Corporate Benefits of Collaborating with Universities

In today’s competitive business environment, continuous innovation is a prerequisite for building a firm-specific advantage. Few firms can rely entirely on in-house research. The value of open innovation is widely recognized; yet, little is known about how firm-level and lab-level policies toward open innovation are related to R&D performance.

A recent study of Japanese firms – across many industry sectors – sought to understand this.

In surveys conducted at the lab-level of over 200 Japanese firms, Asakawa, Nakamura and Sawada asked lab managers’ perceptions of corporate open innovation policies at their firm. The surveys also asked about the labs’ operations, including the external R&D collaborations with universities and businesses. While other studies have explored open innovation in corporate labs, this study was unique in its multi-level approach – exploring both the firm-level and lab-level influences concurrently – and differentiation between university and other business ventures.

Their results showed that open innovation policy can have a positive impact and contribute significantly to a laboratory’s R&D performance, depending on the lab’s alignment with the firm’s policies and on the type of collaboration.

Lab managers’ perceptions of their firms’ open innovation policies vis a vis local universities and businesses were positively and significantly correlated to their labs’ collaborations. Interestingly, the impact of the policy perceptions had a stronger benefit on R&D performance than the actual collaborations did. The benefit appears to be less about the specific contribution of the external collaborator to the lab’s R&D performance and more about the increase in research capacity that results from those collaborations, especially with universities. While this may seem counter-intuitive at first, there is a logical explanation.

Asakawa et al. explain it this way. The way top management regards the potential of innovation outside the firm influences the mindset and the behavior of each unit and person inside the firm. Top management’s views determine the dominant logic that defines the frame in which managers think and behave. When open innovation is sanctioned as the firm’s dominant logic, searching for and utilizing knowledge that is external to the firm becomes legitimized. This legitimacy authorizes members and subunits within the firm to pursue open innovation accordingly. Executed at the firm level, open innovation becomes institutionalized as a corporate routine, develops symbolic properties associated with such behaviors, and becomes part of the corporate culture, even at the level of laboratory personnel.

Now, here’s the part I like most.

Open innovation policies vis a vis local universities have a significant and positive impact on the laboratories’ research performance (as distinguished from development capabilities.) Interestingly, open innovation policies vis a vis local firms (intended to deliver development results) do not have this same impact. In other words, there is a differentiated impact of the firm’s open innovation policy, depending on its whether the impact is intended for research or development activities.

One explanation is that a laboratory’s research performance is highly dependent on the firm-level technological capabilities. Firms that engage in open innovation are more likely to have the ability to absorb the benefits of collaboration. Externally sourced knowledge (research) is transformed into firm-specific capability (development) through the firm’s combinative capability. Once internalized within the firm, knowledge and capability can be transferred to the laboratory and leveraged there. The firms’ combinative capability reinforces the laboratory’s absorptive capacity, which facilitates its sourcing and leveraging of external knowledge to enhance R&D performance.

The perception of firm-level policies about open innovation are important. Laboratory-level collaborations with external parties are heavily influenced by the corporate dominant logic, which legitimizes laboratory-level behavior. What this study suggests is that corporate R&D executives need to put more emphasis on facilitating the external collaborations than on trying to directly influence the labs’ efforts to enhance R&D performance. The results of this study also suggests that in order to enhance the laboratory’s R&D performance, corporate and laboratory managers need to be in alignment on the objectives a of open innovation policies. Additionally, the results also suggest that lab-level managers need to be aware that different types of external collaborations contribute to different types of R&D performance. Collaborations with universities tend to contribute to research performance. Corporate policies influence the success of these collaborations. Collaborations with local businesses are generally intended to contribute to development performance. The ability to absorb development know-how is less influenced by the perception of corporate policies; this absorption may be more direct and rely less on research capabilities.

It’s important for laboratory managers engaged in external collaborations to proactively align those activities with open innovation policies at the corporate level. If sanctioned at the firm level, collaborations with universities have very strong potential to positvely influence the capacity of labs – potentially providing a cascade of benefits for knowledge acquisition from both internal and external sources.

Kazuhiro Asakawa, Hiroshi Nakamura and Naohiro Sawada, “Firms’ open innovation policies, laboratories’ external collaborations, and laboratories’ R&D performance,” R&D Management 40:2, 2010.

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