Table Of ContentPhilipp Herzog
Open and Closed Innovation
GABLER RESEARCH
Betriebswirtschaftliche Studien in
forschungsintensiven Industrien
Herausgegeben von
Professor Dr. Hans Georg Gemünden, Technische Universität Berlin
Professor Dr. Jens Leker, Universität Münster
Professor Dr. Søren Salomo, DTU Executive School of Business, Danish Technical University DTU
Professor Dr. Gerhard Schewe, Universität Münster
Professorin Dr. Katrin Talke, Universität Hamburg
Im Mittelpunkt dieser Schriftenreihe steht das Management von Unternehmen,
die sich durch ein hohes Engagement im Bereich der Forschung und Entwicklung
auszeichnen. Die Reihe richtet sich einerseits an Leser in der Wissenschaft und
andererseits an Leser in der Praxis, die im Rahmen ihrer Tätigkeit auf der Suche
nach neuen anwendungsorientierten Problemlösungen sind. Die Schriftenreihe
ist nicht auf Veröffentlichungen aus den Instituten der Herausgeber beschränkt.
Philipp Herzog
O pen and Closed Innovation
Different Cultures for Different Strategies
2nd revised edition
With a foreword by Prof. Dr. Jens Leker
RESEARCH
Bibliographic information published by the Deutsche Nationalbibliothek
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detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.
1st edition 2008
2nd revised edition 2011
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Foreword to the 1st edition
Firms acting in an environment of rapid technological change are often dependent on
externally developing knowledge sources in order to generate radical innovations. This
pressing need of integrating external R&D sources has forced many firms to shift from a
Closed Innovation model to an Open Innovation model. In the chemical industry – as the
industry of focus in the present work – the innovative force slowed down in the last 20 years.
As a consequence, many chemical firms strive for implementing new forms of innovation
management and follow an innovation strategy that involves the external environment to a
greater extent. They implement the Open Innovation concept by setting up separated
organizational units (e.g. Degussa’s ‘Creavis Technologies & Innovation’ or BASF’s ‘Joint
Innovation Lab’), which focus on innovation projects that cannot be operated by their internal
R&D departments alone. However, many firms are facing difficulties during the
implementation. While the implementation effort often focuses on external ideas and
technologies and the processes to identify them, cultural challenges are neglected.
Given the actual relevance and increasing importance of the innovation culture in Open
Innovation settings, it is quite astonishing that this subject has not been addressed in research
on technology and innovation management so far. The dissertation of Philipp Herzog closes
this important white spot. Philipp Herzog develops a theoretical framework arguing that Open
Innovation and Closed Innovation cultures need to be different in many aspects. For example,
he argues that being infected with the not-invented-here (NIH) syndrome may not be
problematic in case of a Closed Innovation strategy. However, since sourcing knowledge or
technologies from outside the organization is a major building block of an Open Innovation
strategy, a NIH infection would be disastrous.
Philipp Herzog tests his hypotheses on cultural differences between Open and Closed
Innovation units by means of a multi-respondent empirical survey among 120 R&D
employees within three business units of a leading multinational company from the specialty
chemicals industry. He provides first empirical evidence for many of the hypothesized
differences in innovation culture between Open and Closed Innovation units. The empirical
findings as well as the applied approach to measure elements of innovation culture are
particularly relevant for firms that plan to implement or have already implemented an Open
Innovation strategy. They can easily identify gaps between the existing and desired state of
innovation culture and take adequate actions to close such gaps. Since (radical) innovation
projects are often long-term endeavors, the quantitative culture assessment is an attractive tool
to measure the impact and/or progress of Open Innovation initiatives. It can therefore be
applied as a very useful indicator for future innovation success.
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The theoretical and practical relevance of Open Innovation culture has been confirmed in
international conferences. Parts of the present work have been awarded “The Best Student
Paper Award” at the Conference of the International Society of Professional Innovation
Management (ISPIM) in Warsaw, Poland, 17-20 June 2007. I hope that this publication will
see the broad dissemination and considerable recognition that it deserves, both in the research
community as well as in corporate practice.
Prof. Dr. Jens Leker
Preface to the 2nd edition
Long before the term ‘Open Innovation’ was introduced by Henry Chesbrough, many firms
realized the necessity of opening their corporate boundaries to spur innovation. Firms like
Degussa, which is now part of Evonik Industries, set up completely new organizational
structures to allow for close collaboration with external partners. However, research in the
field of Open Innovation is now catching up with corporate practice as can be seen in a
plethora of published journal articles dealing explicitly with the subject. Two years after
publication of the 1st edition of my dissertation, Open Innovation continues to be among the
most discussed management topics in the field of innovation management.
Since the completion of my research project, my former PhD colleagues at the Institute of
Business Administration at the Department of Chemistry and Pharmacy, Center for
Management (CfM), University of Münster, have continued to explore the many facets of
Open Innovation. These research projects focus, for example, on ‘Knowledge sharing in
collaborative R&D projects’ (Dr. Benjamin Niedergassel, completed), ‘The anticipation of
converging industries’ (Dr. Clive-Steven Curran, completed), Innovation teams in the front
end phase’ (Dr. Verena Holtorf, completed), or ‘Not-invented-here syndrome in academic
research’ (David Große Kathöfer, in progress).
This 2nd edition has been completely reviewed and I hope that I spotted and corrected most of
the little errors and typos that the 1st edition – to my surprise ;) – still contained. Furthermore,
some references were updated and I made some minor changes, such as updating the
examples from Degussa’s Creavis Technologies & Innovation or adapting the layout of some
figures and tables.
Overall, I continue to be excited about the interest that my work has received from both the
academic and the management community.
Philipp Herzog
Preface to the 1st edition
In recent years, there has been increased awareness of both managers and researchers within
the field of technology and innovation management regarding the concept of Open
Innovation. The former ‘do-it-yourself’ mentality of Closed Innovation is no longer
sustainable in many industries. For example, in order to generate radical innovations or build
new business, firms are quite often depending on external ideas, technologies, or ways of
VIII
commercialization. This pressing need to integrate external R&D sources has prompted many
firms to shift from a Closed Innovation to an Open Innovation model, using external ideas and
knowledge in conjunction with internal R&D to achieve and sustain innovation. The broad
awareness of the concept of Open Innovation as well as its relevance and significance in the
academic community can be seen in several special issues of the leading journals within the
field of technology and innovation management. Although strategies, processes, or the role of
business models have been addressed in the Open Innovation literature, the evolving debate is
missing a key element: the people side of the equation. Since Open Innovation requires a
different way of thinking and a change in employees’ practices in dealing with ideas,
knowledge, or technologies, it is quite surprising that aspects of innovation culture have been
neglected so far.
The central objective of the present work is to shed light on the cultural aspects of Open
Innovation. A questionnaire-based empirical study into differences between Closed and Open
Innovation cultures constitutes the core of the present work. 120 employees from R&D within
three business units of a leading multinational company within the specialty chemicals
industry participated in the study. As the first large-scale empirical study into this area, the
present work not only diminishes existing white spots in research. Apart from contributing to
the literature on Open Innovation and apart from stimulating further research, the results of
the study also may be directly applied in corporate practice. That is, the results may help firms
cope with the difficulties and challenges experienced in the implementation of the Open
Innovation concept.
The present work is the result of my doctoral research project at the Institute of Business
Administration at the Department of Chemistry and Pharmacy, Center for Management
(CfM), University of Münster. During the time of the doctoral research project, I was funded
by the Ministry of Innovation, Science, Research and Technology of the State of North Rhine-
Westphalia, whose support I gratefully acknowledge.
Though in the end, I am solely responsible for the creation of this dissertation, it is my
pleasure to thank various people for their support. Without their considerable tangible and
especially intangible “investments”, the successful completion of this research project would
not have been possible.
I am greatly indebted to my academic advisor, Prof. Dr. Jens Leker, for coaching me during
the research project in an excellent way. He was the supportive and at the same time
challenging mentor who strongly influenced the quality of my thesis in a positive way. I am
especially thankful for the academic freedom he provided and the valuable experiences I was
able to gain during my time at the institute. Moreover, I would like to thank Prof. Dr. Gerhard
Table of contents IX
Schewe from the Center for Management’s Chair of Organization, Personnel & Innovation,
University of Münster, for co-advising my dissertation. I also thank Prof. Dr. Jens Leker,
Prof. Dr. Gerhard Schewe as well as Prof. Dr. Søren Salomo, Center for Technology,
Economics & Management (TEM), Technical University of Denmark, for publishing my
work in their scientific series “Betriebswirtschaftliche Studien in forschungsintensiven
Industrien”.
Furthermore, I thank all my former and current colleagues and friends at the Institute of
Business Administration for creating such an – in various ways – inspiring atmosphere. I
especially would like to thank Dr. Stefanie Bröring, Benjamin Niedergassel, Jan-Henning
Trustorff, and Dr. Dirk Mahlstedt. Steffi was a great help and played a significant role in data
collection for this research project. We have also co-authored several papers together, which I
greatly enjoyed. Ben was always available for discussing my emerging ideas (once in a while
in one of Münster’s pubs). Both Steffi and Ben took the trouble to proof-read my manuscript
in its whole-length. They provided valuable comments for further improvement. Due to them,
I was able to correct some more or less severe blunders. Jan-Henning was so kind to provide
an insight into his exceptional statistical knowledge, often during long-lasting tours with our
racing bikes. Dirk and I not only shared the same office but also the ups and downs of
academic research. Listening to his expert knowledge in soccer was always fun and a pleasant
distraction from daily work. Besides my colleagues and friends at the institute, I would like to
thank my aunt, Prof. Dr. Kerstin Stender-Monhemius, for being my personal advisor over the
years in all study and research issues.
Above all, I thank my girlfriend Rieke, who has been accompanying me along the way for
(almost) all the time, for her patience, encouragement, and personal support. Finally, my
greatest gratitude goes to my parents, Margarethe and Karl Herzog, who made all my
education possible. They generously supported and always encouraged me in an outstanding
way during all my endeavors. Thank you so much! To you I dedicate this work.
Philipp Herzog
Table of contents
Figures .................................................................................................................................... XV
Tables .................................................................................................................................. XVII
Acronyms ............................................................................................................................. XIX
1(cid:3) Introduction ......................................................................................................................... 1(cid:3)
1.1(cid:3) Research problem .......................................................................................................... 1(cid:3)
1.2(cid:3) Research questions and objective ................................................................................. 5(cid:3)
1.3(cid:3) Outline of the thesis ...................................................................................................... 6(cid:3)
2(cid:3) Innovation and the Open Innovation concept .................................................................. 9(cid:3)
2.1(cid:3) Definitions and dimensions of innovation .................................................................... 9(cid:3)
2.1.1(cid:3) Innovation ........................................................................................................... 9(cid:3)
2.1.2(cid:3) Innovation process ............................................................................................ 10(cid:3)
2.1.3(cid:3) Innovation strategy ........................................................................................... 12(cid:3)
2.1.4(cid:3) Technological and market dimension of innovation ........................................ 14(cid:3)
2.1.4.1(cid:3) Technological dimension ................................................................... 14(cid:3)
2.1.4.2(cid:3) Market dimension .............................................................................. 17(cid:3)
2.2(cid:3) Closed and Open Innovation – definitions and underlying rationales ........................ 19(cid:3)
2.2.1(cid:3) Closed Innovation ............................................................................................ 19(cid:3)
2.2.2(cid:3) Open Innovation ............................................................................................... 21(cid:3)
2.2.3(cid:3) Reasons to follow an Open Innovation approach ............................................. 23(cid:3)
2.3(cid:3) Two aspects of Open Innovation – technology sourcing and technology
commercialization ....................................................................................................... 27(cid:3)
2.3.1(cid:3) Technology sourcing ........................................................................................ 28(cid:3)
2.3.1.1(cid:3) Internal R&D ..................................................................................... 30(cid:3)
2.3.1.2(cid:3) Non-equity alliances .......................................................................... 31(cid:3)
2.3.1.3(cid:3) Equity alliances .................................................................................. 34(cid:3)
2.3.1.4(cid:3) Acquisitions ....................................................................................... 37(cid:3)
2.3.2(cid:3) Technology commercialization ........................................................................ 39(cid:3)
2.3.2.1(cid:3) External technology exploitation capability ...................................... 41(cid:3)
2.3.2.2(cid:3) Strategic alliances .............................................................................. 44(cid:3)
2.3.2.3(cid:3) Divestment of firm units .................................................................... 46(cid:3)
2.4(cid:3) Organizational implementation of the Open Innovation concept ............................... 48(cid:3)
2.4.1(cid:3) Ambidextrous organization and Open Innovation for solving the radical-
incremental innovation dilemma ...................................................................... 48(cid:3)
2.4.2(cid:3) The example of Evonik’s Creavis Technologies & Innovation ....................... 51(cid:3)
