones: collaborations are with few types of partners (typically suppliers and customers). A good example here is a small-sized textile company that has declared in some follow-up interviews. performance expressed by innovative performance) and Chi-square test has been employed to compare the frequency on nominal variables (i. carried out after data-analysis stage. companies that form the second largest group. The prevalent partners are in fact suppliers and customers. we realized that these companies access to external sources of knowledge only for a specific. ANOVA) has been used for comparing means of scale variables (i. internal research and development procedures “jealously preserved”) by using the low-intensity contribution of its customers and suppliers on the idea generation phase. these companies still seem a “bit behind the open”. but it is a matter of time: with increasing confidence in partners. Already also emerged in our previous work. type of industry. especially on the idea generation phase. Finally. This means that the integrated collaborators “share” with their few trusted partners the whole process of innovation. It must be said that the scarcity of observations on clusters integrated and specialized makes not 178 . An example is a small company in the electronics industry that produces and commercializes panels and electrical equipment: suppliers and customers.e. universities. customers. one-way variance analysis (i. but instead of being tightly focused on one stage. Results of cluster analysis experimentation and engineering). with whom the company has a longstanding relationship. Particularly little-used in the closed companies are the collaborations with universities and firms operating in different sectors of activity. company’s size expressed by revenues and number of employees.e. to follow a traditional innovation approach (i. the cooperation will also increase by covering all the innovation process.e. The companies in the smallest cluster 2 can be named integrated collaborators. 2009). they can be extended to the whole funnel.

high weight of medium-small sizes for companies) that reflects the Lombardia’s and Italy’s condition. at the highest level.. a company must have the appropriate skills and competences.Firm-Specific Factors and the Degree of Innovation Openness applicable Chi-square tests as well as the results regarding scale variables are often not significant. we reiterate that this may be due to the inherent imbalance of the investigated sample (i. Zahra & George. we found that the open cluster has a higher mean (in the factor score resulting by factor analysis) than the closed and this difference is statistically significant. shows a mean higher than integrated. 2008). As clues relatively to integrated and specialized clusters. This is consistent with the literature and empirical evidence that suggest that companies. the integrated and the specialized cluster. see Lichtenthaler.e. although very little. to a wide variety of phases (even if with few partners) or. 2008). 2008). just it seems they invest less than open. interestingly the integrated shows the lowest average of R&D intensity whereas the specialist is more similar to the open one. they will be briefly presented in order to deepen them with next research. where people are organized according to their specific area of expertise. despite being small. Perrons et al.e. which might suggest that perhaps the partner variety is more relevant. Indeed. some clues on other two clusters also emerge and thus. in 179 . if interesting. with emphasis on radical innovation rather than incremental innovation. But what perhaps we can say is that Italian companies. This does not mean that the closed invests little. although the following evidence is useful above all to compare open and closed companies. 1990. Perhaps the integrated innovator invests internally less because it relies on a few trusted collaborators along the whole innovation process. However. This is consistent with the theory of absorptive capacity (Cohen & Levinthal. Interestingly. This finding suggests that companies look for competences and creativity by opening up in some way: to a wide variety of partners (even if on few phases). we found significant difference among open and closed clusters (see Table 1): the open companies invest more on average than the closed companies. Groups do not seem different even for type of industry (see Table 2). Regarding the type of objectives pushing companies to collaborate. the competence-building receives also a formally structured attention and thus it could suggest competence is considered a pre-requisite to openness. Chi-square tests on internal organizational structure for innovation activities show that the input-oriented one (i. when focalized on radical innovations. 2002) in the sense that to be able to absorb from the outside. Very similar to each other (and in intermediate position between open and closed).. 2005).Chiesa 2001) is typical for open innovators rather than for closed (for which an informal type of organization is prevalent). “Relevant knowledge” that our data seem to suggest is coming from a higher degree of openness in term of wide partner variety and wide phase variety. the degree of open innovation seems to be mainly determined by the individual strategic choice of a company rather than by industry characteristics (for similar evidence. As concerns approach to innovation. Anyway. Regarding R&D intensity. competences. must collaborate because they are not able to internally develop all relevant knowledge (Lichtenthaler. in keeping the stream of literature that argues that small firms behave like this (van de Vrande et al. This finding provides support for the assumption that firms consider open innovation as complementary with internal R&D and not a substitute (Lichtenthaler. are nevertheless brought to open up to outside sources. the specialized. 2008. we did not find significant differences among clusters. creativity” with respect to closed companies. In addition. open cluster shows higher mean (and statistical different) in the first-type goal “aim to extend skills. whose growth is continuously fed . As concerns size (see Table 1). As suggested by the follow-up interviews. in similar vein with previous absorptive capacity interpretation.

28 0.63 0.38 1.25 .13 1.13 -0.49 1.47 -0.002 .29 1.02 0.67 1.01 .18 .19 .66 0.47 -0.04 -0.61 1.18 1.22 -0.56 1.63 2.000 2.05 1.1.86 0.32 1.56 1.38 3.35 1.58 0.18 1.26 7.34 6.72 1.000 .000 .61 1.28 1.18 1.40 1.36 1.05 .89 3.56 1.61 1.35 1.80 1.32 0.59 1.11 .40 1.45 0.01 7.02 1.44 1.44 3.69 .00 1.005 1.29 1.Firm-Specific Factors and the Degree of Innovation Openness Table 1.59 0.63 .87 1.5 1.33 1.34 1.08 1.000 .59 -0.29 0.11 -0.52 1.12 1.61 0.25 1.26 1.09 1.20 -0.37 7.11 1.62 1.93 1.29 1.82 1.22 1.41 .30 -0.29 1.49 1.03 1.35 1.67 1.9 1.18 .53 0.36 1.51 1.39 1.01 .20 0.000 .01 .20 1.37 1.07 -0.000 .11 1.61 1.04 1.74 1.35 -0. Information on the clusters and main differences (scale variables) Variables Sample (n=99) Cluster 1 (n=43) Open Cluster 2 (n=9) Integrated collaborator Cluster 3 (n=11) Specialized collaborator Cluster 4 (n=36) Closed Significance (Anova test) Partner and phase variables Partner variety Phase variety Intensity of collaboration with University and Research centres Intensity of collaboration with Technical and Scientific Service Companies Intensity of collaboration with Governmental institutions Intensity of collaboration with customers Intensity of collaboration with suppliers Intensity of collaboration with competitors Intensity of collaboration with firms operating in different sectors of activity Intensity of collaboration on Idea generation Intensity of collaboration on Experimentation Intensity of collaboration on Engineering Intensity of collaboration on Manufacturing set up Intensity of collaboration on Commercialization Firm-specific contextual variables/factors Revenues (Log) Employees (Log) R&D intensity (Log) Innovation approach Objective of extending skill and competence Objective of sharing risks and costs Organizational and managerial actions for OI 7.23 continued on following page 180 .33 0.77 2.03 1.52 0.17 .13 0.80 1.35 1.002 .5 1.16 3.35 1.70 1.

Continued Variables Sample (n=99) Cluster 1 (n=43) Open Cluster 2 (n=9) Integrated collaborator 0. Integrated and specialised have got a lower degree of openness (the integrated lower than the specialized) and probably a lower complexity in the collaborations.38 0. the second-type goal of sharing risks and costs is related to the degree of openness in our conception. closed companies are pushed to open by the objective of sharing costs and risks.29 0.001 0.7 0. Information on open and closed and main differences (dummy variables) Variables Sample (n=99) Cluster 1 (n=43) Open 46% 12% 7% 5% 7% 14% 53% 47% 34% 18% 9% 3% 6% 6% 33% 22% Cluster 4 (n=36) Closed Significance (Chi-square test) Industry Mechanic/machinery Metallurgy Textile Food Electronics Chemical/pharmaceuticals Organizational context Organization input-oriented Existence of organizational unit supporting collaboration 44% 35% .94 both directions. we studied the differences between clusters only with an explorative purpose to define Table 2. As concerns the organizational and managerial actions.73 0.70 0.9 0.08 0.29 0. Regarding performance (see Table 1) we obtained only some preliminary indications and mainly focus on innovative performance. Also a significant Chisquare test on the existence of an organizational unit supporting collaboration (see Table 2) gives evidence of the organizational and managerial differences between open and closed approaches.89 0.78 -0.04 0. it is not necessary to introduce high-intensive managerial and organizational actions.02 41% 14% 8% 4% 7% 10% 0.76 0.69 Cluster 3 (n=11) Specialized collaborator 0. 2008) these type of actions are necessary to ensure successful collaborations and this is confirmed by our evidence. Similarly. It is also interesting to note the prevalent objective in each cluster. open cluster shows an average intensity on these tools statistically higher than closed (integrated and specialised still similar each other and in intermediate position between open and closed).65 0.42 181 .81 . Indeed.30 0. Whereas in open cluster the main goal is the first. With this premise.05 . Thus. we believe that the analysis of overall company’s performance is a complex topic due to the fact it can be “explained” only by considering a wide set of factors that can have opposite impacts. As suggested by literature (Pisano & Verganti.7 0.48 0.80 0.Firm-Specific Factors and the Degree of Innovation Openness Table 1.78 0.75 Cluster 4 (n=36) Closed Significance (Anova test) Performance Innovative performance ROS (Log) ROA (Log) -0.

Moreover. that is even greater in the closed than in the open cluster. Another interesting explanation of this result refers to the need to invest in internal competences in order to be open. different models for open innovation are studied. low or high) were found among companies. Anyway. As a result.are far more diffused (in coherence with the correlation found between the two variables). Another clue for this type of interpretation is given by the specialist innovative performance: higher than integrated just in these two items. p<. Thus. especially in terms of: • Approach to innovation: open innovators are those who choose an aggressive technology and innovation strategy. Open and closed innovators actually emerge from this analysis as two significantly different open innovation models. In perfect coherence with this result. to come first to the market with new products. it is important to keep in mind that they are only clues. to pursue even radical innovations.Firm-Specific Factors and the Degree of Innovation Openness next steps of research and in terms of innovative performance (i. by studying correlations between innovative performance and partner variety. R&D intensity: open innovators invest more in R&D than closed. suggesting that the open is more innovative and that the innovativeness seems to be linked to the partner variety. as part of their effort. companies for which the two variables are different in their value. it can be argued that opening the innovation process to a wide variety of partners and all along the innovation funnel is conceived as part of an aggressive strategy.e. further investigation on performance is surely required. they spend for opening up their innovation process. there is evidence that an input-oriented organisational structure for the R&D activities. i. factor that is a combination of five items). closed innovators.e. that is difficult to generalise because of the limited number of companies included in these clusters. by means of a survey conducted among 99 Italian manufacturing companies. intermediate cases (i. to deepen and integrate the knowledge base. Type of objectives: in coherence with the two results above. The two extreme models – open and closed . with respect to two variables: the partner variety and the innovation phase variety.001).71. four different models for open innovation were found in the practice of companies: open innovators. integrated collaborators. not confirmed by the analysis of company’s overall performance (measured by means of ROS and ROA). Particularly strong were the relations between the single item “The company’s competence base was enlarged” and partner variety and “the level of innovativeness of new products/processes was improved” and still the partner variety. in which they work to be technological leaders. open innovators. mainly open their innovation process to achieve benefits related to internal competences. specialised collaborators. Although these two variables are highly correlated (. so the intermediate ones need a more dedicated analysis to confirm what is emerging • 182 . In other words. aggressive innovators spend significantly more in R&D and. and this in some way confirms the difference in the strategy for the two clusters. as the absorptive capacity of the company is critical to identify and exploit potential collaborations and exchanges with external partners. here. with respect to closed ones. is typical for open innovators rather than for closed. which maximises the absorptive capacity. We found that open cluster seems more performing than closed (and better than the sample average). to lead the technology evolution with superior know-how. to in- • DISCUSSION In this chapter. we found a high and significant relation.e.

if so. level of novelty. learning. routines and tools especially dedicated to the design. in terms of the most relevant context conditions emerged in this study. in which specific context conditions. As a consequence. development and implementation of collaborations with external partners. it seems that there is a sort of “continuum” in the openness of companies. by introducing roles. 183 . it is relevant to reflect on such results since they can represent the starting point for a future research aimed at verifying whether these two open innovation models can actually represent a valid alternative to open and closed models and. which found a positive correlation between the degree of openness (measured in terms of intensity of outbound licensing) and the economic performance (measured through ROS and ROI). to achieve excellence in knowledge production. just to quote a well known framework. let’s take a specialised collaborator. As a consequence. The results concerning the two “intermediate” models of open innovation. Even in terms of performance the four models are different and a first tentative conclusion in this sense is that the degree of openness is positively correlated to the innovative performance: from closed innovators to open ones the level of innovative performance increases (in terms of new products and services. as well as the degree of openness. excellent research centres. But this does not seem to have an effect on the company’s economic performance in the short term. Figure 3 clearly shows that specialised and integrated collaborators can be really considered as “intermediate” models: the most significant variables that characterise the open and closed models. but. On the other side. Organisational and managerial actions implemented to support openness: open innovators have actually modified their organisational structure and management techniques. i. As a consequence. by sharing them with external partners. as already discussed above. In our opinion. However. these companies have limited expectations in terms of benefits deriving from open innovation. specialised collaborators and integrated collaborators. the electronic company cited above: the general manager wanted to spend a limited amount of resources on studying opportunities for opening the innovation process. This result is in contrast with other studies (Lichtenthaler 2009). costs for new products). in fact. at the same time. universities. as shown in Figure 3. This can probably lead to many different measures for evaluating the relationship between openness and performance that certainly requires further in depth studies. the relation between performance and open innovation is very complex to be studied: performance is intrinsically a multi-dimensional concept (think. Integrated and specialised collaborators are thus viable options for companies that don’t have a highly aggressive approach to innovation and that don’t want to invest too much for opening up the innovation process. they decided to open only the idea generation phase to a wide variety of partners.e. only some tentative interpretation of the achieved results can be put forward. By making a synthesis of all results achieved for specialised and integrated collaborators. to the balanced scorecard concept). have values that are between the two extremes4. R&D managers clearly felt the need to integrate their knowledge with external contributions coming from other industries. because of the limited number of companies found for these two clusters. closed innovators are rather focused on reducing the costs and risks of innovation. are less robust. time to market. As an example.Firm-Specific Factors and the Degree of Innovation Openness • • crease creativity and flexibility. but do not want to completely abandon the opportunity to access to external sources of knowledge and competencies.

2003b). As a consequence. In conclusion. The study is conducted by means of a survey involving 99 Italian companies operating in manufacturing industries. but it can be interpreted and adopted with different degrees (Chesbrough. I=integrated collaborators. analyzing the path followed by companies to open their innovation process (Chiaroni et al.e. We suggest that intermediate models for opening the innovation process can be a first relevant topic for future research. and the proper ways to manage them. technological collaboration). in order to understand if such perspective can confirm the existence of different open innovation models. closed innovators. the chapter introduces a new perspective that integrates both the number/typology of partners and the number/typology of phases. O=open innovators) CONCLUSION AND FUTURE RESEARCH DIRECTIONS Our area of research is related and contributes to innovation because collaborations and networks (in particular. R&D intensity. intermediate open innovation models (i. integrated and specialized collaborators) are viable options for companies that do not have a highly aggressive approach to innovation and that do not want to invest too much for opening up the innovation process.although in need of further empirical investigation.are far more diffused and actually emerge as two significantly different open innovation models. consistently with the company’s specific context. Thus. S= specialised collaborators. Moreover.Firm-Specific Factors and the Degree of Innovation Openness Figure 3. provide evidence in support of Chesbrough’s (2003b) theoretical proposition that businesses may be located along an Open Innovation Continuum. are today largely recognized as means to improve. type of objectives. integrated collaborators. or at least to support. a third one may concern the study of open innovation models in a dynamic perspective. Different models for open innovation are found in the practice of companies: open innovators. these companies have limited expectations in terms of benefits deriving form open innovation.. specialized collaborators. Specialised and integrated collaborators between the two extreme models (C=closed innovators. firms’ innovation capabilities (Chesbrough. The two extreme models – open and closed . organizational and managerial actions implemented to support openness. performance of open innovation can be a second one and. i. finally. 184 .e. it provides useful managerial implications because it suggests that OI is not an “on/off” choice. 2006).specialized and the integrated collaborators . The two intermediate models . 2009). but do not want to completely abandon the opportunity to access to external sources of knowledge and competencies. in terms of approach to innovation.

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J.). G.1016/j. Vanhaverbekec. We applied the criteria suggested by the EU (European Commission. W. 185–203. (2007). customers and external knowledge sourcing (Gassmann & Enkel. Open Innovation: Firms rely increasingly on external sources of innovation. Absorptive capacity: A review. V. H.00434. closed is artificial (Chesbrough. 29. 2003b).x vandeMeer. base through the integration of suppliers. Specifically. W.. KEY TERMS AND DEFINITIONS Absorptive Capacity: The ability of a firm to recognize the value of new. (2002). & Pearson. Choosing governance modes for external technology sourcing. R & D Management. Technovation. New York. UK: Oxford University Press. R&D activities of firms with aggressive technology strategies are usually highly specialized. and apply it to commercial ends (Cohen & Levinthal. Technology Aggressiveness: Firms with aggressive technology strategies constantly developing new technologies that are superior to the technologies of their competitors.1111/j. develops and commercializes its own ideas.10.. an autonomous company is classified as: (i) small. C. & Vanhaverbeke. NY: Oxford University Press.. A. Between the two pure models . doi:10. 36(3). 6(2). deJong. Open innovation in SMEs: Trends. & deRochemont. & J. The sources of innovation. assimilate it. which means that ideas. E. 2003b. 2004). Based on this specialization. resources and individuals flow in and out of organizations (Chesbrough. Open Innovation Continuum: Innovation models which the firms follow are not exclusively open or closed. M. (1988). S. the firms tend to focus on radical rather than incremental innovations (Brockhoff. Lemmens. V. technovation. 2007). (2006). 1990). 2005) for classifying firms on the basis of their size. 2004).001 van de Vrande..2008. Open Innovation: Researching a new paradigm (pp. Creativity and Innovation Management. motives and management challenges. West (Eds. Academy of Management Review. 2009).Firm-Specific Factors and the Degree of Innovation Openness van de Vrande.14679310. Dahlaner & Gann. Oxford. selling IP and multiplying technology by transferring ideas to the outside environment (Gassmann & Enkel. 192–202. 347–363. Vanhaverbeke. Zahra. 205–219). 2003a). 27. external information. (2006). & George. (2008). re-conceptualization and extension. 423–437. Lichtenthaler & Ernst.there are many shades of grey and the dichotomy between open vs. but rather show varying degrees of openness. W. Closed Innovation Model: In closed innovation model a company or closed .2006.. In H. Inbound Open Innovation (Outside-In Process): Enriching the company’s own knowledge ENDNOTES 1 2 The other two items are: the specialization of the company’s R&D activities and the high importance of development activities (the D part of R&D) relative to the firm’s overall R&D activities (Lichtenthaler and Ernst.. Chesbrough. 1992. Open innovation — The Dutch treat: Challenges in thinking in business models. if the number of workers is < 50 and turnover is <= 10 million € or the 188 . Outbound Open Innovation (Inside-Out Process): Earning profits by bringing ideas to market. 2009). The interorganisational context of open innovation. This philosophy of self-reliance dominated the R&D operations of many leading industrial corporations for most of the 20th century (Chesbrough. W. doi:10. von Hippel. Vanhaverbeke.

if the number of workers is > 250 and revenues > 50 million € or the annual balance sheet total is > 43 million €. if the number of workers is between 50 and 250 and turnover is between 10 and 50 million € or the annual balance sheet total is between 10 and 43 million €. (iii) large. but this is coherent with the fact that closed innovators need to invest a lot in R&D.Firm-Specific Factors and the Degree of Innovation Openness 3 annual balance sheet total is <= 10 million € (ii) medium. since they have to develop internally all tangible and intangible resources needed for innovation. Data about correlations between intensity of collaboration with each typology of partner 4 and each typology of phase are not reported in this chapter but they are available upon request. 189 . Only R&D intensity is lowest in the case of integrated collaborators.

there is a “champion” acting as a facilitator for the collaboration success d. Partner variety: in the last five years you have collaborated with a wide variety of external actors 2. Enlarge the company’s competence base ii. Customers. The company analyses and selects the potential partners with a formal and explicit process 8. Innovative performance a. Phase variety: in the last five years you have collaborated on a wide variety of phases. Giving emphasis on radical rather than incremental innovation 7. The company formally evaluates the objectives and risks of the collaboration e. competences and creativity: i. Intensity of collaboration on phase: in the last five years you have collaborated very strongly on the following phases (Idea generation. aims to share risks and costs: i. The time to market of new products / processes was reduced d. Suppliers. Sales volume and market acceptance of new products was improved 190 . Personal relationship of the R&D manager are exploited to start technological collaborations c. Competitors. Intensity of collaboration with (each) partner: in the last five years you have collaborated very strongly with the following partner (University and Research centres. Influencing the industry structure and rules by means of products characteristics d. The company’s competence base was enlarged b. Reduce or share the costs of innovation 6.Firm-Specific Factors and the Degree of Innovation Openness APPENDIX 1. Reduce or share the risks of innovation ii. For each collaboration. Governmental institutions. Aggressive acquiring new business areas by means of innovation c. Top management is committed towards the maximization of the collaborations results b. Engineering. 3. Trying to recruit the best researchers and experts available on the market e. aims to extend skills. Manufacturing set up. The level of innovativeness of new products / processes was improved e. 5. Technical and Scientific Service Companies. The average development costs of new products/processes was reduced c. Approach to innovation (technology aggressiveness) a. Objectives of collaboration a. Experimentation. Investing for technological leadership b. 4. Firms operating in different sectors of activity). Commercialization). Organizational and managerial actions for open innovation a. Increase the flexibility of the internal organization iii. Stimulate creativity and idea generation capability b.

and more specifically. Based on a literature review of Resource Dependence Theory (RDT) and four case studies. . Findings include: (1) the specific needs and resource dependence by the innovative firm during different PDPs affect the status of the firm’s INRs.4018/978-1-61350-165-8. growth. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. this chapter contributes by discussing how various INRs are affected by PDPs of an innovative firm. maturity. and (3) the development of INRs cannot be captured on a dyadic level. IGI Global. DOI: 10. the INRs become increasingly complex where network parties become negative resources of the innovative firm through increased uncertainty being introduced into previous relationships. While these phases have been related to and used for the study of product life cycle. product development has frequently been associated with four distinct phases: introduction. but various parties’ relationships with one another need to be considered. less or no attention has been given to the subject of Innovation Network Relationships (INRs). Sweden Chapter 11 ABSTRACT In research literature. market strategies and competition. and decline. whereas new relationships are built and old ones are finished. to whether and how INRs are affected by these Product Development Phases (PDPs).ch011 Copyright © 2012.191 Effects of Product Development Phases on Innovation Network Relationships Christina Öberg Lund University. (2) during product development.

The chapter shows that: (1) the specific needs and resource dependence by the innovative firm during different PDPs affect the status of the firm’s INRs. In addition. the INRs become increasingly complex where network parties become negative resources of the innovative firm through increased uncertainty being introduced into previous relationships. and mean that other companies become less inclined to establish or maintain a relationship with the firm. the method is described. Thus. 2005). as well as pure business partners. INRs here describe the ties to external parties that an innovative firm is connected to by means of contracts. 2009). 2006. The phases have been described in terms of how a company should act in marketing. and also refers to the PDPs and INRs. finance bodies. resource provision and balance/ imbalance between them. The next section describes the theoretical point of departure. and (3) the development of INRs cannot be captured on a dyadic (between two parties) level. and whether and how RDT explains the effects on network relationships in the various phases. 192 . This chapter further contributes to research into business networks by showing that business relationships may develop and expire as a consequence of an innovative firm’s PDPs. 2002. Levitt. customers. (2) during product development. they include relationships with both equity and non-equity partners. or business deals. growth. but various network parties’ relationships with one another need to be considered. The empirical part of the chapter is based on four case studies of innovative firms. Gasparin. An innovative firm describes a new venture that was created to market a new product or service idea. maturity. collaboration. 1990. yet less seems to be known about how the relationships with these parties are affected by the development of an innovative firm. Heide & John. however. this research contributes to the field of innovation by demonstrating how these PDPs involve different needs and dependencies on network parties.Effects of Product Development Phases on Innovation Network Relationships INTRODUCTION Studies on products and markets often describe their development as consisting of four phases: introduction. and companies would act differently in the various phases (Moon. 2003. and how they are affected by the phases of development (introduction. This chapter contributes to the field of RDT through discussions on negative resources in terms of connected relationships and how such relationships need to be incorporated to fully understand the development of dependence. Caldwell & Lewis. Magnusson. 1965). Öberg & Grundström. Johnsen. Negative resources thus describe assets or relationships of a company. maturity. RDT. The chapter ends with conclusions and ideas for further research. The concept of negative resources is developed in the chapter to express how relationships of a company may be negative in that company’s relationship with other firms. growth. Thereafter. and decline (Christiansen. 2010. 2008). The purpose of the chapter is to discuss various INRs and how they are affected by the PDPs of an innovative firm. The chapter is structured as follows. and what the competition looks like during the different phases (Lehmann & Winer. Hienerth & von Hippel. 2006. Thomke & von Hippel. These PDPs would expectedly follow one another. Phillips. the network parties. Varnes. ownership. The PDPs could. and decline). also be considered in terms of INRs. whereas new relationships are built and old ones are finished. Various network parties are discussed based on their roles as suppliers. These are summarized after the method section and then analyzed in terms of the development phases. External parties have proven to be important for the development and prosperity of a company (Baldwin. and so on. Storm-Nielsen & Vinther.

however mostly as rescue plans or to decrease imminent dependence on a single actor. Consequently. while the alliance literature has explained joint ventures and similar as a means to decrease uncertainty (Doz & Hamel. Phases of Development The product life cycle is frequently used in marketing and product management research to depict how products. Each phase means new challenges. and these could be expected to focus on various types of resource needs. 1999) to explain why companies commit into business relationships with one another and the consequences of such relationships. or may become allies to retain a balance towards business partners. Maturity describes how the product reaches a peak in terms of number of users. and without it necessarily having reached complete functionality. While much of the focus in power and resource dependency theory remains on the dyadic relationship level. Levitt (1965) outlined the product life cycle as consisting of market development/introduction. 1996). 1979. The idea thus focuses on the dyadic level of relationships to explain their continuity. Pfeffer (1972) used this argument early to explain mergers (cf. and consequently also affect resource providers. Thompson. Högberg. Rink & Swan. Katila. to decrease dependence on a single party and to maintain options should the first relationship become imbalanced to the detriment of the company. (3) emergence of status. growth. leading to bounding with and creating new relationships. while focusing more on how companies should make themselves as little dependent on other parties as possible. (2) extension of the power network. The decline phase refers to how customers abandon the product. RDT developed from this (Pfeffer & Salancik. Sarkar & Echambadi. or even companies or industries progress (Agarwal. Rosenberger & Eisenhardt. or (4) coalition formation. four basic strategic alternatives would expectedly apply: (1) the party with less power withdraws from the relationship. 1998. 193 . this would potentially lead to other parties being considered or that changes are induced on the dyadic level. while simultaneously optimizing company autonomy. Tellis & Crawford. The wider network aspect of resource dependence suggests that other relationships are kept to ensure that alternatives are available. 1995). RDT. and decline. RDT replaced the discussion on power with a similar one on resources. 1981. 1967). meaning that alliances are created with other actors. while also decreasing the number of new users.Effects of Product Development Phases on Innovation Network Relationships THEORETICAL FRAMING This section outlines the theoretical point of departure. a wider network is consequently considered. maturity. where the party with less power is given status recognition. The introduction phase describes how a product is first brought to market without there necessarily being a demand for it. 2002. Van De Ven & Scott Pole. The power-dependence idea suggests that relationships would only continue as long as there is a balance between power from one firm’s perspective and dependence from its business partner’s point of view. dependence between firms and thereby network relationships in different ways. 1962. Network parties may act as alternatives to decrease dependence on existing business partners. Gomes-Casseres. Dependence and uncertainty became those variables to minimize. 2008. and briefly introduces research on PDP and network relationships in innovations. 1978). The growth phase is marked by increased demand and competition. This consequently means that when a relationship becomes imbalanced. A Resource Dependence View on Network Relationships RDT was developed from power-dependence (Emerson. When not in balance.

suppliers. The case companies however share resemblances in terms of how they now are part of mature industry structures. and other external parties. the findings suggested in this chapter could be expected to be general (with certain case-specific differences) for INR effects in various phases of innovative firms’ development. and their different reasons for founding the companies (technology- driven or customer initiative). It is thus evident that various network parties provide the innovative firm with different resources. for instance. Compared to this study. and as a consequence. Von Hippel (1978). Those particular companies studied here are innovative firms in mature industries. describes customers in idea generation. the conclusion on 194 . An additional four case studies have recently been performed to further ensure the transferability of the findings from this chapter. However. venture capital companies. 1986). Lee and Pennings (2001) focus on venture capitalists. 2008. non-equity partners. 2000). cross-case basis. They have all gone through the phases of introduction and growth and reached a phase of maturity or even decline. notes from interviews. the present chapter deals with effects on INRs and use the RDT lens to understand such relationship effects. 1989. customers. interview transcripts and secondary data were coded. Öberg and Grundström (2009) summarize external parties to innovative firms in the following categories: innovators. The data collection for the four case studies consisted of interviews with owners. The coding was first performed to capture the content of the individual interviews. Lee. customers. and that they have relied on external parties for support in their early developments. financial backers. A total of forty-one interviews were conducted between 2003 and 2008. Yin. and public bodies. and as a second step to compare data on a crossinterview. The interviews were complemented with a secondary data analysis to gather background data on the firms and check the accuracy of interviews (Welch. suppliers and customers in product development. But how are the network relationships then affected by the various PDPs? METHOD This chapter is based on case study research. Further. Thus. innovators. Hirschman. They were chosen based on how they represent various innovations. It further relates network parties to various PDPs. 1994). suppliers. many case study results would be expected to be transferable to other situations and cases (Hirschman. Results from the interviews have previously been presented in Öberg and Grundström (2009). and was explorative in that sense. The article by Öberg and Grundström (2009) focused on challenges and opportunities related to the development of innovative firms’ networks. and the resource provision could. as argued in this chapter. which made them suitable for this chapter. In the analysis procedure. Case study research is often criticized for not allowing generalization of findings. Such arguments are further strengthened if similar findings are repeated between various cases studied while not being the reason for their selection. owners. 1986). Chandra and MacPherson (1994) describe consultants. Findings from the four cases presented in this chapter confirm each other through indicating similar findings (Guba & Lincoln. The second step also entailed the analysis of the data using the framework of RDT and the division of development into PDPs. managers.Effects of Product Development Phases on Innovation Network Relationships Network Parties in Product Development Several researchers have highlighted external parties in innovations. The case study method enables the exploration of data and allows additional analyses on previously collected data (Dul & Hak. be expected to vary with the PDPs of the innovation.

The innovative firm built on a customer initiative (Company D) relied heavily on the customer to understand specific needs related to the product. became dependent on such actors as venture capital companies or incubators in their early development. while Companies A and C still have less than ten employees each. All four companies are small or middle-sized companies with a turnover running from six to two-hundred million SEK. In the early phases of development. B and D) are today part of multinational industry groups. while Company C remains domestically owned. “Often when we are about to invest in a new system. and network parties then helped the innovative firm to grow through providing initial income (Company D) and financial resources to the innovative firm (Companies A-C). although several of them actually were competitors. For one of the companies. while those supported by pure financial bodies developed skills in how to get to market. without these skills being specifically encompassed by the company and without it leading to any inherited relationships. Three of the companies (Companies A. first and foremost with no actual knowledge on our product. EMPIRICAL FINDINGS This section summarizes the four cases through describing them in the various phases of development. Companies B and D are the largest of the firms. but have since expanded into new geographical markets. The three companies Growth Phase All four companies managed to establish relationships with other industry actors: suppliers. either to be implemented in other products or to be sold as standalone solutions. we check if any colleagues have it.” (Company C.Effects of Product Development Phases on Innovation Network Relationships how various INRs need to considered beyond their dyadic relation with the innovative firm finds support beyond those specific circumstances of innovative firms. When they were first established. Additional relationships were mainly established during the growth phase. its financial backers were industrial actors in the industry the company aimed for (Company A).) Introduction Phase The four cases studied all describe companies developing software solutions. Company B being the oldest of the firms. and contributes to RDT through describing network relationships as positive and negative resources of a firm. while the fourth (Company D) based its innovation on a customer initiative. they all operated on the Swedish market. They were founded in the 1980s to the early years of the 21st century. This was also the company that developed the standalone solution. there was no conflict of interest between these parties. that were not initially backed by a customer providing ideas and financial resources.) An industry-related venture firm allowed for contacts with other firms through its network. Those three companies (Companies A-C). additional customers or money providers. and the customer also helped in spreading the innovation to other customers.” (Customer to Company D. Three of the companies (Companies A-C) developed their innovations based on technological ideas. 195 . also had strong foundations in university environments. while the other two companies (B and C) were supported by venture firms with good knowledge on how to develop companies but less knowledge on the specific innovations developed. and with five to fifty employees. “They were financial bodies.

Those future resources accounted for previously would not be realized. “A new owner was needed if we should be able to develop further. and the connection between the innovative firm and its new owner constructed a negative resource in that way.) The acquisitions meant that the companies indeed reached those financial resources provided. The acquisitions largely meant that the innovative 196 . but clear for all cases is that the firms looked for long-term financial solutions for further growth at that point in time. In addition. This resulted from network parties no longer providing ideas. Network parties experienced competition with the acquirers. in combination with the performance and actions of the acquirer. Maturity Phase To secure financial resources long-term. In the first of these (Company C). the maturity phase hence caused them to lose resources accounted for previously. in terms of own revenues (customers and suppliers). either because they were competing industry parties (Companies A and B).Effects of Product Development Phases on Innovation Network Relationships The network parties’ reasons for doing so much related to expectations on future returns: in terms of return on investments (venture firms). for network parties. Dissolutions or further distancing in network relationships followed. the innovative firms were acquired. firms reached a maturity phase. and hence connected such returns to that point. the acquirer only had interest in part of the innovative firm. the innovative firm reached a decline phase. the acquisitions introduced an imbalance in their relationships with the innovative firms. Network parties experienced this decline as fewer resources being provided. “It was clear from start that their (the venture firms’) interest was only temporal. in turn affecting the innovative firm and finally ending up in liquidation of the acquirer and the innovative firm. but also meant a lessened focus on developing innovations further. Such declines were foremost seen in two of the four cases (Companies C and D). The other case (Company D) describes how the acquirer continued to make additional acquisitions. at the same time as those network parties that had previously supported its development decided to dissolve their relationships with the innovative firm. and thus marked by a difference in time between experienced dependence and resource provision between the innovative firm and its network parties. the innovative firms) were active to various extents in those processes. These subsequently drained the acquirer’s financial resources.” (Company B. Decline Phase Unless the acquisition was performed successfully. This was either a consequence of the acquirer having other intentions with the firm (Company C) or resulted from a more restricted innovation process than previously (Companies A. and hence. while other network parties often saw returns as long-term and as benefitting the parties in also other than financial terms. the acquisitions meant that previous business partners distanced themselves from the innovative firm (Companies A-D). or as a result of how the acquisitions changed their abilities to realize those long-term intentions that the network parties had had with the innovative firm (Companies A-C). or in terms of those products provided (customers). B and D). Venture firms had an explicit exit plan. Thus. For network parties.” (Company C. as well as a result of competition.) Relationships were often strong and close. the rest of the company was not given sufficient resources to continue. The acquired parties (that is. and also that expectations on future resources increasingly disappeared.

to the development of products and the company established for the sake of the product. Similar to the introduction phase. or how they may be a means to decrease dependence and uncertainty (Pfeffer. and at various times. Similar balances. To customers. those other established relationships of the innovative firm often were considered as positive resources of the innovative company that vouched for its continuity. What is more. the resource balance between the innovative firm and its network parties was based on how resources provided were expected to equal future returns. while the per-party dependence of the innovative firm decreased. and such relationships were often dissolved. resulting in the possibility of new relationships being considered as negative resources by the network parties.g. The innovative firm was not as dependent on their resources. more customers or venture firms were included in the network. 1972). and in longer-term perspectives for innovators. it was instead dependence on future resource provisions (in terms of the innovation as a complete functional product) that drove the customers to that phase. shows that the maturity phase meant that an imbalance 197 . The introduction phase was marked by innovators providing knowledge skills related to the innovation. for instance. made them continue their relationship with the innovative firm. however. potentially causing an imbalance in individual relationships. where the potential for returns in terms of actual products increased. However. and customers or financial bodies providing financial resources to enable possible growth. Previous research has related acquisitions to how a balance can be recreated in relationships. hence. while individual relationships became increasingly distanced. The maturity phase was in the cases reached through acquisitions. There was a balance between the expectations for future returns and the dependence on these external parties by the innovative firm. Little conflict was seen between various relationships in this phase. Therefore. and they were thus considered rather as positive resources of the innovative firm. where they were dependent on the innovative firm for its knowledge in those specific areas that the customers did not comprehend themselves. based on additional parties being included in the network (e. as in the previ- ous phase. Additional customers increased the likelihood of successful developments. decreasing uncertainty in the relationship. and less attention was paid to individual needs as a consequence. the growth phase meant that relationships were close. As new parties entered.. the innovative firm no longer provided the right fit. each party’s importance for the innovative firm decreased. while also being marked by less-specific resources and actors of those network parties. they still remained. and hence also for financial returns. For network parties. This chapter. for instance. and in their constructs as incubators. or caused them to dissolve. The growth phase mostly entailed similar network parties as in the introduction phase. These acquisitions further increased the distance in existing network relationships. These network parties were affected by the introduction phase in terms of how it provided them with the potential for future business opportunities. more customers). Incubators or universities in this phase realized that their resources were no longer needed. Such returns were expressed in terms of finances for venture firms. thus creating an increased distance in relationships with customers. Relationships during the introduction phase were close. however. The innovative firm equally became dependent on these resources for its development. it seems apparent that several different network parties contributed resources to various extents. yet often marked by how companies only included a limited amount of resources and actors in them. Resources provided by the innovative firm were less customized. such dependence decreased while also leading to increased uncertainty among network parties.Effects of Product Development Phases on Innovation Network Relationships ANALYSIS Based on the cases.

First. (iii) emergence of status. The figures (i) to (iv) refer to the various ways a company would be expected to react based on RDT. depending on whether they bring credibility to the innovative firm or lead to competition between such parties and the acting network party. during the development. or was a consequence of other network parties intending to acquire the innovative firm. 2. The decline phase can be described as how business partners dissolved their relationships as a consequence of their dependence on the firm actually decreasing. they are introduced as positive and negative resources. and were also marked more by business-related buyer-seller conditions than by financial resource provisions. thus extending the focus beyond the dyadic level of analysis. For one thing. Other alternatives were indeed available. the network parties faced how their future positions with the innovative firm were challenged. Based on Table 1. The network parties did not automatically choose another party to compensate the loss. since the innovative firm had found another owner. they did not dissolve the relationship as a result of other options. the stronger party was the one withdrawing from the relationship. or (iv) coalition formation.Effects of Product Development Phases on Innovation Network Relationships was created as a consequence of the acquisitions. where the party with less power is given status recognition. Secondly. and therefore reevaluated their relationships as future resources from the innovative firm would not meet their needs. the relationship established between the innovative firm and the acquirer could be seen as a negative resource. While decreasing dependence would normally make a company more inclined to continue its relation- ship with a firm. Two of the companies reached the decline phase. Such a phase is marked by less competition and also decreasing customer interest (Levitt. (ii) extension of the power network. Rather. Second. resulting in less present positive resources from the innovative firm. it is not certain that it is the party that negatively experiences an imbalance is the one to act.. and 198 . certain issues would need to be addressed compared to RDT. leading to bonding with and creating new relationships. relationships of the network partners may need to be considered. CONCLUSION This chapter discussed how INRs are affected by PDPs of innovative firms. also leading to competition between network parties. the decreasing dependence was less than the perceived decline in the need for the resource. a consequence of them not thinking that the innovative firm provided resources that were sufficiently attractive. Here. The negative resource in terms of the ownership ties with the new owner resulted from competition between those other network partners and the owner. Such an acquisition would not take place. Table 1 summarizes the various phases. the network becomes increasingly complex. the specific resource needs of the innovative firm during various phases of development leads to new INRs being established while previous ones are dissolved. This affected network relationships in terms of how customers dissolved their relationships with the company. At this point. meaning that alliances are created with other actors. when the relationship with another party becomes imbalanced: (i) withdrawal of the party with less power from the relationship. 1965). while they were the parties taking the initiative to dissolve the relationships. network relationships had been increasingly distanced during the maturity phase. but such dissolutions resulted rather from disappointments in the present relationship than from the attractiveness of other options. as seen in the decline phase. Findings of a literature review on RDT and case studies were: 1. which underlines how. This imbalance can be explained twofold.

Such other relationships could be accounted for as positive or negative resources of a firm. 2000. Balance/Imbalance Balance Imbalance: network parties’ power decreased. since it cannot make everything itself. leading to bounding with and creating new relationships Decreased dependence on individual parties as network grew (iv) coalition formation. and they would spread their risks to other parties if their dependence on the innovative firm becomes too strong. As a consequence. Such effects include how changes in one dyadic relationship affect others. From the network parties’ perspectives. indirect effects in networks are not as easily explained. 1987) as it develops. Decline Imbalance through network parties’ decreased dependence. Dwyer. Such changes in resource needs would consequently affect the INRs. 1998). If relating this to INRs during various PDPs of an innovative firm. and the firm would aim to decrease its dependence on individual parties through either alliances with other firms or by dissolving relationships in imbalance. the innovative firm would establish new relationships to outweigh possible imbalance in existing ones. universities withdrew (i) the party with less power withdraws from the relationship Parties dissolved their relationships as the innovative firm’s connection with its acquirer was considered negative. also increasing uncertainty Here the party that became less dependent withdrew (in contrast to (i)).Effects of Product Development Phases on Innovation Network Relationships Table 1. this would suggest that the innovative firm’s resource needs vary with the PDPs. To exemplify the latter. 2000. but this is somewhat different from 199 . Möller & Tähtinen. the innovative firm would choose to establish yet also dissolve relationships with different network parties (Alajoutsijärvi. similar considerations would be anticipated: the network parties would keep their relationships with the innovative firm as long as they provide them with relevant resources (presumably in terms of innovations or returns on investments). meaning that alliances are created with other actors Network parties Expectations on future returns as resource (i) the party with less power withdraws from the relationship Incubators. as well as why additional network relationships are established (and indeed dissolved). this includes how a dissolved customer relationship may lead to other customers dissolving their relationships with the same supplier. Hertz. where relationships as positive and negative resources become a means to capture network parties’ impact on a relationship. RDT suggests that the reason that the dyadic relationships are there in the first place is the company’s needs for resources provided by others. It could also be described as how increased uncertainty is introduced into a relationship. 3. leading to a decrease in resources. Schurr & Oh. and may be seen as domino effects along a supply chain or how indirect business relationships affect one another on a network level (Havila & Salmi. but various parties’ relationships with one another needs to be considered. While resource dependence theory may be used to explain changes on a dyadic level. Secondly. Maturity Imbalance through acquisition: network parties perceived acquirer as negative resource of the innovative firm. the development of INRs cannot be captured on a dyadic level. Innovative Firms and Network Parties in the Various Phases Innovative firm Introduction Growth Dependent on resources (financial and idea generation) (ii) extension of the power network. but this has not previously been addressed in RDT.

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such as universities. searching to improve their innovative capacity and performance. Development and Innovation activities (R. The purpose of this chapter is to introduce the reader to the concept of network management and demonstrate the principal attributes that impact the formation and optimization of innovation networks. To reach this purpose. Through the results we were able to identify a maturity model consisting of four levels for innovation network management: initiators.203 Maturity in Innovation Network Management Caspar Van Rijnbach TerraForum Consulting. the United States of America and Europe between March and June 2009. we interviewed executives at 24 leading companies known as innovators in their industry. companies are focusing increasingly on Copyright © 2012. established and world class. have raised the gap between the need for innovation and what companies can deliver internally. the combination of the characteristics of the network’s participants as well as the network’s organizational format to attract and maintain the partnership. clients. DOI: 10.D&I). Brazil Suzana Monteiro Leonardi TerraForum Consulting. . IGI Global. Brazil Chapter 12 ABSTRACT Companies are focusing increasingly on the creation and maintenance of external networks for innovation. In this study.ch012 This situation has stimulated companies to create innovation models based on collaboration with external sources. INTRODUCTION The complexity of current Research. ever increasing cost of these activities. explorers.4018/978-1-61350-165-8. more sophisticated customer demands and shorter product life cycles. based on the network´s objectives. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. companies from other sectors. Brazil Gustavo de Boer Endo TerraForum Consulting. or even competitors. This new framework is being referred to as “Open Innovation”. we present the results of a benchmark study undertaken in Brazil. With the concept of open innovation becoming common.

Literature includes discussions of how management of external networks differs from the more traditional way of managing strategic alliances (a. This type of R&D is called “closed innovation” (Chesbrough & Vanhaverbeke. partially qualitative. INNOVATION NETWORKS Traditionally. Much has been written about innovation networks and their management. 1998) as well as how to measure the effectiveness of specific networks (a. This study was for a large part concluded in 2009 and preliminary results of the research were presented during the International Society of Professional Innovation Management (ISPIM) conference in Austria in 2009. more sophisticated customer demands and shorter product 204 . Our research was undertaken amongst 24 Brazilian. developing and commercializing technologies and products internally. this often occurs without using a holistic approach to the architecture of networks and individual participants. It requires a portfolio view of networks. we combined and adapted several theoretical models developed in books and articles from renown authors in this area. measuring the fit between the network’s objectives and the management activities of the company in regards with the network. We identified an opportunity to research more extensivily how organizations link different types of networks to organizational strategic goals and define methodologies to optimize network composition and architecture. 2004).o. 2003). We hope this study will contribute to a better understanding of how innovation networks work and how to develop them. 2006). 2009).o. ever increasing cost of these activities. relational. To develop this theoretical framework. Although some practices partly depend on the company’s industry or R. Large R&D organizations were seen as important assets to their companies and focused on discovering. Our method was based on testing our theoretical framework mainly through structured. Development and Innovation activities. we see that many practices are common and their use depends on the company’s level of maturity regarding open innovation networks. Unfortunately. However. Gulati. Segil. as already indicated by Vanhaverbeke e Cloodt (2006). The maturity model should contribute to the debate around best practices in network management for open innovation. The main references we used were: “Alliance portfolios: designing and managing your network of business-partner relationships” (Parise & Casher. support and organization. This can create malfunctioning of the networks. 2006) and “Effective practices for sourcing innovation” (Slowinski. For this research we developed a theoretic framework on the ways companies are managing the composition and structure of their innovation networks.D&I investment levels.Maturity in Innovation Network Management the creation and maintenance of external networks for innovation. partially quantitive interviews. the complexity of current Research. “Open innovation: researching a new paradigm” (Chesbrough & Vanhaverbeke. not being able to obtain the network’s goals and thereby not having the impact as expected on the companies strategic objectives. Research and Development at large organizations have been handled internally. European and American based firms. Our research amongst the 24 international organizations. Companies often look at specific competencies that need development and do not evaluate the network composition and its effectiveness based on the specific network’s objectives and its contribution to the overall company strategy. showed that some common good practices exist among companies when it comes to open innovation management. The main results from our study therefore was the construction of a maturity model for open innovation. based on four dimensions: strategic.

with growing degrees of complexity between them. 2009. or even competitors that collaborate to improve their innovative capacity and performance. 2007. as demonstrated in the following figure. 2004). 2007). Van de Vrande. to dense multilateral relations where actors tend to cluster in alliance blocks (Lemmens. This level permits us to understand how companies organize themselves internally to take the most advantage of external knowledge acquired and referes to the internal culture of the company which either stimulates or prevents the usage of Figure 1. clients. 2007). as stated by Terra (1999): • • • • Joint ventures and research corporations Shared agreements for R&D Agreements for technology exchange Direct investments: minority shareholding driven by technology factors • • • • • • • Licensing agreements Networks for Subcontracting Research associations Joint research programs sponsored by governments Computer databases and networks for exchanging technical and scientific information Informal networks Other networks Since open innovation primarily refers to establishing of intra and inter organizational relationships. companies from other sectors. This new framework is being referred to as “Open Innovation” (Chesbrough. have raised the gap between the need for innovation and what companies can deliver internally (Slowinski.Maturity in Innovation Network Management life cycles. such as universities. Vanhaverbeke e Cloodt (2006) suggest that the analysis of such relationships should be undertaken in five different levels. Networks refer to inter-organizational relationships and can range from sparse dyadic. This situation has stimulated companies to create innovation models based on innovation networks: a set of external sources. Complexity in intra and inter organizational relationships (Fonte: Vanhaverbeke e Cloodt (2006)) 205 . Chesbrough. The first level treats the relationship between individuals of the organization for innovation. Innovation networks can be formed through various forms of cooperation.

They discuss how to select partners for innovation. 2002. Doz. Therefore.both internally and externally . Teng. evaluate strategic alignment between two partners and how to generate a strategic alliance over time. e Vanhaverbeke et al (2009. form interdependent networks that often compete with each other . Increasing sharing of knowledge and information between these different alliances is a great challenge. 2007). with emphasis on the fourth and fifth level. Oskan. The second level treats the benefits that a company can obtain with open innnovation and is related to the types of partners and the company’s strategic objectives in relation to its open innovation model. others argue that they are created intentionally and therefore can be managed to some extent – a ‘network organization’ perspective (Moller & Rajala. Arino. that they are emergent – a ‘network of organizations’ perspective. de La Torre e Ring (2001). taking into consideration the five levels as described by Vanhaverbeke e Cloodt (2006). When discussing innovation networks one should contemplate and manage relationships at all five levels. 2003). and Parise and Casher (2003). Ozkan (2007). The fourth level considers inter organizational networks and studies how a leading company integrates its external relationships within a coherent strategy and manages this over time. supranational or sectorial dimension. To be able to define a preferred portfolio of partners one should answer the following questions: • • For which part of the innovation process a partner is required? Which type of partners would be ideal to obtain the companies objectives within the specific part of the innovation process? 206 . 2000. The fifth level consists of understanding how innovative companies are embedded in institutional arrangements and are able to leverage and optimize the innovative efforts of a group of companies gathered in an innovation system that can be can be of local. Olk. or what we called. or what might be called a portfolio view. We tried to use a more holistic approach to the management of networks. Ring. focuses on how to manage the portfolio of alliançes and partners. national. A Portfolio View of Innovation Networks Different innovation processes and innovation activities demand different type of innovative capacities. Parkhe and Miller (2000). This level is quite well discussed in academic literature about strategic alliances by authors like Gulati (1998). In this situation it will be necessary to develop a portfolio approach to successfully implement innovation network management. regional. Some authors pledge that networks connect naturally. evaluate risks and returns. Wixted e Holbrook (2008). The third level considers the benefits and interests between two or more companues to create links between them. This level of analysis takes in consideration that every specific alliance is part of a network of interactions that can either optimize or restrict diadic relationships. typically a company is involved with various partners in different alliances or contracts. a portfolio view. 2000.Maturity in Innovation Network Management this knowledge and technologies from outside of the company. Our research was undertaken based on the latter view and focuses specifically on the capabilities of the firm to manage its networks. The various alliances with multiple partners. Literature by authors such as Das and Teng (2002). Das. a systemic approach to open innovation. they have become significant drivers for innovation (Dyer & Nobeoka.for limited resources (Parise & Casher. 2007). A portfolio of partners can be defined as a collection of direct partners of a company that are the central components of a collaborative network. In knowledge-intensive sectors.

2007. relationship management. and management of individual partnerships and alliances. 2007). Nielsen & Mahnke. Boronat. business intelligence. one must take into account that these agreements lead to the creation of dense networks of partners linked by direct and indirect relations. organizational characteristics and trust. There are many challenges of managing a network of collaboration among partners. 2002. Partnerships are difficult to manage. 2008). Duyster. 1998. Man. and the ability to establish mutual trust and interdependent relationships (Arino. Camisón. With greater involvement and collaboration in the innovation process.formed both by allies and rivals. One of the factors of complexity in managing partnerships and alliances is that it involves nonhierarchical relations between different institutions and demands an unusual combination of skills from traditional managers: entrepreneurship. 1997. 2001). a more strategic approach to management of innovation networks becomes necessary. According to Parise and Casher (2003) the principal challenges are to: • • Understand the collaborative and competitive dynamics between partners Monitor and understand changes in the business environment which may alter these dynamics When it comes to managing partner networks for innovation. De la Torre & Ring. cross-cultural diplomacy. 2003). evaluating its performance and results and formulating strategies to improve their performance (Harbison & Pekar. 207 . It includes monitoring and managing the network created by all these relationships. support and services and organizational structure. Establish different strategies for each type of network collaboration Understand how each partner selection and its position in the network will affect both individual relationship and overall network performance MANAGING AND FORMATION OF INNOVATION NETWORKS Innovation network management refers to a systematic approach to work with external partnerships along the innovation processes. especially when there are cultural differences between partners (Arino et al. In the next few paragraphs we will explore four dimensions of innovation network management one needs to take into consideration to guarantee that these critical and strategic factors are handled correctly: strategy setting.Maturity in Innovation Network Management • Which combination of partners and commercial type of relationships will optimize knowledge exchange and results within the network? • • The portfolio approach provides a clear view of how to manage the network of partners . Lichtenthaler. Villar. External collaboration with different organizations brings with it a high level of complexity related to culture. It allows minimizing and diversifying portfolio risk and leveraging synergies of the network of partners as it permits the reflection on the future needs of potential partners and developing processes that enable the sharing of information and knowledge among the network participants. Understanding the concepts and implications of the formation of strategic alliances to find the best setting and the appropriate partners for the innovation network is a major challenge for open innovation (Van de Vrande. since the agreements governing the relationship between the partners can bring significant risks to the company.

Another decision that will direct which partners to choose. For example.Maturity in Innovation Network Management Dimension 1. when one seeks more radical innovation and closer to manufacturing when it comes to incremental innovations (so as to be able to quickly deliver small improvements to existing products). Also.). For example. companies will need to understand the dynamics and the potential issues that a combination of certain partners might bring (companies of different size. Strategy Setting To make open innovation successful. 2008): • • • Understanding of the context: what is the strategic situation to be reviewed? Definition of the actors: which types of actors the network should focus on? Creation of an interdependent matrix: who determines the nature of network relationships? Creation of the desired portfolio of partnerships: where must each partner act? Creation of a strategic matrix: what potential must each actor possess for directing or leveraging the network? • • Once having determined the strategic objectives for open innovation. innovation activities could be near the customer Table 1. development and innovation Objectives Increase profitability Shorten time to market Enhance innovation capability Create greater flexibility Expand market access Business Requirement Lower cost Incorporate already-developed component Increase the number and variety of front-end technologies Share risks with partners Broaden the pathways to market for products and services 208 . Some partners are better in helping to reduce risks whilst others are better in bringing cost of development down. Last. some firms might be reluctant to open up their innovation process in technologies that are strategic to the company. Also. it is necessary that its objectives are aligned with company strategy and innovation strategy. For example. while others do exactly the opposite with the objective to diminsh risks. There are some steps in developing the strategy for the formation of innovation networks (Schlange & Jüttner. External collaboration can be used in different parts of the innovative process. from the generation of ideas through the development of solutions and commercialization of products and technologies. as shown in the Table 1 (Chesbrough & Schwartz. Specific partners work better in different parts of the innovation process. companies should define what partners are best to reach their goals and targets. different culture etc. is the decision on where to locate innovation activities. companies should take into consideration the strategic impact of adding certain partners to their portfolio. as shown in the following model adapted from Chesbrough (2003). Part of the innovation network strategy. universities are good at scientific and basic research normally. but not least. is the determination in which technology or business areas to collaborate for innovation. Objectives for external collaboration in research. a current partner could become a future competitor. but not considered the right partners for commercialization of technologies. Five main business objectives are common in the development of partner networks for collaboration. The logic behind the decision on where to locate is to be either close to innovation competencies. It will be necessary to evaluate the risks that accompany the decision to involve this partner in once’s network. 2007). 1996 apud OJASALO.

De la Torre & Ring. 2009). In this sense the diversity of partners is even more important to the success of innovation than the number of partnerships (Duyesters & Lokshin. However. 2007. as the interactions between partners happens.. 2001. it is also important to examine potential synergies between different partners that can be leveraged and how network limitations and conflicts can be reduced through development of partners or termination of partnerships. potential R&D cooperation with Universities. 2003). Framework for open innovation so to understand trends and needs. its constitution is not immediate. The objective behind these criteria is to ensure that the portfolio value is greater than the sum of the values created by each individual alliance (Parise & Casher. Mutual trust between partners is a central aspect in the management of partnerships (Parkhe & Miller.Maturity in Innovation Network Management Figure 2. 2007). the decision on where to locate innovation activities must take in consideration. access to equipment. Dimension 2. 2000. Vanhaverbeke et al. rich in resources and diverse capabilities enhance the innovative capacity of a company (Ozkan. with many different elements and geographic locations. such as: access to research structure. ease of recruitment and selection of skilled labor. promoting the image of the company. because only then the process for search and selection of partners can be successfully implemented (Slowinski. defining clearly what the company objectives are and what it wants from its portfolio of partners is central to the success of the network. 2007). including the definition on how to manage relationships between company and its partners and between partners. 2009). 2007). access to new consumers. besides the network strategy. However. Although the criteria for inclusion of a partner in the network should be related to the company’s strategic objectives. So. it occurs gradually. some other factors. There is a positive relationship between the most innovative companies and the existence of a complex portfolio of partnerships. Therefore. Suseno & Ratten. among others (Westhead & Batstone. 1999). Arino. Defining the strategy forms the basis for the next steps. Relational Diversified portfolios. the greater the variety and number of elements in a portfolio of partners the complexity of their management increases (Duyesters & Lokshin. This process of 209 .

personal and business services. a population of companies and organizations geographically interconnected facilitates complementarity between the activities of network participants. Interdependencies can be facilitators when they bring positive impacts to the network and are directly related to the success of the portfolio and can be restrictive and bring negative impacts on other partnerships. The level of trust in a partnership is directly related to previous experiences of partners in other alliances. or reliability. Another attribution of portfolio management is to understand and manage synergies and constraints that may be generated by the relationship between the partners themselves. Table 2 shows possible facilitative and restrictive interdependencies. machinery. reputation and ethical behavior are also extremely important in building trust between partners.. Interdependencies exist when one partner is not fully in control of all the conditions necessary to achieve the expected result and is dependent on other partners to gain access to resources.. Meeus e Boekema (2003) when discussing the reasons why innovative companies involve themselves in innovation networks state the following motives: • Get access to complementary resources (knowledge. Oerlemans. (Vasudevan et al. Share risks. components. Nevertheless. Ring 2001). Meeus. mechanisms for attracting and retaining participants should be created. 2007). no one neglects the fact that innovation and knowledge transfers occurs in space (Polenske. 2003). For this reason. knowledge and information and also offers quick access to institutions and public services. 1997). leading innovative companies have ended up focusing on specific geographic areas. • • To be able to attain these goals. also called the interdependencies (Parise & Casher. & Boekema. capabilities and competencies. 2001). These reflections on the ideal design of a partnership portfolio and understanding of possible impacts of the relationship of partners between them should be the basis for the search and selection of partners. Dimension 3. as well as their organizational capacities and technical skills. financial and physical resources). 2007). Only with time and several interactions confidence will increase and take the full meaning of faith in one’s partner. confidence is more related to the sense of security. During the process of partner search and selection for participation in the innovation network and even before the partnership has really developed. In summary. It also facilitates the understanding of the needs of partners and increases face-toface contacts (Oerlemans. because proximity makes it easy and less expensive to provide access to physical space. it is important that the company offers the potential partners the necessary conditions for sharing of knowledge and experience to happen smoothly (Kratzer. Providing Adequate Support and Services for the Innovation Network Innovation practitioners constantly disagree about the importance of physical location for fostering innovation.Maturity in Innovation Network Management building mutual trust is called “relational quality” and is considered the foundation of a successful partnership (Arino. enabling the development and maintenance of optimal innovation network. In addition. or trust. information. 2003). On the other hand. geographic proximity affects 210 . The need to attract and keep the partner interested to continue participating in the network requires the analysis of other two dimensions for network management as shown next. Create synergies through the sharing of resources. This “relational quality” is constantly measured by participants and plays a significant role in the process of building mutual trust (Arino et al. The relationship of integrity. de la Torre.

to facilitate joint technology development and transfer of knowledge and enable the development and commercialization of innovations. a single model of governance does not seem appropriate. Dimension 4. communication systems. all these services and support.Maturity in Innovation Network Management Table 2. However. 211 . When taking into consideration the support and services dimension. physical structures and support required to attract and retain the preferred partners (Support and Services). companies that lead innovation networks will need to consider: • • • The network’s strategic objectives. Governance Structures With a wide range of potential services available to support their network and with a number of partners located in the same area. Table 3 shows some types of support services utilized to attract. as well as the management of the individual and network relationships require processes. developing the services. defining the working relationship with individual partners and the network as a whole (Relational). Legal and Administrative Organization to Foster Innovation Networks After deciding which partners to work with. the arrangement should offer facilities and services that complement the partners’ capacities for innovation. The Support and Services dimension consists of defining the type of infrastructure and services necessary to attract and complement skills and capabilities of potential partners as well as to create conditions that facilitate learning. physical facilities. Clearly. creativity and sharing of information and knowledge. it will be necessary to establish governance capable to manage relationships. Characteristics of the participants that they want to attract. In this dimension are included: the supply of buildings and facilities to host partners. According to Bibliardi et al (2006). technical services. what for and where (Strategy). Partners interdependencies Facilitative interdependencies Partners are part of the same collaboration network Partners provide additional resources Partners seek similar technology standard or infrastructure to innovation Partners see opportunity and have the desire to learn from each other Partners perceive other network members as a way to mitigate their own risks Restrictive interdependencies Partners are members of competing networks of collaboration Partners are strong competitive rivals in the sector Partners seek rivals technology standards Exclusivity required by a particular partnership that prevent effective collaboration with other partners the ability to receive and transfer knowledge and improve network performance. a company needs to organize management of the network to guarantee systematic and sustainable results. Activities that they wish to facilitate or reinforce. companies will make sure that the physical and virtual structures are designed to encourage the flow of knowledge and creativity. equipment. management and technology. governance and legal structures. develop and retain partners in innovation networks. To decide which set of infrastructure and support services to offer to their network partners. to attract potential partners for a specific geographic space. laboratory infrastructure. offer services to partners and maintain the infrastructure created to support the network. as we discuss in the following paragraph. finance.

Figlioli. such as: managing organizations without legal personality . A large Innovation network with a lot of partners and innovation projects requires forms of governance capable of promoting the interests of the participants. foundations. leaders of innovation networks can promote conditions for the partners to become fit and attractive to receive investment funds from Venture Capital (Romera. To do so. The definition of governance for the network partners must take into account. Such services are usually performed by specialized partners such as offices or agencies for innovation. technical or technology training directly or through partnerships with educational institutions. Lourenção. According to these authors. Since the transfer of technology is a goal for the network. such as the innovation network leaders. Porto. as well as spaces and infrastructure to conduct its projects and research. human resources management. network partners. so to optimize gains for itself as well as for the network as a whole.being tied to a department of the organization leader . Plonski. Harris. will have different characteristics and therefore different requirements. In order to increase this capability it might be necessary to build a specific structure to host not only the partners. 2007). The objective is to assure the protection and commercialization of intellectual property for the network. Access to capital Intellectual Property support Training Support services for business development Operational facilities since networks with different objectives and different players. Important here is that. Harris. 1996). offering offices or structure for the operation of business.associations. 2005. management. the proximity of the partners facilitates knowledge and technology transfer and business development.strategic planning. project management and legal counseling can also be provided by network leaders in order to develop the business skills of its partners (Gargione. governmental institutions and investment companies. marketing. Although there are many innovation networks that work without an established physical structure. The type of legal form will also influence its governance. Services such as management support . business meetings and submissions of projects to government funds for innovation. 1996). Given that funding for innovation is still faced as a challenge to companies. Legal Forms of Innovation Networks The legal form or arrangement between the players of the network is important because it will be able to influence and limit the strategic objectives of the network and influence directly the relations between partners.Maturity in Innovation Network Management Table 3. among others. how the arrangement will be evaluated and the indicators to be used (Bigliardi et al. The network leader can also provide business. to facilitate leading and managing a company’s network. the leading company offers aid to the development of business plans. sales. Types of support services Type of Service Technology services Description Companies that lead innovation networks can offer a suite of technology services to its partners. it is necessary that the network leader offers services to support such activity (Gower. such as support for testing and technical analysis and help for partners to obtain certifications or technical documentation. although the leader has a central role in the network. Many legal and administrative formats are possible. primarily (Figlioli. understand the objectives of the various participants. The legal solution found to accommodate the interests of the actors of the initiative. according to specific demands presented by the partners (Gower. 2006). The intensity and importance of partnerships. different types of legal structures might be required or preferred. it should see itself as part of the network and therefore will need to 212 . 1998) or government. business plans. finance and accounting. 2007): • • • • The partners’ leadership. The objectives of the partners.

Regardless of the nature of the promoter of the venture. Managing networks will require the implementation of a wide variety of processes and involve the following roles and responsibilities: 213 . regional or national government incentives and regulations and optimization of long term value. 2007). finance. In this case. marketing and project management to the participants of the network. foundations. the guarantees offered and the revenue stream (Figlioli. opportunities for financing of innovation is influenced by both the legal framework that supports innovation network and by the goals. financing of innovation networks in literature discusses cases of projects promoted by public institutions. the most common sources of funding for innovation networks are universities. Funding of Network Projects In general. 2010). The great variety of formal legal structures and consequently of governance in innovation networks is explained by Arranz. scientific publications and research databases. business model and the results expected by the network: the prospect of future income. or even governmental institutions. the valuation and transfer of technology. banks. de Arroyabe (2007) as a result of two main factors: the level of applicability of the type of activity (how easy it is to deploy the technology in the market) and the network’s goals. government grants. Managing partnerships. 2007). formal structure mechanisms do not seem to be as important (Arranz.Maturity in Innovation Network Management private companies (publicly traded and privately held) and public companies. In the case of activities with low applicability such as basic research or pre commercial applied research. including evaluation. Management of technology services offered to network members and support for intellectual property protection. Fdez.such as management services. Activities as applied research and product development possess a high degree of applicability (easiness to deploy the technology in the market) and their evolvement through R&D networks can lead to opportunistic behaviors among the network participants. development and eventual disconnecting from partners Management of support services offered . Management of the innovation network portfolio – aligning the partner portfolio with corporate and innovation strategy. either directly or through universities. According to Rosenblum (2004). philanthropic funds and venture capital. among others. Fdez. formal structures are established due to the fact that new products and patents can be implemented immediately. feedback. Managing partnerships in R&D projects including issues of intellectual property and commercialization of technology generated by the project. Processes and Roles in Managing Innovation Networks Networks should be governed by adequate mechanisms and roles to ensure the achievement of desired outcomes (Rampersad et al. and activities related to the diffusion of knowledge such as training. de Arroyabe. The leader of the network might become the single shareholder of this separate legal entity or might divide the ownership with some of its principal partners. • • • • • • Prospecting of potential partners. All depending on the interest of the different parties involved.

The study involved 24 companies. and Work together with several partners. Europe and the United States. such as the energy. leader. computer. Relational. five based in Europe and seven based in the United States of America. agribusiness. verifying the network strategy of the group All of them where large companies and they invested between 1. roles and responsibilities of actors and their legal. These companies. OUR RESEARCH Objectives of the Study The study aimed to determine how companies and institutions organize management of their innovation networks within the four dimensions. Marketing and Promotion of the Innovation Network In order to attract potential new partners.Maturity in Innovation Network Management Communication. 2010).5% and 6. with four dimensions is shown in Figure 3.D&I. Various sectors were represented in the research. efficient communication between players is crucial to the effectiveness of the innovation network.D&I. in 2008. automotive. It can be obtained making information and knowledge available to all network collaborators (Rampersad et al. the structure of the network of partners. it is desirable to promote the innovation network through marketing actions. Support & Services and Organizational were used in our research to determine how companies and institutions organize their innovation networks. Siemens and DuPont) were ranked among 214 .D&I processes. electronic consumer goods and telecommunications sectors. The dimensions Strategy. their physical infrastructure and services and the solutions used for organizational governance.5% of their revenue in R. all together spent more than US$ 18 billion on R. Nokia. of which twelve in Brazil (three Brazilian companies. We visited and interviewed managers responsible for innovation networks to describe the practices of companies in Brazil. to receive government support and community approval. The companies for our research were selected based on the following criteria: • • • Known as innovators in their industry.000 people in technology development and worked together with over 2. The Companies Selected for our Research Our study was undertaken between March and June 2009.000 partners in their R. as well as sponsoring of specific events and initiatives related to the networks’ focus. This model. These might include propaganda via different media. chemical. Possess their own research center. besides promoting collaborative forums and network meetings. employed around 85. managerial and financial formats. but also promoting debate around the networks objectives at regional or national level. nine Brazilian based foreign multinationals). Also. During our research we searched to understand the following questions: • • How do renowned companies form and develop their networks for innovation? Are there common practices among the companies that lead to success (a common ground)? Are there logical phases when building one’s open innovation practices (common building blocks)? • Innovation Network Management Model The important aspects discussed above led to the construction of a theoretical model which summarizes the main points for the formation and maintenance of networks for innovation. Four of the companies (Philips.

the areas in which the company partnered and the type of technology Open Innovation Objectives Objectives for corporate partnering are myriad. the objectives for partnering in R. very few companies in Brazil have a long history of extensive and intensive external collaboration. Furthermore. though.Maturity in Innovation Network Management Figure 3. Innovation network management model the most innovative companies as selected by Business Week (2008). The purpose of innovation is sometimes to support current operations. Although our selection process focused on companies with research facilities and large networks.D&I. Partnering plays a vital role in this process. For many. RESULTS Strategy In this dimension we endeavored to understand the role of innovation in a company. innovation plays a key role. high-impact products and services that facilitate entering new markets.D&I activities and the rationale for such placement. but one stands out: companies partner to obtain 215 . with pioneering innovations being sought to generate groundbreaking. companies have loftier purposes for innovation. innovation is the motor of the company’s future. more often. The Role of Innovation in Strategy In each of the companies we examined. All Brazilian based companies showed a tendency towards more investment in research and more intensive external collaboration along the various phases of the innovation process. we discussed where the company located its R. even outside Brazil within the near future. deployed in the partnership.

such as being known as an innovative and collaborative company. This brings together all the fundamental aspects of the technology innovation process.D&I value chain. That way. a company can acquire these competencies and knowledge. this may be because most interviewees are not especially capital-intensive in their R. but for now we can confirm that. However. and experimental development. which ordinarily make major investments in R. companies largely do not outsource research and development of strategic technologies because of the potential risk in loosing legal control and technological know-how. To that definition we added scientific research while also expanding the other side of the R&D equation to include advanced development and commercialization. applied research. By partnering. nor does any even contemplate investing in this type of research with third parties (or at least none explicitly acknowledged doing so). We touch more upon this below. The reasons are twofold. On the other hand. This reason was especially cited by Brazilian companies. which includes basic research. Some interviewees focus on partnering in development and testing to accelerate implementation of technologies. None of the companies interviewed collaborates in scientific research. The reasons for partnering and the frequency they were mentioned can be seen below. there are technological competencies that companies want to master but do not possess. In examining the stages of the innovation process in which companies opt to partner. with most focusing on basic and applied research to develop breakthrough technologies. A few partner with competitors in technology research in the pre-competitive stage but not in the more competitive developmental stages.D&I process. distinguishing between Brazilian based companies and European and American based firms. In some cases. there is one particular exception: companies do outsource research and development of their strategic technologies so 216 . Only a few interviewees partner in the stages of commercialization and licensing of technologies. the company shares the risk while working on research projects that are industry-strategic. In terms of partnering in technology. This partnering practice is closely related to another significant driver: the search for complementary capabilities in the R. companies seek outside competencies and technologies because they do not recognize any strategic reason to develop them internally.D&I. where collaboration in the innovation process is still reasonably new to many. were included in the study. It is well known that companies seek partners to aid them in bringing technologies and products to market more rapidly.D&I investments and no pharmaceutical companies. we used the basic definition of research and development as set forth by the OECD. A more surprising outcome from our findings was that various companies recognized important benefits in partnering with universities and institutes. Firms mentioned risk reduction as another partnership objective. we discovered that all interviewees collaborate with partners in various parts of the R.Maturity in Innovation Network Management specific competencies and technologies that they do not possess. they focus their partnering activities mostly on less-strategic parts in that chain.D&I. The second-most cited objective for partnering is to enhance the execution capacity of the company’s R. Open Innovation Strategy Over the course of our study. but did so less often than expected. given that it is well established that partnering can reduce risk substantially.D&I value chain. However. One of the companies interviewed mentioned that its approach to initiating research is to join or partner with research being conducted at one of the major research institutes to see what is “hot”. as companies position themselves within the R.

usually near their production facilities. The configuration of the other three dimensions depends on what is practiced in this dimension. development and innovation still seem to function best with face-to-face real-time interaction. For instance. the infrastructure and services necessary to support them. 217 . and the format for collaboration. Other companies take a more deliberate approach. but research. These companies are doing more than just searching for competencies worldwide. allowing the firms to acquire beneficial knowledge while maintaining control of intellectual property matters related to their technologies. thus creating their own local technology innovation systems with third parties close at hand. most companies distribute their R. partnering objectives define the type of partners sought. Defining Strategic Location Our interviewees revealed that the location of their R. Main reasons for partnering long as their staffs monitor their partners closely.D&I activities differs widely.Maturity in Innovation Network Management Figure 4.D&I activities over multiple locations. It seems counterintuitive in today’s highly connected world with ready access to people and information anywhere around the globe. they prefer to have them located nearby. preferring development to be close to their factories in order to be able to fine-tune solutions for production. The strategy dimension gives direction to all other key dimensions. For example. In general. Some have created their own technology parks beside their own research laboratories. and research to be close to world renown universities or world-class technology parks. Technology monitoring normally occurs closer to the end customer. one of the companies interviewed spoke about its “antennas” across the globe to monitor what local competitors are developing in their field and what local universities are working on.D&I locations have been determined historically. Some companies’ R.

218 . Several companies also leveraged “virtual” networks. To locate the best partners. Collaboration with other types of partners often depends on the length of time the company has been working with open innovation. even though some companies prefer a local country partner. but all are well aware of the many potential opportunities. Companies seek partners that are “best in class” and may in fact be on the other side of the globe.000 partners (including international research programs).Maturity in Innovation Network Management It can be concluded that all the interviewed companies seek to optimize their decision making based on strategic objectives. our findings indicate that various interviewees use patent and article databases to initiate their searches. as partners. Not every company has the opportunity to define exactly how to set up its Open Innovation System. they converse via telephone to secure worldwide recommendations in the target technologies. because of the ease of having face-to-face meetings with students and professors. allowing for more fine-tuned relationships and less intellectual property risks. business constraints (such as budget) and open innovation logic. One of the interviewees claimed that interaction with the university improved significantly when they moved close to the university. Firms that have a longer history of open innovation collaborate with partners across a wider range of categories. clients. specialists in technology development. D&I process and when they outsource research and development activities for a range of technologies. Although a vast quantity of partners may seem very impressive. collaborating with fewer partners is preferable for strategic technologies because trust and control are critical in such situations. companies that commercialize technologies and governments. On the other hand. Our research unveiled some companies that accumulate hundreds of partners. Nevertheless. The most common partners are universities and research institutes. suppliers. This again indicates the relevance of proximity and real-time interaction. Firms tend to have an abundance of partners when they collaborate in several different stages of the R. research institutes. a network with fewer partners gives the firm more control over its network. and the handling of intellectual property rights. One can argue for either many or few partners. instead of having to travel 20 miles. Although both models have their advantages and disadvantages. The firms we interviewed cited partnerships with universities. specifically with how many and which type of partners the companies collaborate. Less strategic technologies can be outsourced to a wider range of potential partners to capture more extensive benefits In terms of the location of partners. most partners are global. having many partners does not necessarily ensure a more effective network. But a larger network also brings the complex task of managing many relationships. Network Composition Companies work with a wide range of partners. with one company even boasting more than 1. such as Innocentive. consultancies. Many partners can facilitate direct access to technologies by creating more choices and fewer difficulties in targeting specific competencies when needed. the role and location of partners and the nature of the partner relationship. On the contrary. Relationship In this dimension we explored the composition of the R. Based on their initial findings.D&I networks. most of the interviewees reiterated the importance of being close to their partners. some interviewees mentioned the importance of having fewer network partners with whom they could execute a wider range of projects.

Nevertheless. Institutes are targeted for their specialization and expertise on general technological industry challenges. and their ability to generate graduates with master’s degrees and PhDs.D&I process. Types of partners Role of Partners in Open Innovation Partners can play varied roles in the R. They are more focused on searching for solutions to their research or operational challenges than receiving new ideas from their partners.Maturity in Innovation Network Management Figure 5. In such cases. although very few companies in our study rely on this approach. Virtual networks. In a few instances clients themselves are co-developers. When partnership objectives are more profit-oriented. universities and research institutes are increasingly utilized for basic and applied research. Companies exhibit certain strong preferences in collaborative habits. 219 . and the government in support of a broader open innovation effort. In research partnerships. As expected. Consultancies also are enlisted at various stages of the process. Suppliers also play a role by providing new instruments for laboratories and at times can be co-developers. One of our interviewees explicitly mentioned that it prefers working with other multinationals. Competitors also are selected as partners at national or international consortia that are convened to set industry standards. In the context of pre-competitive research. their exceptional competencies in research.D&I. companies also turn to major corporations as development partners. intellectual property agencies. like Innocentive. increasingly are being leveraged to solve specific. Firms that are more advanced in open innovation go further and utilize “supporting” partners. targeted problems in applied research and early development. these partners at times may even be competitors. such as venture capitalists. Companies that partner in the commercialization of technologies rely on a wide variety of actual and virtual partners. depending on their expertise in R. since it finds them more reliable than universities. there remain those that still prefer universities for their deep-rooted research expertise. Partners also are sought as potential sources for ideas and insights. the overriding objective is to share risks. Universities are primarily sought for their infrastructure. partnerships seem to be more effective.

What support and services do they offer their partners? Do they give partners access to their laboratories and/or invest in their partners’ infrastructure? Do they provide business support and other services to their partners? Do companies proactively manage their networks? And do companies stimulate collaboration and learning between participants in the networks? Intellectual Property Rights All companies generally place great importance on protecting intellectual property rights. In terms of distributing intellectual property rights. licensing agreements. solution provisioning. joint development contracts. formal or informal) and the objective of the relationship (such as research. there is little evidence that they intentionally aid in developing their partners’ capabilities.) A valuable insight here is that some companies seek out a close relationship with their strategic partners not only through master agreements but also through involvement in their daily affairs in order to facilitate their partner’s understanding of their business. Therefore. Best practices in this dimension are mainly a function of a corporation’s maturity (time and Partner and Network Management To attract new partners.” Finally. equity participation and co-participation in national and international programs. but even those companies that seek out longer-term relationships remain reluctant to set up plans for developing their partners. for instance through articles authored by individuals within the company. This reduces R. According to one of the interviewed firms. Support and Services In this dimension we discussed with the companies how they attract partners and develop the network as a whole. the interviewed companies generally rely on their strong reputations.D&I employees’ hesitation to participate in open innovation and helps them define what to share and what to withhold. commercialization of technology. strategic or non-strategic.Maturity in Innovation Network Management Type of Relationships The types of relationships vary widely: there are one-off contracts. Nevertheless. the better it usually defines its relationships and its intellectual property policies. In fact. and the more it will broaden its horizons in search for potential partners. The type of commercial relationship logically is defined by the type of relationship sought (for example. companies in more advanced stages of open innovation occasionally possess a 220 . but non-strategic technology can be made available to generate extra value for the network. Companies that are more sophisticated in their open innovation efforts not only have clear policies in place but also have educated their employees on these policies. most companies focus on protecting only strategic property rights. master agreements. Some companies also open their research departments to interns during the summer months of school vacation. Except for investing in infrastructure and sponsoring some research projects.” experience) in partner relationships. the more mature a company is in its relationships. investment. Some use their top-tier facilities to attract partners. one of our interviewees calls together its key suppliers to share its strategic “top needs list. Longerterm relationships certainly benefit partners. among others. which they all possess in their respective industries. the more types of relationships it normally will have in the various stages of the process. etc. whereas others attract partners via ongoing public relationships. Companies rarely invest in the development of their partners. “We must guard strategic technology. patents also play a role in negotiating co-development projects when the various parties are expected to leverage some of their own patents to develop a new technology.

Most companies invite their partners annually. but some companies organize events several times a year. One of the interviewees. Similarly. some companies have “technical meetings” in which a technical expert on a certain subject gives a presentation to the partnership network. a fitness center and childcare facilities to 221 . there are companies that only provide their partners with basic access to laboratories. prompting them to think together about the types of products that might be relevant to the future. stimulate a sense of community and to facilitate collaboration and well-being onsite. IP policies. These Business Support and Services Business support and services is the area in which companies most differ in innovation management. consultants. within one physical space. one interviewed company offers its partners office space (for a fee). national and international research initiatives is another approach companies employ to stimulate collaboration among partners. mostly in the case of technology-based companies. an incubator for technology startups. however. Also. During our study in Brazil. contractors. governmental research organizations. there are companies that construct a comprehensive local technology innovation system by bringing together. the majority of companies do not provide advanced business support and services to their partners. periodic meetings often informal meetings with their network partners. This seems to be a basic. Collaboration Incentives In terms of partner collaboration. as explained below. business services and other activities. large. research specialists. people inevitably meet one another. encourages the formation of groups to collaborate on important societal priorities. some companies also provide access to a restaurant. Overall. suppliers. centrally located meeting rooms also promote collaboration and interaction. for example. On one hand. with the objective of promoting knowledge exchange among partners. several companies mentioned to face some problems with investing in Universities. Furthermore. Infrastructure All companies generally support their partners with some degree of access to their laboratories. venture capitalists. at a minimum. On the other hand. and a laboratory to conduct experiments and test equipment (in the case of suppliers). Some firms also invest directly in their partners’ equity. because restaurants are not allowed in other buildings. patent offices. One of the interviewees trains its customers in its laboratory so that they learn to use the laboratory on their own. companies that are focused more on generating a network than on a simple set of individual relationships generally maintain. Many companies invest in the infrastructure of their partners. Other companies also provide partners with apartments and comprehensive support for foreign specialists. since many of the universities do not have the funds for maintenance of the investments. the partners benefit from interaction through spontaneous encounters. Some firms even go further by promoting “Dream Days” with their partners. with only a single central restaurant. Since transportation on campus is on foot or by bicycle because cars are not permitted. given provision in partnership agreements. Encouraging participation in and leading regional. In an example of the latter case.Maturity in Innovation Network Management clear partner-development strategy that usually encompasses infrastructure projects. etc. Most also offer engineering know-how or other expertise to assist partners in executing their projects. In addition. especially universities. Some firms – two in this study – specifically attempt to stimulate collaboration through the physical layout of their facilities and campus regulations.

the company’s internal business units.D&I organizations are a department within their mother company while others are a separate legal entity but remain part of the business group. 222 Only a few companies have specific organizational structures with open innovation objectives. However. Most companies embed roles in their routine R. with business unit heads maintaining a degree of involvement as well. With the exception of contractual and legal processes. . has set up a scouting group that searches globally for new technologies and. The major distinction between companies that give strong support and companies that do not appears to be a function of their experience and confidence in open innovation. Innovation Processes Very few companies have official open innovation management processes. for example. because the choice depends on national laws and corporate structures and policies. consequently. One company that has partnered with a university provides extensive staff to facilitate the relationship between the university. and their work often earns the approval and appreciation of the government. There are reasons for choosing a specific format. including open innovation strategy and partners selection. another is the desire for the R. in fact. Organizational structures to seek and select partners and manage and support partnership networks are generally rare. the selecting.D&I organization to function as a profit center. their ambition and their resources to invest. and students by offering technical support to all parties in the partnership. Overall.Maturity in Innovation Network Management groups assemble in meeting rooms and virtual spaces. One is the quest for tax benefits. there are companies that have established a dedicated M&A department to invest in technology-based firms. One of the interviewed companies. new partnerships. In addition. and a third relates to the organization’s objective to serve a variety of clients. Technical experts inside the firm. companies provide basic support to their partners and networks. normally rests with the Chief Technology Officer. Organizational Structure & Governance for Open Innovation There appear to be basically two different types of legal organizational structures. In organizations with larger structures and headcounts. In order to identify new partners. The strategic management of open innovation. more staffing resources) than managing partnerships.D&I organizational chart. There does not appear to be a single preferred practice.e. some companies deploy a dedicated team. Another firm gives their partners access to wikis and other collaborative tools to stimulate interaction and knowledge exchange via a virtual platform. Few companies allocate exclusive full-time resources to partnership management. such as access to laboratories and office space and periodic meetings. Another firm has developed a worldwide network through which it seeks external partners to complement and accelerate its innovation efforts. developing and evaluating of partners and the network as a whole are all done informally. searching for partners seems to attract more focus (i. can be responsible for targeting potential new partners in their fields. The latter seems to be handled principally through project relationships. firms that aspire to offer a higher level of partner support will need to invest not only financial but also human resources and possess a passion to strengthen their open innovation systems. are practices to which any firm can commit.. Certain best practices. Organizational In this dimension we focused on the various organizational structures to support the innovation networks as well as governance and processes to manage open innovation. We also looked briefly at how companies promote their open innovation initiatives. Some R.

established. especially in innovation networks outside Brazil. but in structure. Therefore. looks practically from the start at what partners might be involved in development and commercialization. our interviewees did not mention that they selected their partners based on a portfolio view of their network. when starting a new research project. Maturity model in innovation networks 223 . not only in technical terms. is mapping the entire R. The maturity stages describe good practices adopted by companies’ taking in consideration the different stages of development considering four groups: beginners. The analyses of these results were consolidated and the practices observed adopted a pattern. Figure 6. often discussing informally their project(s). as stated by one of the interviewees. A good management practice.D&I partnership’s requirements for a technology. culture and results. The evaluation of partners is generally done quite informally by companies. Funding Regarding the funding origins. THE MATURITY MODEL OF INNOVATION NETWORKS The result of this study shows different practices adopted by companies in regard to open innovation around the world. specifically where one evaluates if the current network supports the company’s strategy. explorers. Although few would consider the use of venture capital. not just by partner for an individual project. the progress and results. such as based on grades.Maturity in Innovation Network Management Selecting partners is normally done on a case by case basis. The participation in national and international research programs is quite common. There also are companies that conduct a more formal review on agreed upon objectives and results within contracts. But it appears rare that a company (only one company interviewed) would evaluate their partner using a quantitative approach. world class. These stages are described next. Companies can sometimes be selected for an individual project. much of the funding for projects developed by the network of innovation comes from their own network leader. However. with the data gathered on this study was possible to develop a Maturity Model regarding Open Innovation activities grouping and classifying the practices around the world into four different maturity stages. This company also put a high premium on cultural alignment as an important evaluation point. the search for subsidized funding and local government incentives were quite common in both surveys. Most companies have year-end reviews with their partners. but as well to build long term relationships. This company.

suppliers and universities. utilizing a number of strategic partnerships in the various parts of the R&D& I process. Mapping technology needs and potential partners (technology strategy). especially focused on being able to generate innovation with an impact on the company. The objective of these companies is to maximize value generation from a wide range of partnerships. for they never did this deliberately to systemically explore external knowledge and competencies. Some partner access to company infrastructure. Resistance from within the company to the open innovation model. Majority are one-off contracts. They manage their open technology innovation system in an organized and structured manner. The objective of the companies in this stage is to create cheaper and faster ways to generate incremental innovation for their current markets. or only waking up to the benefits of open innovation. Partnering in long-term contacts with universities. No specific governance model set up to manage partners. Adapting umbrella contracts are increasingly common.Maturity in Innovation Network Management Beginners These companies are at the very beginning of open innovation. Worrying excessively about loss of Intellectual Property. Investing in the infrastructure of partners. • • • • • • • Established These companies use open innovation as a strategic tool in their technology development process. mainly suppliers. Pre-competitive research with competitors. seeking partnerships in their various technology needs. Characteristics of companies in this stage: • • Searching for breakthrough technologies together with partners. It does not mean that these companies have never worked with partners. They are at times reluctant to advance with Open Innovation Systems because of worries about intellectual property rights. technologies that are substantially or even radically innovative to support the company’s future competitiveness. Characteristics of companies in this stage: • • • • • • • • Using open innovation to search for substantial and radical innovations. a strong belief in the old closed innovation model. Use of external venture funds to invest in technology based companies. The objective of these companies is to search for partners that help them create • • • 224 . Setting up the management for individual partnerships. Searching for external funding just starting. research institutes and other partners. Using partners for particular knowledge. Partnering mainly with universities and research institutes. Accessing infrastructure and some engineering support. Characteristics of companies in this stage: • • Partnering focus on improvement in existing products. Explorers These companies are deliberately searching to utilize all the opportunities of open innovation to their advantage. Intellectual Property policies clearly defined and shared with staff. Looking across borders for potential partners (outside the country). Engaging when required (per project) with few partners. and sometimes clients or universities.

Relevance of technology as a competitive differentiator. the commercial relationship with partners. Stimulating constantly the collaboration and learning between participants. Ambition to be a technology innovation leader. Characteristics of companies in this stage: • Creating their own physical structure instead of just participating in collaborative systems and infrastructure. Commercializing technology with partners. the location of research and development facilities. practices and maturity levels between the interviewees. however. These companies look beyond their own short-term benefit. including management and patent advisory. Governance to manage partner portfolio. Need for open innovation (how much the company needs to involve 3rd parties in the innovation process). • • • • • • • 225 . services and clients of the R. • • • Due to quick and major changes in the technological environment. besides individual partnership development. the legal format and level of organizational preparation to manage the partnership networks. while scouting for new partners. support and develop new partners. There were clear differences. managing their systems deliberately to grow in value over time. Leading national and international research programs. the processes outsourced. In this manner they are creating a self-regenerating and expansive system that interconnects across other innovative networks. the business support for partners and access to infrastructure. the number and type of partners. Searching for network expansion. the working format. instead searching to optimize the value of the whole system by giving strong support to their partners and encouraging constant collaboration and learning within the system. in all very much in line with what one can find in published literature about open innovation. World Class These companies are the leaders in open (technology) innovation. the use of intellectual property rights. We found that the differences were primarily related to the following forces: Maturity in open innovation practices (the time period in which open innovation has been practiced). CONCLUSION The results of the research show a diversity of approaches.Maturity in Innovation Network Management • • • • Business support for partners. Strong feedback mechanisms and evaluation. A governance structure in place with individual partnership management and development. There are some common practices utilized by the interviewed companies. Nominal investments in technology innovation or the ability to invest more in innovation and thereby open innovation. among companies concerning the following: the business model for a partnership. Maintaining strong services to attract.D&I center. the investment in partners or base technology companies. Participating in national and international research programs. but we are able to identify some key findings.

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and that less attention has been given to the role of ONs and SPs in the processes of technological learning and innovation.ch013 Copyright © 2012. We consider that ONs are elements of knowledge production and can contribute to the development of core competencies to pursue dynamic innovation and sustainable competitive advantage. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. In particular. Brazil Chapter 13 ABSTRACT This chapter investigates the contributions of Science Parks (SPs) to innovation. IGI Global. This chapter is based on a literature review of scientific papers and theses which are included in indexed databases related to SPs and their contributions to innovation. we discuss whether the literature on innovation and SPs consider the fact that SPs can be catalysts of Organizational Networks (ONs). Brazil Leonardo de Jesus Melo Federal University of Rio de Janeiro. .230 Science Parks and Their Role in the Innovation Process: A Literature Review for the Analysis of Science Parks as Catalysts of Organizational Networks Renata Lèbre La Rovere Federal University of Rio de Janeiro. DOI: 10.4018/978-1-61350-165-8. Preliminary analysis of the literature shows that SPs have been mostly studied as part of innovation systems.

After a review of the literature on business networks. Proximity provides economies of scale. 2008). To enable these goals to be met. especially because organizational proximity may be as. dissemination and appropriation of knowledge are enhanced when organizations are linked in a network and develop mechanisms for governance and management aimed at coping with the knowledge assets generated and traded in their context. they should be considered in studies of SPs. provides access to sophisticated clients. where the interaction between 231 . a Science Park stimulates and manages the flow of knowledge and technology amongst universities. Despite the variety of concepts and low level of accuracy of studies about clusters of firms (Hasenclever & Zissimos. companies and markets. In this paradigm. and provides other value-added services together with high quality space and facilities. The SPs literature considers those institutions as ways of organizing enterprises in a territory that foster innovative activities (Squicciarini. Networks can be formed by clusters of firms in the same territory or in different territories. Nevertheless. Rather. companies seek to meet requirements for flexibility and speed by involving themselves in networks. Innovation in SPs is related to positive externalities that result from geographical proximity. the quality of products and processes. or even more. it facilitates the creation and growth of innovation-based companies through incubation and spin-off processes. important than geographical proximity in the development of innovations. SPs should be viewed as spaces that not only allow for the creation of organizational networks but also strengthen organizational networks that existed before firms moved to the Park.Science Parks and Their Role in the Innovation Process INTRODUCTION In accordance with the International Association of Science Parks (2002). This subject is directly related to the theme of innovation. dissemination and appropriation of knowledge in order to develop sustainable competitive advantage. the fact that the Science Park promotes the development of organizational networks among its firms does not mean that firms located in the Park will develop relations only with other firms in the Park. a Science Park is an organisation managed by specialised professionals. Britto (2002) identifies three possible types of network: subcontracting networks. Therefore. whose main aim is to increase the wealth of its community by promoting a culture of innovation and the competitiveness of its associated businesses and knowledge-based institutions. possibilities for development of production chains. and companies’ capacity for technological development. reduces transport costs and. all the authors who have analyzed these agglomerations have pointed to the benefits that companies may obtain. Networks are key elements for the creation and diffusion of knowledge that underlies the generation of innovations. where a company outsources part of its activities. the research question addressed in this chapter is the extent to which SPs. productivity. the fact that firms are close to other firms and universities in a Science Park does not necessarily mean that interactions among them will occur. contribute to the generation and strengthening of organizational networks for innovation and how these networks deal with the processes of creation. accumulation of knowledge and innovative activities. We define proximity not only as geographical proximity but also as relational proximity. as spaces that can combine benefits related to geographical and relational proximity. The processes of creation. As organizational networks have a role in promoting and organizing interactions between firms and institutions. 2006). in the case of urban areas. Studies of local development highlight a variety of forms of association and network integration of these networks in global markets. since in the current techno-economic paradigm the ability to create and sustain competitive advantages in a particular territory is related to learning ability. Furthermore. R&D institutions. Marshallian industrial districts.

with 66% of the Parks surveyed being within a city and 27% being quite close to one (25 km or less). 36% of SPs worldwide are located on a university campus or adjacent to one. Science Parks are mostly an urban (or semi-urban) phenomenon. this period of just five and a half years is responsible for 26% of all the SPs in the sample. as it assumes that networks of companies and their worlds of production can be organized in different ways with different impacts on territory (Markusen. while 8% are located on land owned by a university. In SPs the actors involved are located in the same area and they are influenced by an institutional initiative whose main objective is to foster technology networks. we assume that the interaction between companies. But one can see that the curve rises steeply in the first decade of the 21st century. These studies assume that firms have limited rationality and asymmetric information. 2008). the majority of SPs (53%) are located outside university campuses and on land not owned 232 . Our discussion will be based on concepts drawn from the Evolutionary and New Institutional Schools. This chapter assumes that SPs. However. which have made the most significant contributions to the literature regarding innovation and regional development in the Post-Fordist period..Science Parks and Their Role in the Innovation Process the components of the network allows for the acquisition of static and dynamic advantages related to geographical proximity. research institutions. 2000). According to IASP (2007). so their decisions concerning innovative activities and production will be affected by the decisions of other firms and institutions. SPs originated in the United States during the 1950s. the second half of the 1980s was the period when the largest amount of SPs was created (23%). 1996). in addition. The interactive processes that shape the decisions of the firms are self-organizing and will determine the properties of local networks (Vicente. institutions and local community in a given territory affects the spread of knowledge and innovation (Storper et al. as innovation environments. Furthermore. we also aim to understand the challenges and opportunities faced by companies regarding the management of their resources and cooperation with other members of the network. Furthermore. Secondly. many of which were created to support ongoing research activities in universities. as a consequence of the emergence in the postwar period of a large number of high-tech companies. BACKGROUND: SCIENCE PARKS AND THEIR ROLE IN INNOVATION The theoretical framework of this chapter is in line with the Evolutionary Studies approach. we will analyze the existing potential and the main challenges involved in the generation of networks capable of dealing with the processes of creation. This chapter will present the main results of a search in scientific papers and theses included in indexed databases related to SPs and their contributions to innovation. The study of the relationship between SPs and organizational networks will primarily contribute to the debate about the role of organizational proximity and geographical proximity in the creation of sustainable competitive advantages. and are presented by current literature as a mechanism for local development capable of catalyzing the generation of organizational networks that act as means of articulation among the principal agents of innovation. The methodology used is a review of the literature. stimulate and manage flows of knowledge and technology between universities. companies and markets. dissemination and ownership of knowledge assets. as Figure 1 shows. although not on a campus or adjacent to it. Storper. 2007. In accordance with IASP (2007). and technology networks. where the interaction between the components takes place with the specific purpose of developing innovations. In this type of network geographical proximity is not necessarily more important than organizational proximity. The chapter also draws on literature from the New Institutional School.

because. the educational level of entrepreneurs. 2007). according to Frigant (2001). Zander (2004) argues that entrepreneurs prefer to be geographically close to their clients. Therefore. in an econometric study using data from the European Union. development of innovative activities and generation of local knowledge. when recognizing an opportunity local entrepreneurs will establish new businesses by assimilating local knowledge and recruiting members of their social network. They came to the conclusion that knowledge spillovers are positively related to clustering and entrepreneurship. Second. In Brazil the physical spaces chosen for the deployment of SPs usually comes from public agencies or universities (ANPROTEC. whereby successful enterprises influence local entrepreneurs’ perceptions of socially desirable businesses. suppliers and competitors for several reasons. Third. This is why SPs are built: institutions promoting them expect that Parks will generate benefits in terms of the stimulation of new businesses. The formation of clusters of firms is seen as the result of a selective mechanism that provides favorable conditions to meet the demands posed by technological change. Fourth. they need to identify their competitors and learn to prepare adequate competitive strategies from their competitors’ movements. Studies of innovation that emphasize the role of territory suggest that enterprises are rooted in institutional arrangements consisting of social relationships that feed creativity and adaptability. Global creation of science parks (%) (Source: IASP) by a university. Positive effects of entrepreneurship and agglomeration on innovation were verified by Acs and Varga (2005). there is a demonstration effect on the territory.Science Parks and Their Role in the Innovation Process Figure 1. agents have a sense of embeddedness. Therefore the territory is relevant as a locus of social capital and entrepreneur action. to discuss the role of these institutions as catalysts of networks we must first look at the literature on the benefits of proximity for firms. will affect local entrepreneur choice of business. Growth opportunities are 233 . Innovation is seen by these studies as an “island of activities” determined locally (Amin & Cohendet. First. SPs may be analyzed as clusters that are deliberately promoted by local institutions to enhance innovation and learning in a particular territory. conditioned by the territory. 2005). Clusters are also institutional forms in which loyalty relations are easily built.

technologies and objects that can be found in territories. as the principles that guide innovative process are learned. but it is rather a container of relations that combine and transmit knowledge. Relational proximity can be achieved through a variety of regional mobilizations.related to affiliation (same relational area) and similarity (from an organizational point of view). entrepreneurs. (2001).Science Parks and Their Role in the Innovation Process shaped by the legacy of accumulated knowledge and learning that is geographically determined (Iammarino & McCann. propose the concept of another type of proximity. 2005). Adherence (stickiness) of knowledge to specific places derives from unique combinations and interactions of bodies. therefore the knowledge developed within the territories depends on internal and external mobility and connections. Kaufmann et al. trust of partners. as well as with networks of ‘sister’ (similar) companies. For these authors. face to face communication is no longer a prerequisite for innovation. Davenport (2005) confirms Amin and Cohendet’s propositions and shows the results of a survey of innovative firms in New Zealand. 234 . with organizational proximity . such as Lemarié et al. with a number of different distances and directions. common routines. He observes that firms do not draw on local or national knowledge to be innovative. (2003) carried out a study of innovative firms in Austria with similar purposes. ability to manage conflicts.cit. computer professionals). which is independent of territory: relational proximity. They argue that. Relationships between these communities occur in certain places. The authors suggest that geographical proximity is important in the beginning of the innovation process (in design) and in its end (in testing phase). employees of international companies. use the term ‘organizational proximity’ to describe relational proximity. both forms (geographical and organizational proximity) increase the sharing of tacit knowledge in the innovation process (Davenport. as networks may be formed with firms in different locations. Amin and Cohendet (2005) argue that relational proximity. whose concept was developed from the text of Nonaka and Konno (1998) on space-sharing relationships (ba) is fueled by travel. and geographic proximity may be replaced by relational proximity. that the same attributes of networks of firms identified as success factors for innovation. from a review of previous studies. however. financing professionals. commitment to partnership. databases and common software and provision of training to communities through temporary project groups and task forces. cancellation of myopia linked to performance at all costs. minds. crystallized in attitudes. They contrast geographical proximity. The authors then conclude that knowledge is not confined to particular sites. 2006). since they provide competitive solutions their products are designed to meet customer needs and building knowledge comes from strong relationships with networks of customers. He suggests that companies which seize opportunities presented by the external market go through a process of rapid internationalization and present few linkages with the territory. Amin and Cohendet (op. which is space-related. excessive tolerance. and acceptance of partnership as a long-term investment. Clusters with high rates of innovation are characterized by the existence of dense relations among different professional communities (engineers. are also the ones identified as success factors for territorial agglomerations. consultants with complementary skills. distributors. whereas in the intermediate stages of development and prototyping communication can take place remotely. but the networks of these communities extend beyond the territory. such as flexible learning expectations. Thus. which may come in pieces. The growth of these clusters results from the successful management of diverse knowledge assets of the local professional community. a specific cluster is not restricted regionally. More recent studies. languages.) note. Some authors.

Iammarino and McCann (op. knowledge diffusion among members of the cluster is very limited. it will generate positive externalities that will benefit other companies (free riding effect). and seek to limit it through contracts. state-anchored districts and Marshallian districts. and dependent on transport costs. Markusen (1996). Studies of relational proximity and of different types of knowledge diffusion related to diverse types of clusters support our proposition that to understand how innovation takes place in a territory. Lawson et al. Furthermore. Our survey 235 . the available literature on the benefits of territorial agglomerations of firms explains the reasons why SPs are viewed as spaces for innovation and thus are promoted by institutions that want to enhance learning and knowledge production in a territory. However. take into account free riding when making location decisions.cit) also propose three forms of agglomeration of firms: the first is pure or Marshallian agglomeration.Science Parks and Their Role in the Innovation Process The existence of relational proximity may help to explain why clusters of firms differ. companies. These authors did an empirical study of 111 manufacturing organizations in the UK and found that relationships between firms. To summarize. an analysis of SPs governance structures (including the hierarchy structure of local networks and contracts) is needed to assess whether SPs are catalysts of organizational networks. satellite platforms. This argument is confirmed by Crespo and Fontoura (2007). therefore face-to-face contacts are crucial to share sticky and tacit knowledge. particularly large ones. where firms do not have market power. but access is limited by the relations of trust. In particular. built on a common culture. the inter-organizational teams that are formed to develop new products are strongly influenced by informal socialization mechanisms. The third form is the cluster that arises from a social network with ties of trust and cooperation among enterprises. characterized by long-term relations between stable and predictable firms in the cluster. Iammarino and McCann suggest that all agglomerations may have characteristics of the three models. who made an extensive review of literature on the externalities generated by multinational companies and showed that there is not enough empirical evidence to argue that these externalities will in fact occur. identifies four types of agglomerations of firms. (2009) point to the relevance of networks for innovation with their study of knowledge sharing in inter-organizational product development teams. and these agglomerations often occur in urban spaces. buyers and suppliers are crucial in new product development. and their location is regional but not necessarily urban. but one model will always prevail over the others. each one with different configurations of firms and governance structures: hub-and-spoke districts. analysts have to consider networks of firms. Arguments about the spillover of knowledge between firms implied by the models of pure agglomeration and social networking are not always applicable when dealing with multinational or oligopolistic firms with many affiliates. thus conditions in each site will differ. It should also be noted that if the company decides to locate in a given territory to be close to other companies. According to Meyer-Stamer (2005). Entry and exit costs in this market are low. The second is the industrial complex. in her work on industrial districts. the impact on local enterprises will depend largely on their capacity to absorb technology. if we consider that what is relevant for innovation is not the territory per se but the networks that are located in the territory. Contracts may limit the diffusion of knowledge to local firms that is highlighted as one of the advantages of clusters. Access to this cluster is limited by entry and exit barriers. Geographical proximity is necessary in this type of agglomeration. She contests the idea that Marshallian districts will prevail as the dominant form of clusters and points out that in hub-and spoke districts and satellite platforms. continuously change their relations with other firms and exploit market opportunities.

This result may be explained by the fact that Park management must define their objectives in goals that are measurable. using therefore a Meso approach. If directors use traditional measures. in addition to the life cycle of firms. if they have significant patenting activity (Squicciarini. Zhang (2004) found that the critical factors for the success of a Park are location and management. These issues are explored because. as Squicciarini (2009) and Hansson (2004) observe. She also suggests that there is a path dependency in Park activities that creates firstmover disadvantages. job generation and patents used in most analysis fail to properly measure knowledge creation in the Park and related benefits (Hansson. Dettwiler et al. survival of firms. Recent literature on SPs may be divided in two broad categories: studies that focus on firms as the main object of analysis and studies that focus instead on the Science Park as an institution located in a region. Her model used a database of Finnish firms and confirms that size. 2005. (2006) tried to measure knowledge creation by comparing firms located inside a Park with firms located outside it and concluded the former have a slightly superior performance. they use the same traditional measures of performance mentioned above (Link and Link 2003). studies use statistical models. Park managers must also consider proximity to universities and legal conditions. Chen et al. In relation to methodology. 2008. “look unable to learn and improve their performance over time” (Squicciarini 2009:187). industry and government. sector and time elapsed before joining the Park are all relevant for patent capacity.Science Parks and Their Role in the Innovation Process of scientific papers on SPs found that few authors have been working in this direction. 2004). (2009) and Hu (2007). While in the former view innovative activity is seen as a competitive tool for firms and traditional indicators are focused on. Bigliardi et al. Lofsten & Lindelof. 2009). such as productivity of firms. policy or technology. Yang et al. Papers that take a Meso approach focus on different countries and present results complementary to the findings of those focused on firms. case analysis or a combination of both. job creation and value generation.. 2003. 1997). The mixed results may derive from the fact that the traditional indicators such as revenue. 2009). a concept known as the Triple Helix (Etzkovitz & Leydesdorff. SPs. 2009). Whether the focus is on the firm or the Park. (2006) suggest that. Squicciarini (2009) suggests that knowledge creation may be assessed by comparing the patenting activity of firms before and after entering a Science Park and by analyzing patenting activity of incubated firms. Therefore. Some studies of knowledge creation in SPs use patents as a proxy 236 . As Hansson (2004) and Wicksteed (2004) observe. Dettwiler et al (2006) indicated that cost of facilities is an element considered by firms in deciding to locate in a Park. in her words. and identifying the conditions for their growth (Link & Link.. the governance structure of the Park will have a limited scope concerning the creation of knowledge. the latter view focuses on a particular region. how they compare with firms located outside the Park (Squicciarini. what appears to be the common element in all the studies reviewed is that they try to investigate Park efficiency by assuming that innovation depends on active interaction between universities. (2006) also consider the importance of the sector in the performance of firms located inside a Park. 2008). Studies focusing on firms investigate whether SPs generate spillovers (Squicciarini. Tan (2006) found evidence of aging in a Beijing Science Park that gives further support to Squicciarini’s ide (2009) that Park management must take into account the Park’s path dependency. a result also found by Sun et al. the dimension of knowledge creation and networking – crucial for innovation in the creative economy – is frequently lost in these studies. empirical evidence on the effectiveness of SPs regarding the development of technology is mixed. Proximity of universities and adequacy of management are considered crucial by Ratinho and Henriques (2010). Yu et al.

such as access to financial benefits. such as knowledge generation. such as duration. The analysis of the SPs literature shows that although they have been studied as part of an innovation system. take into consideration their organizational networks to set the boundaries of these partnerships. The companies surveyed gave little importance to the presence of universities and R&D. Network analysis must also look at the specific sector of the firms in question to assess the potential of the creation of business opportunities and the learning generated by the network to develop innovation. social and economic) sustainability. the self-organizing process that shapes firms’ decisions concerning innovation and production limits the ability of firms to have independent long-term strategies that may ensure sustainability of activities. This result may be explained by the fact that firms. Nevertheless even case studies may not take into consideration organizational networks as spaces for knowledge creation and diffusion. use Parks mainly to obtain benefits related to financial/operational issues and not as a differentiating factor related to the ability to create and disseminate knowledge and promote (environmental. in establishing partnerships. relationships and learning. planning. Therefore. as being essential to the analysis of innovation networks. firms tend to prioritize physical infrastructure and financial and tax incentives. patents measure only codified knowledge. to study networks that are formed within a Science Park analysts have to look not only at the number of networks and the number of interactions each firm has in the network. transportation facilities. while noting the possibility of establishing and strengthening networks as a factor of attractiveness. which are essential to understand growth and innovative activities of firms inside Science Parks. local incentives.Science Parks and Their Role in the Innovation Process for knowledge creation. little attention has been given to the role of organizational networks in the process of technological learning and the generation of innovation. Case studies like those of Grassler and Glinnikov (2008) provide better insights into codified and tacit knowledge diffusion in SPs. such as main source of capital accessibility. The result of this analysis involves a series of issues relevant to the theoretical field of organizational networks. to the detriment of the creation and strengthening of organizational networks which can generate sustainable competitive advantages. However. Grassler and Glinnikov (2008). The third issue is that the current evaluation of firm performance located in SPs is based on traditional indicators such as patenting and value-added 237 . with the establishment of research projects in partnership with research centres being an uncommon practice. than dynamic advantages. This observation is supported by Manella (2009) in a study of factors that limit the attractiveness of Science Parks for innovative firms. The investigation of these factors in five Brazilian SPs in highlighted certain factors of attraction. for instance. Also revealed by the literature review was that in making the choice to locate in SPs. mention in their work that partnerships found in their case “are far from exploiting promising options”. Firms tend to recognize more easily static advantages of location. As mentioned above. When networks are mentioned in studies. Of the fifteen most important factors considered. The second issue is that understanding that we must go beyond the use of networks to achieve certain and specific short-term goals implies that we must understand them as mechanisms for generating business opportunities. Osajalo (2009) mentions other elements. they are seen as providers of specific advantages to the firm. partnership with universities. The first issue is that within the literature it appears that companies in Science Parks. seven were directly related to the arrangement of financial support by the Park and the rest were directly or indirectly linked to locational factors. as suggested by the authors from the New Institutional literature that we reviewed. infrastructure and common services. control and trust.

should be used in the Science Park literature. and also to assess how organizational isomorphism is related to involvement in institutions with global representativeness (Dimmagio & Powell. but also to contribute to the development of SP governance mechanisms that ensure their sustainability. training and empowerment in the specific sectors of the firms that are located in the Science Park being analyzed. The relevant research questions in this step are: do the firms in the Science Park belong to networks? If yes. as noted above. As Hansson et al (2005) observe. more research is needed on Science Parks with the aim of assessing the contribution of organizational networks to the creation of knowledge and how SPs can develop governance mechanisms that contribute to the creation and strengthening of organizational networks. However. Developing this argument. a possible role for SPs is the development of the social capital necessary for enabling and facilitating entrepreneurship in networks. This is because. few studies point to the need to develop mechanisms that allow the use of the benefits generated by intangible assets. how many? Are the networks local. certain research steps must be followed. The second step is an assessment of organizational networks prevalent in the Science Park. ANALYSIS OF SCIENCE PARKS AS CATALYSTS OF ORGANIZATIONAL NETWORKS To conduct an analysis of Science Parks as catalysts of organizational networks. In this sense. Grandori (1997. Finally. we found few recent studies dealing with knowledge creation or about how the tacit and social elements of knowledge creation pose challenges to SPs governance structures. This can be done by applying a questionnaire to firms in the Park.” Hansson (2004) suggests that the concept of ba. learning. Therefore. Although the literature confirms that Science Parks are environments for the development of skills aimed at building sustainable competitive advantage. This may be true in those cases where geographical proximity is sufficient to develop the necessary interactions required for innovation. the author analyzes the different types of governance mechanisms and management that contribute to the coordination of knowledge sharing and integration between networks and organizations within their own companies.Science Parks and Their Role in the Innovation Process generation and does not consider intangible assets. This can be done by a literature review. such as organizational networks. which combines three central elements of knowledge creation – process. suggesting they are important elements when proposing some form of governance knowledge. The first step is the assessment of the role that organizational networks play in the generation of business opportunities. dissemination and appropriation). 2005). Zhang (2004:1) calls attention to the fact that “intangible aspects of Science Park management such as marketing. 2001) indicates that there is some neglect of governance mechanisms as antecedents of knowledge processes (creation. but as observed above the literature on clusters suggests that relational proximity must be considered as well. services and the quality of Park management team emphasized were in the third decade of Science Park development. Nooteboom (2009) also observes that governance and competencies are complementary and essential for innovation. These results are not surprising. more studies are needed not only to understand the role of the relational proximity of the firms located in Science Parks for their innovation activities. national or global? Do networks 238 . authors implicitly assume in their analysis that the presence of institutions that form the Triple Helix in the Park will be a sufficient condition to develop innovation. learning and complexity. to understand differences and similarities between experiences based in specific contexts.

meetings. While studies focusing on performance of firms and the attractiveness of SPs are important to assess their relevance as tools for regional development. as innovation focused clusters. social events etc. As Parks seem to have a path dependency and can present signs of aging 239 . The relevant research questions in this step are: what are the specific services provided by SPs to disseminate knowledge? What is the role of each Park agent in the provision of these services? The services provided will differ according to the stage of maturity of the firm. dissemination and protection of knowledge. This can be done by interviewing Park managers. workshops. The third step is an assessment of the role of Park services in the fostering of organizational networks. Clear and efficient governance mechanisms can provide a significant reduction of transaction costs for the enterprises and for the Park itself. As clusters are created with the specific goal of innovation development. the research question dealt with here was how SPs.Science Parks and Their Role in the Innovation Process involve formal or informal contacts? What are their aims? What is the frequency of relationships? How interactions take place (emails. and developing governance mechanisms that take into account the creation and strengthening of organizational networks. Therefore. videoconferences. we expected to find papers that included in their analysis an assessment of organizational networks as core competencies that sustain the organization in the pursuit of dynamic innovation. The relevant research questions in this step are: how are information flows in the network organized? How are the results of interactions disseminated through networks? How is it possible to control results of interactions and their appropriateness? These questions are important because the demand for high speed and quality businesses deals generated by existing networks. we suggested that organizational networks are important to develop innovation since they allow for benefits that stem from relational proximity. The fourth step is an assessment of the governance mechanisms and their relation to knowledge generation in the Park. We tried to answer these questions by reviewing in scientific indexed papers studies of Science Parks. should broaden its scope. the analysis of the SPs literature showed that although they have been studied as part of an innovation system. dissemination and appropriation in order to develop sustainable competitive advantages. Science Park literature. because they can enhance this process by tapping their own networks and extending benefits of networks to all organizations located in the Park. studies of knowledge creation inside the Parks are needed to assess whether SPs provide a relevant contribution to innovative activities and can thus meet the original objectives of the Park. can contribute to the generation and strengthening of organizational networks and how these networks deal with the processes of knowledge creation. Based on a review of cluster characteristics. However. What are the results of interactions? Did the firm enter new networks after entering the Park? Is the purpose of new networks different? To understand the process of network creation and strengthening is crucial for Park managers. services provided to mature firms such as research laboratories of transnational companies will focus on the strengthening of networks that already exist so that risks associated with the entrance of new partners attracted by their location in the SP are mitigated.). therefore. This can be done through interviews with firms and Park managers. Parks present a great challenge for their managers: to intensify their role in coordinating activities related to the processes of the creation. little attention has been given to the role of organizational networks in the process of technological learning and generation of innovation. SUMMARY AND CONCLUSION By having a systemic profile. For instance.

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Entrepreneurship and Innovation Section 3 .

We relate entrepreneurial knowledge to two distinct learning outcomes: the ability to (1) recognize new venture opportunities.4018/978-1-61350-165-8. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. DOI: 10. . Based on analysis of data from 291 Swedish entrepreneurs. Sweden Diamanto Politis Halmstad University. Sweden Entrepreneurial Learning and Innovation: Chapter 14 ABSTRACT The relation between entrepreneurial learning and innovation is poorly understood – especially with respect to how entrepreneurs build up their capability to create new ventures. and (2) cope with liabilities of newness.ch014 Copyright © 2012.245 Building Entrepreneurial Knowledge from Career Experience for the Creation of New Ventures Jonas Gabrielsson Lund University. In this chapter we employ arguments from theories of experiential learning to examine the extent to which entrepreneurs’prior career experience is associated with entrepreneurial knowledge that can be productively used in the new venture creation process. IGI Global. we provide novel insights into how and why entrepreneurs differ in their experientially acquired abilities in different phases of the new venture creation process.

the bulk of past research has instead primarily been concerned with examining associations between entrepreneurs’ career experience and the performance of their new ventures (e. Prior studies are unfortunately of little help to answer this question. 2007). A change in focus towards individual-level learning outcomes. without any attention to the intermediate learning processes that link inputs to outputs (Reuber & Fischer. 2005. while learning outcomes among individual entrepreneurs on the other hand have been largely neglected. Woo & Dunkelberg 1989. Brüderl. The most widely acknowledged viewpoint. there have been very few empirical studies that have examined the extent to which various career experiences lead to entrepreneurial knowledge that can be used in the practice of starting up and managing new innovative ventures. Reuber & Fischer 1993. 2003). however.. 2001. Whether this implicit assumption bears some (or any) truth is however an empirical question and something which up to date has received very limited empirical attention despite its relevance for both theory and practice. the purpose of this chapter is to examine the extent to which entrepreneurs’prior career experience is associated with entrepreneurial knowledge that can be put into productive use in the process of new venture creation. there is hitherto limited scholarly understanding of how enterprising individuals can build up their ability to spot and seize opportunities for entrepreneurial profit throughout their professional careers. Based on the discussion above. 2005. 2005). The focus in past research has thus primarily been on firm-level outcomes. Dyke and Fischer (1990) and consider ‘experience’ as a direct observation of.g. 2008). or participation in. Past research has shown that it is difficult – if not impossible – to point out a single factor that explains entrepreneurial success. however.Entrepreneurial Learning and Innovation INTRODUCTION The important role of entrepreneurs in bringing innovations into the economic system has been emphasized at least since the workings of Schumpeter (1934). This experiential base in turn enables the development of personal and unique knowledge structures and insights that can be put into productive use in the new venture creation process (Politis. A question that still intrigues scholars is why some individuals are more successful than others in the practice of entrepreneurship. Minniti & Bygrave. Although convenient. Yet despite this general inference. Preisendorfer & Ziegler 1992. If we accept this.g. One way to distinguish between the two is to follow Reuber. So far. 1999. such an approach treats the important issues of knowledge accumulation in entrepreneurial contexts as a “black box” and thus overlooks both the sources and outcomes of entrepreneurial learning. 2001. necessitates a distinction between ‘experience’ on the one side and ‘knowledge’ on the other. is that successful entrepreneurs have acquired relevant and valuable experiences throughout their professional careers (e. 2001.. Politis. The main argument emphasized for doing this is that previous studies have made great inferential leaps from career experiences directly to firm performance. The two concepts ‘experience’ and ‘knowledge’ have instead most often been used interchangeably with an implicit assumption that entrepreneurs’ prior career experience automatically leads to entrepreneurial knowledge. then a relevant question is to what extent there is an association between particular career experiences and the acquisition and development of valuable knowledge that can be put into productive use in the process of new venture creation. Shane.g. Corbett. 1984). Butt & Khan 1996). events – while the practical wisdom resulting from what an individual has encountered represents the ‘knowledge’ derived from this particular experience (see also Kolb. Corbett. Cooper. Scholars with an interest in learning and knowledge accumulation in entrepreneurial contexts have recently started to explore individual-level learning outcomes (e. In the study we treat entrepreneurial 246 . Harrison & Leitch.. As a result. Minniti & Bygrave. Rae & Carswell.

varied management experience. and cross-functional experience. The rest of the chapter is structured as follows.. In all. and that by making productive use of this knowledge they are able to spot and seize opportunities for entrepreneurial profit. 2004).Entrepreneurial Learning and Innovation knowledge as a theoretical construct proxied by two distinct learning outcomes that have been emphasized in recent entrepreneurship research: their ability to (1) recognize new venture opportunities and (2) cope with liabilities of newness. Shane. Ardichvili. The next section presents the background where we review relevant literature and define our key concepts. 1997. Venkataraman. Shane. Once the hypotheses are outlined. we mean knowledge that entrepreneurs can put into practical use to produce or create a desirable outcome in the process of new venture creation. De Clercq & Arenius. evaluation and exploitation of opportunities to introduce new goods and services. Based on statistical analysis of empirical data gathered from 291 practicing entrepreneurs in Sweden. processes and raw materials through organizing methods that previously have not existed. Individuals may in reality engage in both phases simultaneously. Through our literature review we identify four career experiences that can be expected to lead to these two learning outcomes: industryspecific experience. for example if they 247 . see also Kirzner. This knowledge is moreover based on the education and accumulated career experience they have obtained throughout their professional lives (Shane. 2003. the findings support our conjecture that there is a need to distinguish between the two concepts “experience” and “experientially acquired knowledge” in future research on entrepreneurial learning. By this. small business management experience. 2003. 2003). The study ends with a discussion of the findings and suggestions for future research. The literature review is followed by a section where we present the hypotheses guiding our study.g. where many actors and institutions interact in the creation of new entities of economic significance (Edquist. Cardozo & Ray. Thereafter follows the analysis and a presentation of the results. BACKGROUND Innovation involves a complex evolutionary process.. ways of organizing markets. 2005). Several scholars emphasize the role of knowledge for the pursuit of entrepreneurial activities. 2000). Shane and Venkataraman (2000) delineate entrepreneurship as an activity that involves the discovery. In this study we have set out to examine the extent to which entrepreneurs’ prior career experience is associated with entrepreneurial knowledge. 1997) – from the initial embryonic pieces of information and knowledge that create opportunities for doing novel things. 2006. to the innovation’s ultimate diffusion in society (Fagerberg. 2000). Entrepreneurs play a crucial role in this process as they are the ones who make ideas for new or better ways of serving customers and markets come into existence by identifying and acting on opportunities for entrepreneurial profit (Shane & Venkataraman. by relating the opportunities that people recognize and exploit to information and knowledge asymmetries in the economy (e. we present the method section with a description of the sample and variables used. This definition helps us to identify two distinct phases in the new venture creation process – the first being opportunity recognition where opportunities for new ventures are discovered and subsequently evaluated (Ardichvili et al. we find that entrepreneurs differ in their ability to perform in different phases of the new venture creation process depending on their prior career experience. 2000. and the second being opportunity commercialization where a new venture is formed and established (Delmar & Shane. inefficiencies or resources that currently are not put to their best use. 1973). A common argument in their writings is that only a few people have knowledge about inventions.

which in turn enhances their ability to recognize and evaluate additional new venture ideas (Ronstadt. Extant research points toward the importance of personal first-hand work experience for developing the ability to recognize and exploit new venture opportunities (Politis. The second learning outcome refers to knowledge that increases entrepreneurs’ ability to organize and manage new ventures.. from a theoretical point of view. 2007). In sum. 2003). It is this knowledge corridor that enables them to use their experientially acquired knowledge base to assess the potential benefit in an opportunity in either a positive or negative light (Park. 1990. 2000). 1990.g.Entrepreneurial Learning and Innovation are involved in several concurrent projects that are in different stages of development. unevenly distributed information about market imperfections (Kirzner. empirical studies suggest that experienced business founders throughout their career develop a unique “knowledge corridor” through which they interpret the outside world. 2000). A conceptual foundation for understanding how individuals acquire and develop knowledge based on their career experience can be found in theories and models of experiential learning (for applications of experiential learning theory in entrepreneurship studies. and decreases with growing age of the organization. 2005. This personal and highly localized information can then be used as a basis for developing the first entrepreneurial insights into a more developed idea of how the market need might be served and resources deployed to yield profit (Ardichvili et al. Corbett. Landström & Rosenberg. In line with this discussion. 2003. it seems fair to argue that the extent to which individuals are effectively involved in recognizing and exploiting new venture opportunities can be expected to be highly dependent on their prior career experience. 2008). 2005. 2005). A key tenet in theories of experiential learning is the need to draw a distinction between the experience of an individual and the knowledge he or she acquires from that experience (Reuber et al. The first learning outcome refers to knowledge that increases entrepreneurs’ ability to effectively recognize new venture opportunities. which in practice means coping with “liabilities of newness” (Shepherd. 1998. Thus. 1973. The term was originally coined by Stinchcombe (1965) who in his seminal study reported that the risk of business closure is highest at the point of founding of an organization. the initial organizing and development of a new venture centers on a new venture opportunity that must have been recognized and evaluated at some earlier point in time. 2007). 1986. The reasons for this risk were certain liabilities that newcomers suffer compared to already established players. and then some 248 . Douglas & Shanley. Huovinen & Tihula. 2000). Venkataraman. Bailey. 2005). For example. Baum et al. A successful entrepreneur is in this respect often described as an alert person who is aware of. However. see e. opportunity commercialization cannot take place without prior opportunity recognition. 2000. Rae. Shane. such as the lack of a stable portfolio of clients and the time required for learning new organizational roles to be performed by their members. The ability to make sense and use of new information to find ideas for new venture opportunities. we relate entrepreneurial knowledge to two distinct learning outcomes that have been emphasized in recent entrepreneurship research (Politis. 1997). namely the grasping of experience. Politis. Shane & Venkataraman. and to effectively cope with liabilities of newness when organizing and managing new ventures. 1988. to assimilate them and apply them to commercial ends can hence to a large extent be seen as a function of an individual’s prior experience (Cohen an&d Levinthal. Johannisson. entrepreneurial knowledge can from this discussion be conceptualized as knowledge facilitating the ability to recognize new venture opportunities.. Corbett. This observation can be related back to Kolb (1984) who argues that experiential learning requires at least two interrelated dimensions.. or receptive to. Based on the reasoning above.

For example. services. it can be conjectured that some career experiences are more beneficial than others for the acquisition and development of entrepreneurial knowledge. and customer problems. Reuber & Fischer. customers and suppliers of the entrepreneurs’ previous employers. even though they are often expected to be conducive to entrepreneurial learning. 1993. 1999).Entrepreneurial Learning and Innovation transformation of this particular experience into knowledge. at least conceptually. some state or experience that is being acted upon. Based on these arguments. Entrepreneurs with prior industry experience also generally have a better understanding of how to meet demand conditions in the market place (Shane. 1994). Duchnesneau & Gartner. This distinction means. Hence. Dunkelberg & Woo. all of which could influence their ability to recognize new venture opportunities and cope with liabilities of newness (Cooper et al. transformation alone cannot represent learning for there must be something to be transformed. 2000). Moreover. the simple perception of an experience is not sufficient for learning to happen.. opportunities and to organize and manage new ventures. the hypotheses are grounded in the conceptual discussion above together with empirical literature and research on entrepreneurial learning and development. viable markets and product availability. the following hypotheses are proposed: H1a: Prior industry-specific experience is positively associated with a higher number of recognized new venture opportunities. Small Business Management Experience Another kind of career experience that has been highlighted in research on entrepreneurial learning is management experience (Cooper. Theoretically. because this allows them to take advantage of important information and knowledge gained during this period (Aldrich. 2005). the conceptual distinction between experience and knowledge that is made in theories of experiential learning intensifies the question of how different kinds of career experiences may lead to the development of entrepreneurial knowledge that can be productively used by entrepreneurs in the process of new venture creation. studies have shown that entrepreneurs tend to start businesses in industries in which they were previously employed. compared to non-surviving ventures (Cooper. customers and suppliers of surviving ventures have been found to be more closely related to the products. ways to serve markets. the products. all of which are impor- Industry-Specific Experience Past research suggests that prior industry-specific experience can facilitate the development of valuable knowledge that enhances entrepreneurs’ ability to both spot and seize new venture 249 . H1b: Prior industry-specific experience is positively associated with an ability to better cope with liabilities of newness. Woo & Dunkelberg. Further. 1988. reliable suppliers. that the experience of an individual will not automatically represent the knowledge derived from this particular experience. 1989. 2000). DEVELOPMENT OF HYPOTHESES In the following section we will develop hypotheses which associate particular career experiences with the two learning outcomes that were previously identified. Management experience may in this respect provide entrepreneurs with knowledge of markets. 1990. For this discussion we have deliberately chosen career experiences that have received limited empirical attention in past research. Thus. Bates & Servon. which requires that something must be done with it. services. Similarly. Politis. Industry-specific experience can hence be expected to provide entrepreneurs with valuable insights about relevant contacts.

1992). varied management experience may provide exposure to a wider variety of situations and problems. having management experience from businesses of varied sizes can be an additional dimension that also may be fruitful to consider when investigating sources of entrepreneurial knowledge (Dyke. as well as valuable social contacts with important stakeholders (Baucus & Human 1994. 1990).. This implies that managerial work requirements vary considerably. 1994). 1997). 2009). Entrepreneurs with previous management experience are moreover generally found to have a higher likelihood of success. and it is often through surviving and understanding such novel situations that learning takes place (Fiol & Lyles. Gimeno et al. 2001. Hence. 1997). Reuber & Fischer. Duchnesneau & Gartner. the following hypotheses are proposed: H3a: Varied management experience is positively associated with a higher number of recognized new venture opportunities. including negotiating. Varied management experience refers to experience from managing people in different firm contexts. Cross-Functional Experience Another experience dimension that has attracted scholarly interest is the functional experience of the entrepreneur (Cooper. as diversity in cognitive inputs often reduces the risk of home-blindness. 1980). Stuart & Abetti. Previous experience from managing a small business can thus be expected to provide budding entrepreneurs with training in many of the skills needed for recognizing and acting on entrepreneurial opportunities. Individuals with such experience are for example generally used to dealing with subordinates in the organization and it may also bring valuable knowledge about a wider set of potential customers and reliable suppliers. leading. 1989. 1986. the following hypotheses are proposed: H2a: Prior small business management experience is positively associated with a higher number of recognized new venture opportunities. Moreover. 1985. 1985.g. depending on functional area. Vesper. 1986. Fischer & Reuber. Reuber & Fischer. rather than task-dependent (Hales. 1990.Entrepreneurial Learning and Innovation tant dimensions in the process of entrepreneurial discovery (Shane. path-dependence and lock-in (e. This type of experience relates to professional experience from various functional areas.. management level. H2b: Prior small business management experience is positively associated with an ability to better cope with liabilities of newness. Cooper et al. Varied management experience from firms with different sizes may in this respect increase entrepreneurs’ ability to handle problems that are “taken for granted” in the small firm context. 1989). 2003). and organizational attributes such as type. 1994. H3b: Varied management experience is positively associated with an ability to better cope with liabilities of newness. Shane. Reuber & Fischer 1994). A consistent finding from previous reviews of management studies is however that managerial work is contextually dependent. 2001. there are also indications that varied management experience may be beneficial for individuals that are involved in new venturing 250 . 1996. Sykes. Empirical studies suggest that small firms are the most typical setting where entrepreneurs carry out their managerial work (Butt & Khan. Reuber. Based on these arguments. Varied Management Experience In addition to small business management experience. Thus. organizing and communicating (Romanelli & Schoonhoven. structure. 1990. Stuart & Abetti. planning. activities (Reuber 1997. problem-solving. decision-making.. 1989. Hambrick & Crozier 1985). implying that they are better prepared to cope with traditional obstacles facing new ventures (Cooper et al. Krueger. Lee & Tsang. 2000). Whitley. 1997. size and industry (Reuber..

Entrepreneurial Learning and Innovation such as management. Based on these arguments. finance. Before sending out the questionnaire. Previous research has failed to find any consistent associations between particular types of functional experience and new venture performance (Stuart & Abetti. The measures were derived from a careful review of previous theoretical and empirical work on experiential and entrepreneurial learning. To verify that the person who answered the questions had experience of starting up a new firm. 1992. firm size and age of their current business. the empirical findings indicate that entrepreneurial learning stems from having functional experience across different kinds of business functions. In line with these findings. Ucbasaran. 1990).8%. product development and R&D. After one postal follow-up we received 303 complete questionnaires. This reduced the total number of cases to 985. RESEARCH METHOD Sample To answer the research question and test the hypotheses developed in this chapter. due to problems of finding the individual entrepreneur (unknown address. Sykes (1986) found a very strong correlation between new venture financial success and having both previous management and sales experience. 1991). Westhead & Wright. Fischer & Reuber. Before making the final analyses we excluded responses from 12 individuals who had no experience of starting up a business. we included a control question in the questionnaire. Dyke. Experience from a broad array of functional areas seems consequently to result in the consideration of more alternatives and more careful evaluation of alternatives – cognitive processes that generally also are considered to contribute to the quality of decision-making in uncertain environments (Milliken & Vollrath. Moreover. production.4% of total responses) respondents. 2008). ownership changes. We conducted chi-square and t-tests to assess whether the results from the sample could be generalized to the population. Vesper (1980) found that experience from different functional areas was an indicator of better new venture performance.6% of total responses) and second-round (30.g. the following hypotheses are proposed: H4a: Cross-functional experience is positively associated with a higher number of recognized new venture opportunities. These tests revealed no statistically significant differences between respondents and non-respondents with regard to industry. it was pilot-tested on a smaller group of practicing entrepreneurs and entrepreneurship scholars. In addition. In a study of success factors of new ventures. the questions were honed and clarified for the final research instrument. Cooper (1985) found that the participation in or observation of a wide range of business functions was an experience relevant to successful venture formation in his study of incubator organizations. we conducted chi-square and t-tests to examine if there were any differences between first-round (69. etc. Rather. accounting.). After the first mailing round we immediately received 15 envelopes in return. corresponding to a valid response rate of approximately 30. We collected information about contact addresses from Statistics Sweden and the questionnaire was sent out in early fall 2004 addressed to the CEOs of the targeted firms. geographical location. The initial sample included 1000 randomly selected entrepreneurs who each started an independent new firm in 1998-2002. This led to a final sample of 291 cases. Based on this feedback. This response rate compares favorably to similar studies of entrepreneurial learning (e. H4b: Cross-functional experience is positively associated with an ability to better cope with liabilities of newness. we designed the empirical study as a questionnaire survey. marketing and selling. No significant dif- 251 . 1994. Reuber & Fischer. liquidation etc.

This variable was constructed using the mean of four items on a Likert-type scale. where respondents were asked to rate the extent (1 = very low extent. Shepherd et al. the variable was transformed using a logarithmic transformation. 2008). Due to a skewed distribution. & Wright. and where the idea for a new venture continually develops as individuals shape these elemental insights into a notion of an emerging business concept (i. (2) uncertainty regarding the market potential for the product or service. The second learning outcome variable was the entrepreneur’s self-assessed ability to cope with liabilities of newness. 5= very high extent) to which they would consider the following obstacles as problematic if they were currently involved in creating and organizing a new venture: (1) convincing potential clients about the new venture. We acknowledge that this item is biased towards the quantity rather than the quality of new venture opportunities. A higher score on this item indicates a higher number of recognized new venture opportunities. In line with our frame of reference.. suggesting that the process starts with the perception of opportunities for recombining resources on the market that the entrepreneur believes will yield profit. This conceptualization is consistent with previous research on opportunity development. (1998). no significant differences were found between early and late respondents with regard to the variables used in the study (see next section below).50. Based on this argument. and (4) uncertainty regarding roles and functions in the organization that a new venture would require. 2003. we also checked item-to-total correlations by applying the rule-ofthumb procedure suggested by Hair et al. Bhave..01. Westhead. 1965). which also supports our conceptualization of the opportunity development process described above. (3) lack of stable relationships with key stakeholders.Entrepreneurial Learning and Innovation ferences could be found between the early and late responses with respect to the same variables. Moreover. These questions were developed expressly for this research based on prior theoretical work on the liabilities of newness (Aldrich. we thus posit that there is a value in generating more rather than fewer new venture opportunities. in a larger pool of new venture opportunities there is greater likelihood that one or some of them can develop into a viable business concept (Ucbasaran.59..e. Starr and Bygrave. 1994. Variables and Measures Dependent Variables In the study we treat entrepreneurial knowledge as a theoretical construct. Cronbach’s alpha (α) for this construct was. We validated the measure against an item measuring the number of business opportunities (defined as unmet customer needs) that the entrepreneur had seized during the last five years. we initially set out to collect information about firm survival. Here we found that the item-to-total correlations were between. Ardichvili et al. 1999. the first learning outcome variable was constructed by an item measuring the number of new venture ideas which the entrepreneur had in the last year and which could lead to a potential new business or a significant part of a business.59 and. 1992. to assess whether our measure could be associated with any firm-level performance advantages when exploiting new venture opportunities. Klofsten. Hence. on these criteria we have no reason to suspect that there are any significant response biases in our sample. However. However. 2005). 2000. The responses were then reverse-coded so that a higher score on the scale indicates an ability to better handle liabilities of newness. which was well above the suggested limit of above. Stinchcombe. Moreover. proxied by the self-assessed ability to recognize new venture opportunities and cope with liabilities of newness. These data were collected in 2007 by identifying 252 . The result shows that the two items are positively and significantly associated at p <.71. as α can be a relatively weak indicator of internal consistency when few variables are employed in a composite measure.

Experience from business closure may moreover affect the entrepreneur’s ability to attract further resources in his or her subsequent venturing activities (Cope. “Cross-functional experience” was measured as the number of different business functions that the entrepreneur had experience from. p. indicating if the entrepreneur had experience also from management positions in medium-sized or large firms (0= no. Through this procedure we found that entrepreneurs with a higher reported ability to handle liabilities of newness to a significantly higher extent were in a high-performing group (with a sales growth which was 2. Instead. We included this control as research has shown that owners often believe they learn significantly from a business closure process so that they are better equipped to run businesses in the future (Stokes & Blackburn. Politis & Gabrielsson. The third control variable was related to the entrepreneur’s experience from working in high-growth industries. The primary reason for this expected association is that the experience gained from starting up one business enables the entrepreneurs to recognize and act on further entrepreneurial opportunities they could neither see.e. we followed the EU definition of a small firm as a firm with less than 50 employees. see also Shepherd.5 or higher. Here. (2) R&D. 253 . Cave and Eccles. indicating if the respondent had previous experience from starting up a new venture (0= no. Starr & Bygrave. 1= yes). which may be a sign of an ability that the entrepreneur can cope with traditional obstacles more effectively in the early development of a firm. Control Variables We also included three control variables in the research model. Shane. Independent Variables The research model involves four main independent variables. However. Dowling and Megginson (1995) and Entrialgo (2002). we made analyses with respect to firm sales growth (the year-to-year average change in sales).05). 2002. 2003. i. High-growth industries are generally characterized by rapid changes and fast technological progress. This rendered us unable to correlate our liability of newness measure against a measure of survival. 1994). “Industry-specific experience” was measured as the entrepreneurs’ total number of years of experience from the industry they now operate in. 2009). we could locate only a handful of firms (n=27) that had closed down. The first control variable was related to the individuals’ experience of discontinuing their earlier ventures due to bankruptcy. and (6) law. 1992 for similar findings). sectors of the economy that experience a higher-than-average growth rate (Storey. The second control variable was the prior start-up experience of the respondent. Shane & Khurana. “Small business management experience” was measured as the number of years that the entrepreneur has had a management position in a small firm. “Experience from varied management positions” was measured as a dichotomous variable. >. (4) sales/ marketing. until they had started their initial venture (Ronstadt. 1990. we used six functional areas to identify and distinguish between different work functions: (1) general management. Prior start-up experience was measured as a dichotomous variable. Based on the work of Stuart and Abetti (1990). Bankruptcy experience was measured as a dichotomous variable. nor take advantage of.Entrepreneurial Learning and Innovation the number of firms in the sample that were still operating during 2006. 2000. indicating if the respondent had previous experience from discontinuing an earlier venture due to bankruptcy (0= no. Douglas & Shanley. (5) finance. McGee. 1= yes). 1988. We included this control as it is widely acknowledged that prior experience from starting a new venture increases the probability that an individual will continue to identify and exploit new venture opportunities (Duchesneau & Gartner. 2003). 1= yes). (3) manufacturing/production. 2004).

r. and construction (28. means and standard deviations) is displayed in the table in Figure 1.8 years (min=1.5%). so we considered linear multiple regression analysis as an appropriate statistical technique (Hair et al. About 62% of the entrepreneurs had experience from three or more functional areas of expertise. max=73). max=41). individuals with prior start-up experience also generally have experience from managing these ventures. The majority of these individuals (68.6%) had experience as board members. 1986. marketing/sales and accounting/finance was the most common.=69.3%).. which according to Nunnally (1978) is the standard threshold used to determine high correlation. and 50. About 69% of the entrepreneurs had experience from ANALYSIS AND RESULTS In our research model we have metric measures as dependent variables and several metric or dichotomous independent variables.3 years (min=24. where functional expertise in general management. Studies of managers operating in high-growth industries have moreover suggested that these individuals often are more alert in acting on opportunities while repressing environmental threats (Covin & Slevin 1989). working in two or more industries. firms with less than 50 employees). max=35). For example. there were inter-correlations among some of the independent variables even though they are well below threshold levels for multicollinearity problems. The average number of start-ups was 2.51 (min=1.Entrepreneurial Learning and Innovation which in turn can influence the level of opportunity present in those industries (Shane. The most common industry-specific experience was from consulting and other business services (49. Studies have furthermore indicated that the environment can be highly heterogeneous both within and across industries (Keats & Hitt. and the average total work experience of self-employment was 12.e. all explanatory variables in the regression analysis had 254 . Their mean age was 47.=45. and the average total years of work experience was 25. 1988.7%) were moreover entrepreneurs with multiple start-up experience. New business opportunities are hence more likely to occur in growing markets.8% had some sort of higher education (university studies). All correlation coefficients are less than r =. and the average number of years in this position was 9. The number of years of experience from these three functional areas were highly correlated with the number of years from working as a small business manager (r. Sample Characteristics The individuals in the final sample represent a broad cross-section of entrepreneurs.70. A description of the variables used in the analysis (correlations. 33. and 34. Westhead & Wright.6 years (min=0. 1993). Moreover.. Zahra.7% had education also from gymnasium/senior high school. We expected some difficulties with using variables connected to entrepreneurs’ career experience in the study.5% of the entrepreneurs had experience from investing their own money as risk capital in unlisted firms in which they have no previous family connections. 2003). 1998). Over two thirds of the entrepreneurs (69. About 12% of the entrepreneurs had compulsory school education (7 or 9 years) as their highest education level. As we expected.2%). followed by wholesale and retail (28. and r. Therefore we chose to measure the entrepreneur’s perception of this type of experience. max=15). 5=major experience). so-called “habitual entrepreneurs” (MacMillan.4 (min=4. We measured industry growth as the entrepreneur’s experience from working in highgrowth industries on a Likert-type scale (1=minor experience. max=50). rather than to classify specific industries that we thought could be considered high-growth industries. About 85% had experience from having a management position in a small firm (i.=44 respectively). 1998).

indicating no support for Hypothesis 4b. It is in this respect widely acknowledged that different career paths create knowledge asymmetries which in turn lead 255 . the empirical data do not support either Hypothesis 1a or 1b.01). First we entered the control variables (Step 1). Hypothesis 2b is supported as there is a positive and significant association between small business management experience and the ability to cope with liabilities of newness (p <.01). The data in Figure 2 support Hypothesis 3b. This step is presented as Equation II. Additional analyses of the data controlled for the possibility that the control variables moderate the relationship between independent and dependent variables. The data in Figure 2 also support Hypothesis 4a. The results of these analyses will therefore not be reported. as there is a positive and significant association between varied management experience and the ability to cope with liabilities of newness (p <. we conducted a stepwise multiple regression. however. We can also see in Figure 2 that Hypothesis 2a is not supported. as crossfunctional experience was positively associated with a higher number of recognized new venture opportunities (p <. as it supports the production and transformation of knowledge into the creation of new ventures. means and standard deviations VIF’s between 1. There is no significant association between varied management experience and a higher number of recognized new venture opportunities. The result of the final multiple regression analysis is presented in Figure 2. There is also no association between industry-specific experience and the ability to cope with liabilities of newness.35. showing no association between small business management experience and a higher number of recognized new venture opportunities. DISCUSSIONS AND CONCLUSION Entrepreneurial learning is a key ingredient in successful innovation. To identify the separate effects of the control variables and the four experience variables.02 and 1. indicating no support for Hypothesis 3a. However. but these tests did not reveal any significant results. The final regression model (Equation II) shows that there is no association between industryspecific experience and a higher number of recognized new venture opportunities. But there was no significant association between cross-functional experience and coping with liabilities of newness.05). Hence. Then we included the four experience variables (Step 2). which lead us to conclude that no problems of multicollinearity exist in our data set.Entrepreneurial Learning and Innovation Figure 1. This step is presented as Equation I. Pearson correlation matrix.

256 . Professional experience from various functional areas is of value for the entrepreneur before the formal establishment of the new venture. Small business management experience and varied management experience. Regression analysis individuals to value resources differently (Shane. Opportunities for entrepreneurial profit occur on the basis of such asymmetries when some people. and future research will hopefully use these insights to advance our understanding of how entrepreneurs develop knowledge from experience. on the other hand. The findings thus suggest that there is a need to reconsider this implicit assumption. specifically suggesting that different career experiences may lead to different kinds of knowledge advantages among entrepreneurs. The ability to make productive use of their personal stock of knowledge that entrepreneurs develop from career experience is thus a key ingredient in the overall process of innovation where new ideas are commercialized and diffused in society. Our empirical findings contribute to current research on entrepreneurial learning where ‘experience’and ‘knowledge’ often have been used interchangeably with the implicit assumption that career experience automatically leads to entrepreneurial knowledge. as it influences his or her ability to come up with entrepreneurial ideas and insights. as they influence his or her ability to effectively cope with liabilities of newness. our study supports the importance of experiential learning for the development of knowledge that can be productively used by entrepreneurs in the new venture creation process. In this study we add to past research on entrepreneurial learning and innovation by showing that entrepreneurs differ in their ability to make productive use of their knowledge in the new venture creation process. throughout their careers. The value of different kinds of career experience can in this respect be related to different phases in the process of new venture creation (Shane & Venkataraman. our findings provide valuable insights into the practice of new venture creation.Entrepreneurial Learning and Innovation Figure 2. As such. 2000). are of value for the entrepreneur after the formal establishment of the new venture. learn to discover and develop ideas for new products or processes that other people are willing to pay for. 2000). depending on their prior career experience. In addition.

we have used a simplified model with the aim of examining personal experience-related factors that are located extensively in the entrepreneur. The reason why we bring this up is that we could observe that some entrepreneurs derived greater. 2005) that can enhance their ability to recognize and exploit new venture opportunities. Their personal networks seem in this respect to provide them with critical and essential information. Singh. Implications Despite the above-mentioned potential limitations. 2007). 2000. but also some kind of learning advantages among entrepreneurs with similar amounts of career experience. and entrepreneurs have frequently been found to base their decisions on personal and professional advice through their personal networks (Birley. there were some entrepreneurs who seemed to learn “more” than others from the same amount of career experience. we believe our study has some important implications for the practice of entrepreneurship. Small business management experience and varied management experience seem on the other hand to provide individuals 257 . this would imply that some entrepreneurs are more effective in transforming their experience into knowledge that can be productively used in the practice of starting up and managing new ventures. 1986. van de Sluis & Jansen. Brüderl & Presiendorfer. First. we should also like to mention that we are aware of the potential limitations in measuring only the amount or quantity of career experience of entrepreneurs. Third. and others less. even though the regressed mean in our analyses showed significant associations between some particular career expe- riences and learning outcomes. as we point out in this study. 1998). Nevertheless. Aldrich & Zimmer. our two measures of entrepreneurial knowledge were based on the self-assessed ability to recognize new venture opportunities and cope with liabilities of newness respectively. Although self-perceptive measures can be a fairly good indication of an individual’s ability to perform certain tasks (Gist. 1987).Entrepreneurial Learning and Innovation Limitations Some potential limitations of the present study should be mentioned. In addition. However. the findings suggest that different kinds of career experience lead to different kinds of entrepreneurial knowledge (Politis. and further research should also consider dimensions of experience related to entrepreneurs’ social surroundings when investigating the relationship between prior career experience and entrepreneurial knowledge. this is not necessarily the same as the actual long-run performance of these tasks. To examine this issue further we suggest developing. 2007). 2000. Cross-functional experience seems to provide individuals with productive knowledge that improves their ability to recognize new venture opportunities. 1985. benefit from their career experience. However. The professional career seems in this respect to expose enterprising individuals to distinct learning opportunities (van Gelderen. this discussion is highly speculative and an examination of these issues would require additional variables and more rigorous statistical analyses. Our findings are hence only part of the story. Ozgen a&d Baron. If so. 2005). this may suggest that there exist not only knowledge advantages depending on differences in their prior career experience. and also expose them to new and different ideas and worldviews (Johannisson. it provides some interesting and relevant ideas for further research which may increase the explanatory power of our theoretical model. Interestingly. A general conclusion that can be drawn from our findings is the important role that an individual’s prior career experience plays for the successful acquisition and development of entrepreneurial knowledge. Second. new venturing activities are in many ways also a social exchange process (Pittaway & Cope. combining and comparing both subjective and objective measures in future studies. Hence.

. which in turn provide the basis for performance differentials in the new venture creation process. Interestingly.. Wellesley. Secondcareer entrepreneurs: A multiple case study of entrepreneurial processes and antecedent variables. we provide empirical evidence suggesting that different career experiences are associated with different kinds of knowledge. 41–71.. Chandler. 2008). It also speaks in favor of new venture teams (e.Entrepreneurial Learning and Innovation with productive knowledge that increases their ability to handle liabilities of newness in the new venture creation process.. In Ronstadt. J. we also argue that there is a need to distinguish between “experience” and “knowledge” in future studies of entrepreneurial learning. even if entrepreneurs do not possess all relevant kinds of experience and knowledge themselves. for example. (Eds. 105–123.. Conceptually. point to a positive relationship between team size and new venture growth. 2006) for successfully handling the process of developing a new venture from initial conception to establishment. (Eds. Honig & Wiklund. The art and science of entrepreneurship (pp. & Zimmer.. they may have access to valuable knowledge resources through a well-composed new venture team. R. & Human.g. ing. Aldrich. & Ray. A. 199–210).). Hence. (1994). Empirical findings. Learning styles of successful entrepreneurs. Journal of Business Venturing. Sin & Yiong. Entrepreneurship through social networks. 18(1). MA: Ballinger. J. & Vesper. H. & Smilor. which also provides some general implications for future research. especially in cases where the team possesses diverse educational and professional backgrounds (Lüthje & Prügl. we believe that our arguments and findings in this study contribute a more detailed understanding of entrepreneurship as an experiential learning process. 19(2). H. C. A theory of entrepreneurial opportunity identification and development.. D. as it implies that an individual entrepreneur is generally not able to cover all the skills and knowledge areas necessary to successfully develop and pursue an identified opportunity through the different phases in the entrepreneurial process.1016/S08839026(01)00068-4 Bailey. E. 3–23). MA: Babson College. In this chapter.. Peterson. In Sexton. S. (1999). K. D. Foo. Baucus.). Harrison and Leitch. (1986). Frontiers of entrepreneurship research (pp. Cardozo. Organizations evolving. Entrepreneurship Theory and Practice. R. 2006). S. 2005. we add to this growing body of literature by presenting an empirical study of the extent to which entrepreneurs’ prior career experience is associated with their productive use of knowledge in the new venture creation process. R. This should be kept in mind. R. Based on theories of experiential learn- 258 . REFERENCES Aldrich.g. Hornaday. A. E. J. This implies that individuals who have developed one kind of knowledge advantage have not necessarily developed the other type of knowledge advantage. doi:10. the empirical findings also show that there are no significant associations between the ability to effectively recognize new venture opportunities and the ability to effectively cope with liabilities of newness. (2003). Conclusion Recent studies have highlighted the need to better understand the relationship between entrepreneurial learning and innovation by examining how individuals learn to act entrepreneurially in different contexts (e. (1986). In all. Ardichvili. London. E.. UK: Sage. Cambridge..

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