Developing new innovation models: Shifts in the innovation landscapes in emerging economies and implications for global R&D management

Over the past two decades, there has been a substantial shift in the global innovation landscape. Multinationals from developed economies are increasingly globalizing their R&D activities and are developing an “open innovation” model to source innovations from outside the firm, including from emerging economies such as those in Asia. In addition, emerging economy firms, which traditionally have played a secondary role in the global innovation landscape, have now begun to catch up in developing their own innovative capabilities. This study explores the implications of this new innovation landscape for CEOs of multinationals and emerging economy firms, as well as for international management scholars and educators. While the multinationals might appropriate rents from their existing capabilities and source new ones in emerging economies, they may be threatened by weak intellectual property rights regimes and unintended knowledge spillovers to local firms, creating potential competitors. Firms in the emerging economies can learn from and catch up with investing multinationals, but to do so they need to develop their own innovative capabilities and move from a process to a product focus and from imitation to innovation.     

Inter‐organizational Cooperation and Environmental Change: Moderating Effects between Flexibility and Innovation Performance

The paper investigates the moderator effect of inter‐organizational cooperation in the relationship between workplace flexibility and innovation performance. This research question is important because innovation is dependent on the strategic integration of technological knowledge, requiring organizations to acquire new capabilities rapidly or to ensure the presence of knowledge that may be beyond existing internal capabilities. Inter‐organizational cooperation constitutes a relevant mechanism for a firm to increase its knowledge base concerning new products and processes. High‐cooperation firms may have more opportunities to take advantage of flexibility for innovation performance because it facilitates the access and dispersion of knowledge within the firm. We test the research hypotheses in a sample of manufacturing and service firms. The results contribute to the literature on flexibility and innovation because they demonstrate that inter‐organizational cooperation moderates the relationship between flexibility and innovation performance. We discuss the implications of these results for future research and managerial practice.     

How organizational cognitive frames affect organizational capabilities: The context of corporate sustainability

We draw on the emerging literature on the micro-foundation of capability development to investigate the effects of the relative importance of corporate sustainability in a firm's organizational cognitive frame on the development of distinct organizational capabilities. Based on survey data from 124 Danish manufacturing firms and seven interviews, we find that the relative importance of corporate sustainability in a firm's organizational cognitive frame positively encourages the development of three organizational capabilities, namely, stakeholder integration, market sensing, and organizational learning. However, contrary to our expectation and reasoning, we find that the development of the strategic planning capability is negatively affected. Our findings provide novel empirical evidence and contribute to an improved understanding of the effect of a firm's organizational cognitive frame on the development of organizational capabilities.     

Towards a Theory of Competitive Progression: Evidence from High‐Tech Manufacturing

This study replicates and extends Ferdows and De Meyers' observed ‘sand cone’ model of cumulative competitive capabilities by means of Roth's related competitive progression theory (CPT). Using path analysis, we model and test the relationships among the generic competitive capability constructs of conformance quality, delivery reliability, volume flexibility, and low cost as predicted by CPT. Our results, drawn from a sample of high‐tech manufacturers, provide further evidence that on average, these four capabilities are acquired both cumulatively and in that sequence. We also find that each generic capability increases operational know‐how and reduces non‐value‐added directly and/or indirectly through the enhancement of successive capabilities in the progression, which in turn improves profitability. The paper contributes a theoretical rationale for the observed sand cone effect, describes how the competitive progression acts to influence accelerated organizational learning over an innovation cycle, and offers evidence that combinative capabilities have strategic value for high‐tech manufacturers.     

Complex technological capabilities in emerging economy firms: The role of organizational relationships

Formal organizational relationships are important sources for capability building in emerging economy firms eager to move up the value chain. We examine how access to valuable knowledge available to firms via organizational relationships creates learning opportunities necessary for the development of complex technological capabilities. Using a sample of 852 observations of emerging economy firms from the Indian software industry between 1992 and 2000, we find that developing strong domestic intra-organizational relationships, through affiliation with a moderately diversified business group or operating in a related industry, promote more complex technological capabilities. In the case of foreign inter-organizational relationships, we find that greater foreign client contact enhances the complexity of firm technological capabilities. However, accessing knowledge from domestic inter-organizational relationships appears to hinder the development of firm complex technological capabilities. An interesting result from our research was that having greater access to knowledge from foreign intra-organizational relationships, embedded within foreign subsidiaries, did not lead to the development of complex firm technological capabilities. The results of our study highlight that for emerging economy firms wanting to improve their complex technological capabilities, there may be diminishing benefits to learning from and acquiring knowledge available within specific types of formal organizational relationships.     

Experiential and Informational Knowledge,Architectural Marketing Capabilities,and the Adaptive Performance of Export Ventures: A Cross‐National Study

Knowledge‐based view (KBV) theory posits that the acquisition and use of relevant knowledge is key to understanding organizational performance. However, there is relatively little empirical evidence to support or refute several important propositions underlying KBV theory explanations of organizational performance. In particular, the extant literature has focused on individual technical and scientific components of the knowledge bases of firms in dynamic industries, and largely ignored both different levels of informational and experiential knowledge relevant to the market environment, and the increasingly important context of exporting. Our study addresses these knowledge gaps by developing a framework for export venture knowledge management and empirically examining relationships between different types of individual‐level and organizational‐level knowledge relevant to the market environment, architectural marketing capabilities, and the adaptive performance of export ventures. Using primary data collected in the United Kingdom and China, our study indicates that export ventures' organizational‐level experiential and informational knowledge, and individual‐level experiential knowledge relevant to the market environment, is positively associated with export ventures' architectural marketing capabilities, which are in turn associated with the adaptive performance of export ventures.     

Innovation in Small,Project‐Based Construction Firms*

Relevant literature is synthesized to provide a holistic picture of our current knowledge of innovation in small, project‐based firms, highlighting significant gaps in the broad areas of ‘focus and outcome’, ‘organizational capabilities’, ‘context’ and ‘process’. Research findings from fieldwork focused on the construction industry are offered to address these gaps. In particular, a consensus model is given of the organizational factors dynamically at play. It is shown that typically the innovations of small, project‐based firms are closely tied to their operational activities and are pushed forward by owners who utilize very scarce resources to make progress in the interstices of normal business. This leads to an emphasis on taking up established technologies through ‘learning on the job’. Growth per se is not an important target. The motivation to act is generally to get past a survival mode of operating and to achieve stability by satisfying clients. These characteristics contrast with large organizations, especially in terms of the role of the owner, the close focus on niche markets and the lack of slack resources to innovate in parallel with normal business. It is hoped that these results will be of interest to other sectors where small, project‐based firms operate.     

Managing Co‐creation Design: A Strategic Approach to Innovation

Co‐creation offers firms and their network of actors significant opportunities for innovation, as each actor offers access to new resources through a process of resource integration. However, despite the significant advantages that co‐creation can offer, there is surprisingly little research providing a strategic approach for identifying the most advantageous co‐creation opportunities, especially when many possible options are available. Recently, scholars have called for research that develops tools and processes related to co‐creation. This study addresses these priorities, making two contributions. First, in contrast to previous work considering co‐creation more generally, or focusing on one specific form only, e.g. co‐production, this paper offers a detailed and granular approach to co‐creation design. A co‐creation design framework is developed, which incorporates multiple design dimensions and categories that can reveal new co‐creation opportunities. Second, the research extends the application of a design approach, specifically within the context of co‐creative activities. The authors use field‐based research with senior executives to develop a framework that includes key co‐creation design elements. A morphological approach is used to explore how a lead firm can identify attractive co‐creation opportunities. An innovation solution in one organization provides an illustration of how the co‐creation design framework can be applied.     

Catch-up as a Survival Strategy in the Solar Power Industry

We evaluate the strategies of the emerging market firms in the context of nascent industries. We use the Indian solar power industry as the empirical setting, against the backdrop of the evolution of the global industry, While in traditional industries emerging market firms learn from advanced economy multinational enterprises (MNEs) and slowly upgrade their capabilities, in the intensely competitive environment of nascent innovative industries, emerging market firms are exposed to global competition in their home market right from the early years. This shortens their catch-up clock. As a result, their long-term survival depends on their ability to catch-up fast, both in output and innovation capabilities. In the solar power industry, we find that innovations stem, in the main, from advanced economy firms. Further, Chinese firms are beginning to move from cost-based imitation to innovation. In contrast, with a few key exceptions, most firms in the Indian solar industry remain locked within a narrow niche of downstream site-based installation. Their operations are opportunistic, short term, and without specific catch-up goals, a scenario that does not bode well for the industry's future in India.     

Ambidextrous Organizational Culture,Contextual Ambidexterity and New Product Innovation: A Comparative Study of UK and Chinese High‐tech Firms

Contextual ambidexterity is of paramount importance for new product innovation and organizational success, particularly in high‐tech firms operating in a dynamic environment. Whilst it is recognized that contextual ambidexterity is grounded in organizational culture, existing research has not crystallized what kind of organizational culture enables contextual ambidexterity and consequently new product innovation. In this paper, drawing on data from 150 UK and 242 Chinese high‐tech firms, we conceptualize ambidextrous organizational culture as a higher‐order construct consisting of organizational diversity and shared vision, and examine its impacts on contextual ambidexterity and consequently on new product innovation outcomes. Using structural equation modelling, we find significant relationships between ambidextrous organizational culture, contextual ambidexterity and new product innovation outcomes; contextual ambidexterity mediates the relationship between ambidextrous organizational culture and new product innovation outcomes. Our findings also suggest that the above relationships are robust in the UK–China comparative research context, and that contextual ambidexterity and new product innovation outcomes are dependent on business unit level heterogeneity (i.e. ambidextrous organizational culture and research and development strength) rather than industry or cross‐cultural differences.     

Conditions of Radical Transformation in State‐Owned Enterprises*

This study analyses the key contributors to radical organizational change in five New Zealand state‐owned enterprises during their ownership transition between 1985 and 1995. Abrupt government reform policies, organizations' market positions, realization of rapid technological innovation, proactive managerial actions and the new owners' strategic intent are established as key conditions of radical change in state‐owned enterprises. We integrate our findings with institutional theory and resource dependency theory to argue that organizational dynamics in times of uncertainty depend on de‐institutionalization of old and institutionalization of new patterns of resource dependency.     

Interactive profit-planning systems and market turbulence: A dynamic capabilities perspective

This article describes, theorizes and empirically investigates the concept of interactive profit-planning systems (PPS) through the lens of the dynamic capabilities logic. With this conceptualization: interactive PPS capabilities comprise budgeting, forecasting and results-reporting routines, in which top and middle managers interact to create knowledge for sensing, seizing, and business model reconfiguring (to manage strategic business change). Survey data from 331 Australian firms is analyzed employing partial least squares structural equation modeling. The data provides support for two hypotheses: (1) greater market turbulence strengthens the positive effect of interactive PPS capabilities on business unit performance; and (2) greater market turbulence strengthens the positive effect of flexibility values (of organizational culture) on interactive PPS capabilities. Our findings show that interactive PPS capabilities function according to the salient tenets of the dynamic capabilities logic, and clarify the beneficial roles of formal cybernetic control systems and the intertwined involvement of top and middle managers in using dynamic capabilities.     

Competitive Strategies and Firm Performance: a Comparative Analysis of Pure,Hybrid and ‘Stuck‐in‐the‐middle’ Strategies in Spanish Firms

The purpose of this study was to examine the viability of hybrid competitive strategies, which combine differentiation and cost elements, and their impact on organizational performance in comparison to pure strategies and ‘stuck‐in‐the‐middle’ combinations. Previous studies have focused above all on US data. The analysis carried out in this paper has centred on a multisectorial sample of 164 Spanish firms. The findings show that a large number of the organizations use different types of hybrid strategies and also that such strategies tend to be associated with higher levels of firm performance, particularly those strategies which place emphasis on a greater number of strategic dimensions, and specifically on innovation differentiation.     

When Gray is Good: Gray Markets and Market‐Creating Investments

Gray markets arise when an intermediary buys a product in a lower‐priced, often emerging market and resells it to compete with the product's original manufacturer in a higher priced, more developed market. Evidence suggests that gray markets make the original manufacturer worse off globally by eroding profit margins in developed markets. Thus, it is interesting that many firms do not implement control systems to curb gray market activity. Our analysis suggests that one possible explanation lies at the intersection of two economic phenomena: firms investing to build emerging market demand, and investments conferring positive externalities (spillovers) on a rival's demand. We find that gray markets amplify the incentives to invest in emerging markets, because investments increase both emerging market consumption and the gray market's cost base. Moreover, when market‐creating investments confer positive spillovers, each firm builds its own market more efficiently. Thus, firms can be better off with gray markets when investments confer spillovers, provided the spillover effect is sufficiently large. These results provide a perspective on why firms might not implement control systems to prevent gray market distribution in sectors where investment spillovers are common (e.g., the technology sector) and, more broadly, why gray markets persist in the economy.     

Institutional and Resource‐based Explanations for Subsidiary Performance

Addressing calls to integrate insights from institutional theory and the resource‐based view, we bring together dual theoretical explanations from institutional theory and the resource‐based view to examine the effectiveness of transfer of practice and human capital development as two routes to subsidiary performance. Our study of Hong Kong firms with subsidiaries in Mainland China shows that both routes positively affect subsidiary performance. However, our data show that our sampled firms struggled to successfully transfer practices from their parents. We attribute an explanation for this to the characteristics of practices as organizational capabilities in which transfer is made harder by the difficulty in replicating such capabilities. Consequently, developing subsidiary human capital is an important ally to practice transfer as a means to achieve superior subsidiary performance. Our results raise interesting questions about practice transfer and the resource‐based view relevant to future scholarly research.     

On How Firms Located in an Industrial District Profit from Knowledge Spillovers: Adoption of an Organic Structure and Innovation Capabilities

The canonical approach argues that firms located in industrial districts enjoy advantages for both innovation and performance as a consequence of the exceptionally strong knowledge spillovers that flow freely and spontaneously within them. However, diffusion of shared competences is not as easy and free as postulated in the literature. Using the resource‐based view, we study whether clustered firms perform better than non‐clustered firms, by providing empirical evidence that location of firms in an industrial district does not directly create innovation capabilities or economic rents. This research question is important because it enables us to better understand how firms benefit from this external knowledge flow, both to create advantages in technological innovation and to obtain superior organizational performance. To stand out in capabilities that are often localized at the centre of the same industrial district, a firm needs to develop a learning internal micro‐environment capable of better absorbing localized knowledge spillovers. In particular, the organic form is revealed as a configuration well suited to combining structural flexibility with the productive flexibility offered by the district and to strengthening technological innovation capabilities, thus improving organizational performance.     

Explaining the Causes and Effects of Dynamic Capabilities Generation: A Multiple‐Indicator Multiple‐Cause Modelling Approach

The purpose of this paper is to develop a multiple‐indicator multiple‐cause model to explain dynamic capabilities generation. We use one of the main common effects of dynamic capabilities (operational, structural and strategic flexibility) to design a measurement tool for dynamic capabilities generation. Based on this measurement tool, we test the influence of several factors identified in the specialized literature as potential causes that trigger and promote dynamic capabilities generation. We use data from a survey of 200 CEOs of Spanish firms to test the model. The results show that only organizations whose managers have perceived a high degree of environmental dynamism have generated dynamic capabilities. The results also show that knowledge codification and technical innovation are significantly related to dynamic capabilities generation. We attempt to shed light on current theoretical debates about dynamic capabilities generation and provide a practical guide to explain the origin and results of dynamic capabilities that have been tested empirically.     

Internationalization,Innovation and Institutions: The 3 I's Underpinning the Competitiveness of Emerging Market Firms

The past decade has seen an increase in the extent of research focused on and around emerging market firms (EMFs) and their rising levels of competitiveness in both their home markets and more importantly in the global market place. At the same time, the practitioner-oriented literature has been documenting a growing number of corporate success stories that originate in emerging market economies. We posit that the growing prominence of EMFs is a result of three interrelated phenomena: the fast-paced internationalization of EMFs into both developing and developed market economies; the rapidly increasing extent to which business enterprises in emerging economies are focusing on knowledge-intensive processes and innovation; and the continuous evolution of institutions in these markets, particularly in terms of economic liberalization.     

Discovering and Managing Interdependence with Customer‐Entrepreneurs

Research on inter‐organizational relationships has largely focused on the interdependence between formal organizations. In recent years, firms have encountered a new logic in which interdependent parties are not formal organizations but platform‐based ‘customer‐entrepreneurs’ that create value through illegal means. Drawing on a 5‐year‐long qualitative study, we examine how firms recognize and instantiate this new logic and, consequently, respond to their interdependencies with customer‐entrepreneurs. Viewed through the lens of institutional logic, we find that, with the benefit of hindsight, firms recognize the existence of the logic of customer entrepreneurship, which triggers organizational sensemaking that is made up of three elements: interpretation of legitimacy compatibility; interpretation of efficiency compatibility; and integration of stakeholder perspectives. This sensemaking results in either a determined account concluding on the compatibility calculus in a top‐down manner, or an open‐ended account avoiding the construction of a resolute, synthesized view. A determined account leads to a defiance strategy, by which firms attempt to remove the source of interdependencies with customer‐entrepreneurs, whereas an open‐ended account guides firms to espouse a decoupling strategy, whereby firms covertly resort to efficiency maximization enabled by the interdependence. Our results offer implications for the research on inter‐organizational relationships and institutional logic.     

Investment in Facility Changeover Flexibility for Early Entry into High‐Tech Markets

A model is introduced to analyze the manufacturing‐marketing interface for a firm in a high‐tech industry that produces a series of high‐volume products with short product life cycles on a single facility. The one‐time strategic decision regarding the firm's investment in changeover flexibility establishes the link between market opportunities and manufacturing capabilities. Specifically, the optimal changeover flexibility decision is determined in the context of the firm's market entry strategy for successive product generations, the changeover cost between generations, and the production efficiency of the facility. Moreover, the dynamic pricing policy for each product generation is obtained as a function of the firm's market entry strategy and manufacturing efficiency. Our findings provide insights linking internal manufacturing capabilities with external market forces for the high‐tech and high‐volume manufacturer of products with short life cycles. We show the impact of manufacturing efficiency and a firm's ability to benefit from volume‐based learning on the dynamic pricing policy for each product generation. The results demonstrate the benefits realized by a firm that works with its manufacturing equipment suppliers to develop more efficient and flexible technology. In addition, we explore how opportunities afforded by pioneer advantage enable a firm operating a less efficient facility to realize long term competitive advantage by deploying an earlier market entry strategy.