MULTIMARKET CONTACT CHALLENGES IN OPEN INNOVATION ENVIRONMENTS
Universidad Carlos III de Madrid (SPAIN)
About this paper:
Appears in: ICERI2009 Proceedings
Publication year: 2009
Conference name: 2nd International Conference of Education, Research and Innovation
Dates: 16-18 November, 2009
Location: Madrid, Spain
Abstract:This paper supposes an important challenge in the research of firm´s sources of innovation. We try to overcome traditional boundaries in the research of innovation activity trough the reconciliation of two theoretical models which can be considered opposite. The reconciliation of both schemes gives the opportunity to develop the Open Innovation (OI) innovative pattern taking into account Multimarket Contact (MMC) paradigm. The aim of this research is to provide a new understanding of the role of firm’s multimarket contacts in the creation of OI technological exchanges. We address if the firm´s adoption of a MMC model represent a traditional forbearance mechanism or that such contacts encourage OI activity in high-tech environments. We test the effects of MMC on OI using a sample of 102 Fortune high-tech firms from 1999 to 2005.
First, we analyse the impact of MMC mechanisms on the development of OI exchanges. We argue that MMC intensive firms would present high rates of technological exchanges due to collusion arrangements and competitive structure implications. Results confirm this positive association. However, going into this relationship in depth, we looked for the possibility of the existence of quadratic effects. We understand that there are tipping points after which MMC can negatively affect the development of technological exchanges. Those firms with higher levels of market contact could face markets with high rates of potential competitors, so lower profitability expectations from collaboration. Moreover valuable technology creation would be constrained due to insignificant market differentiation across firms. Finally, resource allocation problems would emerge reducing the number of market object of technological exchanges. Our statistical analysis supports the existence of a U-inverted influence of MMC on OI exchanges.
Second, to build a reliable model we explore the insights of innovation literature in order to look for moderators in MMC-OI relationship. Literature posits active licensing activity as a core assumption in the OI model. Firms with high patents stock would develop absorptive capacity, would improve their bargaining power in the technological exchanges negotiations and would create an interaction pattern encouraging firms to develop more technological exchanges. Our empirical model confirms stock of patents as a positive moderator in the MMC-OI association.
Several contributions stem from this research. First, it deepens our understanding of sources of innovation activity. We analyse OI assumptions from a new perspective realizing about the current market conditions, and propose an innovative pattern. Research on open innovation has been focused on cooperation assumptions derived from markets with high level of competition. We enlarge OI research scope taking into account MMC effects (considered as traditional collusion mechanisms) in the development of cooperation exchanges. At our concern, there is not previous research matching MMC framework with Open Innovation business models. Another gap we try to challenge is the one related to the empirical validation of multimarket models. Over time research in MMC has been tested empirically in markets which exhibit a clear geographical delimitation. We propose to test the model in the largest multinational companies, according to a product-niche analysis.
Keywords: innovation, technology, open innovation.