case study of eight voluntary dyadic partnerships between corporates and NPOs in the United. Exploring open innovation practice in firm-nonprofit engagements.
Exploring open innovation practice in firm-nonprofit engagements: a corporate social responsibility perspective Sara Holmes and Palie Smart Cranfield University, Bedfordshire, MK43 0AL, UK. s.holmes@cranfield.ac.uk; palie.smart@cranfield.ac.uk
This paper examines the concept of open innovation within the context of corporate social responsibility. It demonstrates how the practice of open innovation unfolds in inter-organizational collaborations that involve the voluntary or charitable sector, outlining the findings of an explorative collective case study of eight voluntary dyadic partnerships between corporate and nonprofit organizations in the United Kingdom, which have resulted in innovation outcomes. Two generic approaches to open innovation were witnessed: firstly, a more exploratory approach to dyadic engagement activities that resulted in an emergent innovation process, and secondly, a focused and pre-determined search activity to exploit the resources of the nonprofit partner that demonstrated a more planned innovation process. Two distinct boundaryspanning roles were identified: in dyads exhibiting few organizational linkages, the role was associated with formal responsibilities from senior management to ‘manage’ innovation opportunities and outcomes. In dyads exhibiting high linkages, there was no such formality; the role was a ‘conduit’ to facilitate search and exploration to locate opportunities for innovation through idea exchange. Overall, this research demonstrates the value of an open innovation approach driven by the need to address societal and social issues (rather than those purely economic). Such practice broadens a firm’s ‘search’ activities and delivers innovations in exchange for enhanced social legitimacy – acting innovation capital for future enterprising activities and market advantage.
1. Introduction
T
he use of more collaborative and interactive organizational arrangements to conduct exchanges for the purposes of innovation is fast becoming one of the most distinctive features of leading economies. Such a rapidly maturing industrial milieu resonates closely with Chesbrough’s (2003) notion of ‘open innovation,’ demonstrating that the locus of innovation is shifting away from being firmly rooted within the boundary of a single firm and into a multiorganization domain of diverse stakeholders. 394
In concert with Chesbrough, Von Hippel (2005) suggests the phrase ‘democratization of innovation,’ as concurring that firms need to combine and co-ordinate resources in a multi-stakeholder context. While Chesbrough’s (2003) research signals that many industries, including ‘photocopiers, computers, disk drives, semiconductors, telecommunications equipment, pharmaceuticals, biotechnology, etc.’ (p 37), are currently transitioning from closed to open innovation modus operandi, its descriptive analysis is based on interorganizational collaborations with the ‘for-profit’ sector and does not elaborate specifically into
R&D Management 39, 4, 2009. r 2009 The Authors. Journal compilation r 2009 Blackwell Publishing Ltd. 2009, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
Exploring open innovation practice in firm-nonprofit engagements inter-organizational collaborations that involve the ‘nonprofit,’ or ‘charitable,’ sector. Nonprofit organizations (NPOs) as discussed in this paper can be defined as ‘organizations that have as their primary purpose the promotion of social and/or environmental goals’ (Murphy and Bendell, 2001). Accordingly, they are driven by very different concerns from for-profit organizations (Driscoll and Crombie, 2001; London et al., 2005), and operate according to different sets of values and cultures (Heap, 2000; Yaziji, 2004). Extending the concept of open innovation to such cross-sector collaborations is an important step. NPOs are emerging as major stakeholders in the business arena (Doh and Teegan, 2002), as the traditional antagonism of nonprofits towards businesses is replaced with co-operation and the development of collaborations to address environmental and social issues (Bliss, 2002). This has led authors to begin to discuss the market role and identity of NPOs as well as their more familiar institutional role (Millar et al., 2004). The increased collaboration between corporations and nonprofit groups has been attributed to firms seeking to fulfill their corporate responsibility mandates by growing capabilities to better address social and societal issues (Rondinelli and London, 2003), and to nonprofits seeking additional resources to ensure long-term survival (Berger et al., 2004).
1.1. Engagement with nonprofit stakeholders as an example of open innovation Davis’s (1960) ‘iron law of responsibility’ states that a firm will lose its societal legitimacy if it does not act with the responsibility society demands from its business. A firm’s need to preserve or enhance its social legitimacy has been identified as a means of innovating and is fast becoming a key driver for engagement, particularly with nonprofit stakeholder groups (Yaziji, 2004). The business and society literature argues that a firm needs effective engagement with its stakeholders to enable it to understand its environment, and stresses the importance of fully appreciating the drivers, values and needs of external stakeholders or groups (Freeman, 1984) if it is to survive. Corporate survival, Freeman suggested, ‘depends in part on there being some ‘‘fit’’ between the values of the corporation and its managers, the expectations of stakeholders in the firm and the societal issues which will determine the ability of r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd
the firm to sell its products’ (Freeman, 1984, p. 107). As social issues become a strategic concern for firms, they have embraced corporate social responsibility (CSR) roles and in the context of managing innovation, diverse stakeholders are engaged, heightening levels of bridging and bonding activities with NPOs. Essentially, it would appear that stakeholder engagement is a powerful mechanism to search for ‘weak signals’ (Haeckel, 2004) for changes that may impact future corporate market offerings, and ultimately how innovation processes and resultant outcomes are managed. Innovation management studies stress the importance of interfacing and interacting with a diverse range of stakeholders to pool different knowledge and skills bases that foster innovation (Tushman, 1977; Cohen and Levinthal, 1990; Pittaway et al., 2004). Day and Schoemaker (2004) convincingly proffer that today’s weak signals from the organization’s periphery (and so presently non core to existing business) may become the source of tomorrow’s core business proposition and sustained innovation advantage, and so worthy of management attention: and in this case, attention towards NPOs. In terms of innovation management theory and practice, detecting weak signals is an activity clearly associated with developing organizational ‘search’ capability for innovations, often of a discontinuous nature (Bessant and von Stamm, 2007), which may lead to business model and social entrepreneurship innovation. ‘Search’ is widely recognized to encapsulate the early stages of the innovation process, and searching for new sources of innovation is imperative for all organizations (Laursen and Salter, 2004, 2006). Increasing numbers of firms are learning to pursue improvements in organizational performance through explicit innovation efforts that are not always entirely founded on purely economic principles. Consequently, as organizations forge links with unusual partners and stakeholders to identify the next new source of innovation, search activity, and its associated processes, becomes increasingly sophisticated. Recent research in the field of CSR is testament to this shift (Grayson et al., 2008) and illustrates the importance of delivering organizational performance through innovation initiatives driven by corporates responding to societal and social issues. Adopting a stakeholder perspective, this paper outlines the findings of an explorative collective case study of eight voluntary dyadic partnerships between corporates and NPOs in the United R&D Management 39, 4, 2009
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Sara Holmes and Palie Smart Kingdom, which have resulted in a product, service or process innovation outcome for the corporate partner. More specifically, the research seeks to gain insights into the operating relationships, their engagement antecedents and innovation outcomes. The research demonstrates the value of an open innovation approach driven by the need to address societal and social issues, which broadens and deepens a firm’s search activity and delivers innovations in exchange for enhanced social legitimacy – acting innovation capital to be leveraged as a strategic resource for future enterprising activities and market advantage.
Table 1. Conceptualizations influencing corporate innovation from NPO engagement Core conceptualizations in extant literature
Aspects of concept relevant for research
Stakeholder engagement context
Degree of previous experience (or history) and motivations of NPO collaborations Scope of engagement activity undertaken and development over time Key mechanisms for transferring ideas and competences from NPO to corporate
Stakeholder engagement scope Stakeholder engagement boundarylessness
2. Literature review None of the innovation literatures reviewed for this paper considered NPOs as potential innovation partners; the only nonprofit bodies referred to in this regard are academic institutions or trade organizations. Our research considers open innovation within a CSR context and aims to demonstrate that voluntary organizations can also be viewed as sources of innovation for firms. It seeks to address the question: ‘what are the central aspects of firmnonprofit dyadic engagement undertaken within a corporate social responsibility context with regard to the concept of open innovation?’ To inform the research, papers drawn from the stakeholder engagement and cross-sector collaboration literature were reviewed together with those focused on external sources of innovation. Two important themes emerging from these different literature genres are the need for organizations to have an external engagement orientation and the benefits to be gained by firms from heightened organizational connectivity. Environments are potential sources of knowledge for firms (Koberg et al., 2000), and adopting a ‘bridging’ rather than a ‘buffering’ stance to relations with external stakeholders can assist organizational learning and innovation (Sharma and Vredenburg, 1998). Authors have argued for a reorientation of the stakeholder approach from a firm-centred perspective to a network perspective, where actors view themselves and their practices from within a system of interdependence (Andriof and Waddock, 2002; Lozano, 2005). Collaborative relationships involving organizations that address societal issues are framed in terms of joint problem solving within a problem domain, rather than within an organization, and such a focus also produces learning and capability development benefits for the participating firm 396
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(Heugens, 2002; Salk and Arya, 2005). Authors have shown, too, that developing network competence to access external resources as part of their innovation search activities is key to maintaining a competitive advantage (Ritter and Gemunden, 2003), and accessing resources from nonprofits, which a firm cannot acquire by itself, gives it ‘combinative capabilities,’ which can be used to develop innovative responses to its changing environment (Kogut and Zander, 1992). While it can be argued that the literature clearly demonstrates the innovation benefits to firms of having an external focus and engaging with diverse organizations, little attention has been paid to dyadic relationships between corporates and NPOs collaborating, for social good, within an open innovation model. Table 1 summarizes concepts drawn from the literature that could help explain corporate innovation through dyadic engagement with an NPO and that have been used to inform the field research. These concepts formed the basis of an exploratory empirical investigation to better understand how firm–nonprofit dyadic engagements undertaken within a CSR context inform the concept of open innovation. Stakeholder engagement context: the literature on stakeholder engagement suggests that a firm’s decision to engage with an NPO will be driven by an assessment of the salience of the nonprofit stakeholder (Mitchell et al., 1997) and the prominence of specific social issues. A firm will engage with an NPO if it can benefit from increased social legitimacy by doing so (e.g. LaFrance and Lehmann, 2005; Deegan and Blomquist, 2006) or if there is a high degree of interdependence between the parties (Waddock, 1989; Logsdon, 1991). NPOs can be considered discretionary stakeholders as they possess the attribute of legitimacy, but generally have no power to influr 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd
Exploring open innovation practice in firm-nonprofit engagements ence the firm and no urgent claims for attention (Mitchell et al., 1997). Thus, firm engagement with such groups is voluntary and may be viewed as part of a corporation’s discretionary responsibility (Carroll, 1979) or philanthropic responsibility (Carroll, 1991), and firms may be motivated by philanthropic, in addition to legitimacy concerns. Correspondingly, authors argue that the basis of engagement needs to be highly salient to the parties involved if a longer term partnership is to develop (Waddock, 1988; Logsdon, 1991). Therefore, firms may engage with nonprofits either because they feel obliged to do so due to societal or stakeholder pressure, or because the nonprofits can help the firm address a salient social issue that can involve a change, or innovation, in the firm’s working practices or market offerings (e.g. Sharma and Vredenburg, 1998). Stakeholder engagement scope: Austin (2000) demonstrated how benefits of collaboration increase as the intensity of engagement increases over a period of time. As the partners worked more closely together, greater value was created through resource transfer and exchange of competencies (Austin, 2000). Thus, the increased knowledge flows and new perspectives obtained from increasing cooperation engender conditions ripe for innovation. Goes and Park’s (1997) 10-year study of Californian hospitals showed how transaction intensity, the degree of structural linkages and institutional linkages positively influenced the level of service innovation. Additionally, firms over time develop capabilities to better integrate and generate knowledge from the engagement as they acquire greater experience of interorganizational working (Dyer and Singh, 1998). Stakeholder engagement boundarylessness: in order to be able to search in their environments – in this case NPOs – firms need to have the mechanisms and processes in place to bridge and bond across organizational boundaries (Linder et al., 2003) and ensure effective boundary-spanning activities. To innovate, corporates need to be open to new and fresh ideas (Sharma and Vredenburg, 1998; Howell and Shea, 2001; Fey and Birkinshaw, 2005) and so must be willing to respond to external stimuli, for example the need for social responsiveness from NPOs. Managers assemble configurations of knowledge resources generated by the engagement, an essential sense-making process to identify threats and opportunities resulting from innovation search activities (Howell and Shea, 2001). Voluntary engagement with discretionary stakeholders, such as NPOs, is of interest to authors within the CSR field, due to the focus on social r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd
rather than economic concerns and Wood’s (1991) definitive model of corporate social performance provides a reference framework for research. This model examines a firm’s principles of CSR, its processes of corporate social responsiveness and the outcomes from the firm’s CSR activities. Our research considers open innovation activity within that context: particularly how the demonstration of a firm’s corporate social responsiveness, as manifested in its engagement with NPOs, can produce an innovation outcome.
3. Methods The study adopted a processual perspective to gain a more granular understanding of firm–nonprofit dyadic engagements, their antecedents and innovation outcomes, and how such practices inform the concept of open innovation. The study was conducted from the firm’s perspective as the focus of the research is on the innovative impact of the dyadic engagement on the firm. Given the lack of previous research in this area, a qualitative, exploratory research design was considered suitable (Stern, 1980) and the study was centered in the perceptions and experiences of organizational actors involved in corporate–nonprofit dyadic engagements. Collective case study (Stake, 2000) was chosen as the research method, as it facilitates comparisons between cases (in this research, the antecedents and operation of each dyad). As the research was comparing firm–nonprofit dyads that have resulted in an innovation for the firm, the first step was to identify dyads that appeared to demonstrate this. Two main sources were used to locate a potential research sample: the website of Business in the Community, which provides details of corporate responsibility initiatives by UK companies; and ‘Third Sector’ magazine, which produces a regular column on corporate–nonprofit relationships. As far as possible, the cases were selected from a diverse range of industry sectors so that any patterns found in the workings of these cross-sector dyads could not be attributed to a specific industry context. The research base, which focused on dyad engagement between firms and social-issues-based NPOs, is shown in Table 2.
3.1. Data collection Given the qualitative nature of the research, faceto-face interviews with participants in the eight dyads were used to uncover detailed information R&D Management 39, 4, 2009
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Sara Holmes and Palie Smart Table 2. Dyadic engagements Dyad
Corporate
Nonprofit
Corporate–nonprofit innovation outcome
1
Retail A Co.
Breast cancer charity
New range of post-operative lingerie for breast cancer sufferers
2
Retail B Co.
Cerebral palsy organization
Redesigned staff disability training programme
3
Energy Supplier Co.
Learning disabilities charity
New telephony protocols and training for vulnerable customer handling
4
Communications Co.
Children’s charity
Integrated data management solutions incorporating web and telephony
5
Technology Co.
Pre-school organization
Product commercialization of pre-school computer equipment
6
Broadcaster Co.
Pan-disability group
New call center for universal service access; remodeled TV handset
7
Gaming Co.
Children’s charity
New marketing channel utilizing charity’s network
8
Bank Co.
Hearing-impaired organization
New service introduced for hearing-impaired customers
Table 3. Field data information No. of interviews
29
Data collection method
Single respondent interviews (26 face-to-face; 3 telephone)
No. of Corporate interviewees
18
No. of NPO interviewees
11
Interviewee gender
9 male/20 female
Total material collected
20.5 hours
Data collection period
November 2006– March 2008
Transcribed material
376 pages
about the formation, operation and outcomes of these relationships. The interviewees selected were those who were most closely involved in the creation and development of the dyads and, as such, had rich experience of the way they worked. Each of the firms selected had one person who acted as the relationship and collaboration manager. In some instances, this organizational actor was also the main corporate decision maker for the initiative, whereas in other firms, the main decision maker was not directly involved. Interviews were conducted with the relationship manager, the main corporate decision maker (if these were not the same person) and at least one other staff member directly involved in the relationship. The NPOs also had one person acting as the project or relationship manager and an interview was conducted with them. As the research was interpreting 398
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the data from the firm’s perspective, it was not considered necessary to have additional respondents in the NPOs, although in some cases further interviews were conducted if the original interviewee was not able to supply sufficient details. The previously identified concepts from the literature review in Table 1 were used to inform the development of the interview protocol. The interviews themselves were semi-structured and open ended and were intended to give respondents an opportunity to discuss aspects of the collaboration that they considered most relevant. Data relating to the fieldwork are given in Table 3. The interview data collected were supported by information on NPO relations gathered from the corporate websites and, in the majority of cases, by printed material on the collaboration supplied by the respondents. r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd
Exploring open innovation practice in firm-nonprofit engagements Table 4. Data coding No. of firstorder nodes
No. of secondorder nodes
Coded themes
Coded generic themes
52
14
Prior experience of NPO engagement Engagement motivation of corporate
Engagement antecedents
121
31
Engagement length and status Inter-organizational linkages Initial engagement scope Scope development Firm assimilation of NPO ideas Stakeholder focus Outward facing demonstration of CSR Role of main boundary spanner Senior management involvement
Engagement operations
55
11
Innovation typology Innovation description Innovation process
Engagement innovation outcomes
3.2. Data coding and analysis The data were analysed following Strauss and Corbin’s (1998) process of description, conceptual ordering and theorizing. As a first step, a case history was written up for each of the eight dyads. Audio transcripts from the 29 interviews were entered into NVivo and coded openly, by case, resulting in 228 case-data nodes. These were subjected to a two-stage analysis process, firstly to identify key themes in the data and secondly to evaluate the presence of these themes in each of the cases. As can be seen in Table 4, the 228 first-order case-data nodes were grouped thematically, according to whether they dealt with antecedents of the engagement, the engagement itself or were related to the innovation outcome. A process of clustering was undertaken, based on the instances of coding in the eight cases, resulting in a total of 56 second-order nodes. A further round of clustering led to the emergence of 14 themes. Having identified the key themes, the initial coded data set (first-order nodes) was re-examined to establish the variations in practice in each of the cases. To facilitate cross-case data comparison, a form of analytic induction (Wilson, 2004) was used to compare constructs across cases and is considered a suitable method for building theory and testing ideas across multiple cases (Miles and Huberman, 1994). Analytic induction is iterative and entails a sequential analysis of cases; theoretical propositions generated from the initial case are considered against subsequent cases, and refined as necessary. The resulting patterns seen in the case data are now presented and discussed. r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd
4. Descriptive case findings The cases exhibit open innovation practices in collaborations taking place within the arena of corporate responsibility. It is noticeable that these socially focused initiatives find resonance with the firms’ core business operation, as evidenced in the case vignettes set out in Table 5. A case-by-case summary of our findings is shown in Table 6 and these results are discussed below, with analysis of the emerging data patterns presented in the following section. Engagement antecedents: the two coded themes relating to antecedents of the engagement concerned the firm’s previous level of experience of engaging with NPOs and its motivation for engaging with the charity in the study. All firms entered into this collaboration as the engagement was compatible with their CSR strategy. In four of the dyads (1, 3, 4 and 7), the engagement provided generic support to the firm’s CSR focus: ‘‘. . . . it’s all aligned to the nature of our business, so people expect you to contribute around what you do best. And in our case that is enabling communications.’’ (Dyad 4) While in the remaining four dyads (2, 5, 6 and 8), the corporate engaged with the charity specifically to deliver against a particular CSR objective: ‘‘There was an awareness of if we don’t do this [address hearing impairment issues] we could get prosecuted. And I would have got funding R&D Management 39, 4, 2009
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400 Broadcaster and pan-disability charity The UK broadcast industry was urged to take action to provide services for physically impaired viewers (such as increased subtitling, programme description and signing) ahead of legislation which would make some provision of such services mandatory. In response, the chief executive of this pay-TV broadcaster appointed a disability trouble-shooter to address the issue across the business. From the outset, the project was treated as a business initiative, with the aim of reducing churn rates among subscribers and expanding the broadcaster’s customer base. The company partnered with a national pan-disability organization, which facilitated access to local groups supporting people with various physical and mental disabilities. Twelve focus groups were held with these local organizations, who made more than 40 recommendations on how the broadcaster could improve its service to disabled customers and viewers. The broadcaster acted on all recommendations suggested and the innovation outcome was a new call centre center dedicated to serving the broadcaster’s 40,000 þ customers with various disabilities. The nonprofit organization also provided external verification of the suitability of a remodelled TV remote control handset for physically disabled customers.
Energy Co. and learning disabilities charity The association between this energy supplier and charity representing people with learning disabilities began in 2005 when the NPO was selected by the firm’s community investment committee to be its charity partner for the year. This followed a competitive pitch in which the charity outlined various ways it could assist the firm deliver its key business objectives. However, the first year of the relationship was very much centered on staff fundraising initiatives, with employees raising d250,000 through charity events. The partnership was formally reviewed by the firm at the end of 2005 and was extended for another two years as senior managers appreciated that the collaboration could yield further corporate benefits. A range of initiatives proposed by the charity, aimed at assisting the firm deliver its key business objectives, was cited as the main reason for the extension of the collaboration. The relationship became less focused on employee fundraising, and encompassed a range of other activities including disability awareness seminars for employees and vulnerable customer training for customer-focused staff. The innovation outcome arose from a tailored 2-day training programme delivered by the charity to 24 customer-focused staff, which led to a redesign of the communication protocols for vulnerable customers. In the final year of the alliance, the focus for training moved to training-the-trainer, so that the energy firm could continue service enhancements into its vulnerable customer handling after the relationship with the charity ended in December 2007.
Retail A Co. and breast cancer charity
The relationship between this high street retailer and breast cancer charity began in 2001 when the retailer’s lingerie section supported the NPO during Breast Cancer Awareness month. The charity had been keen to develop a relationship with this firm as the retailer’s demographic, with its large number of female customers in the breast cancer ‘at risk’ group, fitted the charity’s audience. In 2003, a range of lingerie products was branded by the retailer for Breast Cancer Awareness Month, which helped the charity’s earnings from the partnership rise to d400,000. The charity garnered the support of the firm’s head of marketing, and in 2005 cause-related products were sold across the business units, pushing the charity’s income from the retailer to over d1 m. As the relationship matured, the parties began talking about how they could develop new products together when the retailer’s Chairman made development of post-operative breast surgery lingerie a priority, having received a letter from a customer. The innovation outcome was a new product line of post-operative lingerie, developed in collaboration with the charity. The NPO assembled focus groups, gave advice on design and found a group of women to ‘road-test’ the new lingerie, provide the retailer with valuable feedback on the garment. The close collaboration with the charity speeded up development time for the new line, and a range was in stores in Autumn 2006, with another collection developed for retail in Summer 2007.
Table 5. Case vignettes
Sara Holmes and Palie Smart
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Undefined
Expansive
Active
External
Yes
Innovation conduit
Initial engagement scope
Scope development
Firm assimilation of NPO ideas
Firm’s stakeholder focus
Outward facing demonstration of CSR
Role of main boundary spanner
Engagement innovation outcomes
High
Inter-organizational linkages
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Emergent
Innovation process
Emergent
Post-operative Staff lingerie disability training
Innovation description
Process
Indirect
Product
Direct
Innovation manager
No
Internal
Active
Limited
Defined and narrow
Low
1 year; mature
Typology
Senior management involvement
6 years; mature
Engagement length and status
Engagement operations
Emergent
Planned
Planned
New call centre, remodeled TV handset
Pre-school computers Integrated data and voice solutions
Protocols for handling vulnerable customers Emergent
Service
Indirect
Innovation manager
Yes
External
Active
Limited
Defined and narrow
Low
4 years; declining
Product
Indirect
Innovation conduit
Yes
External
Active
Limited
Defined and narrow
Low
6 years; mature
Product
Direct
Innovation conduit
Yes
External
Active
Extension
Defined and broad
High
5 years; developing
Extensive
Dyad 6
Service
Direct
Innovation conduit
Yes
External
Active
Extension
Defined and broad
High
2 years; developing
Extensive
Dyad 5
Planned
Text-talk for hearing impaired customers
New marketing channel Emergent
Service
Indirect
Innovation manager
Yes
External
Active
Limited
Defined and narrow
Medium
5 years; mature
Extensive
Dyad 8
Process
Indirect
Innovation manager
No
Internal
Active
Expansive
Undefined
Medium
4 years; developing
Limited
Dyad 7
CSR strategy CSR strategy CSR strategy CSR strategy CSR strategy CSR strategy CSR strategy (Specific) (General) (General) (Specific) (Specific) (General) (Specific)
Extensive
Dyad 4
CSR strategy (General)
Moderate
Dyad 3
Limited
Dyad 2
Extensive
Prior experience of NPO engagement Engagement motivation
Engagement antecedents
Dyad 1
Data sub-themes
Generic themes
Table 6. Summary of case findings
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Sara Holmes and Palie Smart for the project on that basis anyway, but I wanted a bit more of a customer centred approach and got it sold to management on that basis, which was great really. So it was a conscious decision to do this.’’ (Dyad 8) Engagement operations: nine of the data subthemes related to the operation of the engagement. The length of the collaborations ranged from 1 to 6 years. Four of the relationships were considered mature (dyads 1, 2, 5 and 8), a further three were still developing (dyads 3, 4 and 7) and the remaining partnership (dyad 6) was judged to be declining. The initial remit, or scope, of engagement was evaluated in terms of whether this had been defined and how broad a range of activity was being undertaken, and data on how the scope of engagement activity developed over time were also captured. In addition to examining interorganizational linkages, the role of two sets of corporate actors was found to be relevant in gaining an understanding of how open innovation was advanced in these cases. The firms’ senior managers were either involved directly or indirectly in the engagement and this appeared to be related to the role played by the main corporate boundary spanner (a relationship that we discuss further in Section 5). It was noticeable, too, from interviewee responses, that the engagement initiative was aimed clearly either at stakeholders inside the firm (staff) or at a range of external stakeholders, for example: ‘‘So we tested out a number of [innovation] concepts with our customers and our marketplace and once we found the most fertile area, then we worked in partnership and put together a programme which met our objectives. The selection process [for NPO partner] was informed by, kind of the reaction of our stakeholders, but obviously the final decision was made by us based on that input.’’ (Dyad 4) Additionally, in six of the eight cases, the data clearly showed that firms were looking to the engagement to produce a tangible demonstration of their CSR commitment to external stakeholders. Finally, in all the dyads there was evidence that the corporate partner was responding to proposals and suggestions from the nonprofit about activities the firm could undertake, or changes it could introduce, suggesting that the corporate partner was actively assimilating ideas from the NPO: 402
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‘‘And instead of being us [the charity] insisting that we put people through disability awareness seminars, [the firm] have now changed and they’re saying that one of their measurements now is the number of people that attend our seminars.’’ (Dyad 3) Engagement innovation outcomes: six of the eight corporate innovations resulting from the dyadic engagements can be considered to be product or service developments, which can be defined as ‘changes in the things (products/services) which an organization offers’ (Tidd et al., 2005, p. 10). The remaining two are defined as process innovations: ‘changes in the ways in which [products/services] are created and delivered’ (Tidd et al., 2005 p. 10). In five of the cases (1–4 and 7) the innovation was emergent from the dyadic engagement, while in the remaining three (dyads 5, 6 and 8), the engagement helped the firm realize planned benefits or opportunities. As noted earlier, this is an exploratory study with data from a limited number of cases. While we are aware that findings from such a small research base should be treated with caution, some interesting patterns are emerging that we now present and discuss.
5. Discussion As noted earlier, our research is looking to address the question ‘what are the central aspects of firm-nonprofit dyadic engagement undertaken within a corporate social responsibility context with regard to the concept of open innovation?’ Three main patterns were seen in the case data presented in Table 5, as follows: associations between previous experience of corporate–NPO engagements, the firm’s stakeholder focus and the resulting innovation; the function of engagement scope and scope development in shaping innovation outcomes; and the role of the main corporate boundary spanner.
5.1. NPO engagement experience, stakeholder focus and innovation All the firms in the study had some previous experience of working with NPOs and in the majority of cases this previous experience had been extensive. This was evidenced by the presence of a dedicated community relations team to manage such r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd
Exploring open innovation practice in firm-nonprofit engagements relationships and documented policies governing wider societal involvement. In all cases, there was also a distinct orientation towards the stakeholder communities from which social legitimacy was being sought. In this research, these communities were either internal or external to the corporation: It would appear that the level of prior experience of NPO collaborations is associated with stakeholder orientation or focus i.e. (internal/ external communities). The two firms in the study (in dyads 2 and 7), which had only limited previous experience of such collaborations, exhibited an internal stakeholder focus, while the remaining five firms with extensive experience exhibited an external stakeholder orientation. One might suggest that as the corporate develops its collaborative capabilities over time, it seeks to exploit its fruits and the most demonstrable way of doing this is through an outfacing expression embodied in the development of new market offerings. This notion is particularly supported by data from dyad 3, which was considered to have moderate prior experience of nonprofit collaboration and exhibited a change in stakeholder orientation during the course of the engagement as it transitioned from a staff-focused to a customer-focused initiative: ‘‘In previous [charity] relationships it has been about fundraising. This relationship has gone further than that. It’s now become much more about awareness, employee diversity, understanding our vulnerable customers, as well as fundraising.’’ (Dyad 3) In most of the dyads, engagement activities were discussed in terms of their relevance to an external audience, and corporate managers were concerned with delivering tangible and innovative outcomes, which could explicitly demonstrate their firm’s ethos of social responsiveness (Frederick, 1994): ‘‘We opened [a call centre specifically for customers with a disability] on 12 June, and that was the day that our MD was actually announcing to the City what [the firm] was doing for disabled people. So . . . well it was more than coincidence, it was sort of made to happen on that day.’’ (Dyad 6) Unsurprisingly, perhaps, corporates with this external stakeholder orientation and CSR focus embarked on product or service innovations, suggesting that firms motivated to demonstrate their social responsiveness through such NPO r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd
engagements were actively pursuing new customer-focused market offerings. By contrast, in the two dyads where the primary audience for the engagement was internal to the firm, there was no evidence to suggest that the corporate partner was seeking to demonstrate its CSR credentials externally and in these cases, process innovations resulted from the collaborations. Nevertheless demonstrating social responsiveness was still important, but this time to a known community: ‘‘So that was the best disability training that I could possibly give my team.’’ (Dyad 2) All firms in the study were motivated to engage with the NPO as part of their corporate responsibility activities, and as such, can be seen as responding to societal expectations. Additionally, respondents in firms with an external stakeholder focus were aware that their organization was benefiting from the reflected legitimacy that association with the social issues nonprofit brought (Yaziji, 2004), and in these cases were using the collaboration as a source of strategic legitimacy (Suchman, 1995), whereby a firm extracts legitimacy from its external environment and uses it as a competitive resource: ‘‘One [benefit of collaboration] was obviously the publicity: we’d got the charter mark, our rivals hadn’t. Two was an improved reputation. And the third was increased business . . . . We got a fair amount of publicity and logically you would expect that to follow through on the sales.’’ (Dyad 8) The prominence of an external orientation signals a reliance on searching for knowledge resources outside the boundary of the corporate. As evidence for an opening up of the innovation process, there is clear appreciation that external knowledge is to be integrated with internal abilities, aiding new knowledge production of an order higher than the sum of their parts. We can use Chesbrough’s categorization of research and development (R&D) capabilities (2007) to illustrate that this combinative approach leverages core knowledge about community experiences of social issues from the nongovernmental organization (NGO) partner, critical capabilities in the delivery of product and service development from the corporate partner and contextual capabilities from both parties, but primarily from the NGO. R&D Management 39, 4, 2009
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5.2. Engagement scope and emergent or planned innovations In the dyads where the engagement remit had been narrowly defined by the corporate partner at the outset, the opportunity for scope development was limited: the corporate actors appeared to have a clear understanding of why they were engaging with the nonprofit and did not deviate very much from this. In these engagements the corporate actors had a pre-defined and narrow remit to realize or exploit a particular pre-planned innovation opportunity: ‘‘We had the programme worked out. Part of it was help in understanding whether there is a market, how big that market might be . . . . you know is it financially viable, so in that sense it was a benefit.’’ (Dyad 5) By contrast, in those dyads where the firm had agreed a broader engagement remit with the NPO at the outset, or indeed, had no agenda for the relationship as the nonprofit had approached the firm, the range of activities was expanded or extended further (often to the surprise of the corporate actors involved) and firm innovations in these cases emerged during the course of the engagement1: ‘‘I would say that the objectives have evolved over that period of time because, certainly when I took over the relationship, I don’t think anybody could have dreamt of where it would be now in terms of how it has evolved . . .’’ (Dyad 1) The pattern seen in the data suggests that firms with a narrow engagement scope were looking to exploit the skills and resources of the NPO through the collaboration. The firms’ learning from these collaborations appears to have become ‘codified’ (March, 1991) based on existing capabilities and knowledge, or fixed, as the scope of activities saw only limited development during the engagement. By contrast, those firms with a broad or an undefined engagement scope were more exploratory in their approach, using the collaboration to search for new innovation opportunities. In these collaborations, the learning processes are fluid and knowledge will gradually become codified as collaborative innovation capabilities mature. The cases – particularly those where the scope of activities developed over time – demonstrate an open innovation management approach 404
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(Chesbrough, 2004), enabling the firm to identify innovations from the collaboration. Here, the corporate actors adapted and responded to new information coming from their engagement partner, demonstrated they had the flexibility to change to realize innovative benefits (Waddock, 1988) and were also able to identify and utilize new resources and new information made available through the collaboration. Chesbrough (2003) describes the changing knowledge landscape for today’s globally competing firms. In an increasingly knowledgebased economy, value creation depends on highspeed access to new sources of knowledge and creating synergetic and complementary combinations. Through increased involvement in co-innovation, the search for new value is extended into new and unbounded territory. Greater levels of openness can engender richer learning contexts that challenge the bounded rationality of collaborators to reveal new knowledge bundles that spur innovation activity. Managing this meta knowledge from the gaps between organization creates a priority for stakeholders seeking to reap value for new procedures, processes and regulation. This uncovers management and organization challenges, exclusive to the open innovation model, in which the ‘R&D laboratory’ may occupy the entire space between organizations a not just between two separate R&D facilities. The traditional R&D function has become a distributed organizational concern and a multi-functional operation.
5.3. Role of the corporate boundary spanner Two types of boundary-spanning roles were identified in the study, each with their own unique responsibilities. In four dyads (2, 6, 7 and 8), the boundary-spanning role was associated with formal responsibilities from senior management to ‘manage’ innovation opportunities and outcomes, while in the remaining four dyads (1, 3, 4 and 5) there was no such formality, but more a remit to be a ‘conduit’ facilitating search and exploration to locate opportunities for innovation through idea exchange. In the first scenario, innovation management is clearly associated with a more centralized and formalized role and responsibility: ‘‘I have a budget and, basically, I can decide to work with as many charities as I want . . .’’ (Dyad 7) r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd
Exploring open innovation practice in firm-nonprofit engagements ‘‘. . . ‘Sort it out’ was my total job description. ‘Deal with that problem.’ I just went and prodded people.’’ (Dyad 6) Whereas in the latter scenario, boundary spanning is enacted as a more distributed role and responsibilities, concentrating on early stage search and exploration activity by mobilizing internal connections and networks: ‘‘So I will meet people [in the firm] . . . so I look to deliver the benefits of working with a charity, I sell that into the different business units. So I will read things, see things, work with people and explore opportunities.’’ (Dyad 4) These different boundary-spanning roles, as either ‘manager’ or ‘conduit’ for innovation, appeared to be related to the levels of interaction, as represented by the number of linkages between the firm and the nonprofit actors. Dyads exhibiting low (under 10) or moderate number (10–50) of linkages were associated with a more formal and centralized boundary-spanning role in the corporate organization. Conversely, dyads exhibiting a high number (50 þ ) of organizational linkages and interaction were associated with a more decentralized boundary-spanning role in the corporate organization, and so essentially increasing the probability of identifying suitable opportunities for innovation at the various intercies: ‘‘LB [charity account manager] and I [corporate account manager], I would say are the people that sort of galvanize all the conversations across our organizations and bring them together. But there’s a whole team of people . . . we’ve literally got sort of hundreds of people, that work on this account.’’ (Dyad 1) It could be proffered that in these dyads, the corporate boundary spanner is somewhat less restricted by the relatively loose engagement scope, and so more freely able to locate new sources of innovation. Common to all dyads was the championing behavior of the corporate actor fulfilling the main boundary-spanning role with the nonprofit. As the main point of contact with the charity, this actor became an advocate for the NPO and its values, enthusiastically promoting ideas within their own organization: ‘‘So the thing that I was really interested and excited about, was to provide this kind of r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd
brand new holistic support to a charity with a combined vision.’’ (Dyad 4) Within innovation management studies, boundary-spanning activity has been found to be pivotal (e.g. Keller and Holland, 1983; Fey and Birkinshaw, 2005). Boundary spanners ensure that organizational boundaries do not become obstacles to collaboration and that complementary assets and knowledge can be successfully combined for the purposes of innovation (Gulati et al., 2000). This was apparent in our study, whether the boundary spanner acted as an innovation ‘manager’ in a formalized boundary spanning role, or as an innovation ‘conduit’ through a more loosely defined boundary spanning relationship. Also supported was the championing behavior of the boundary spanners, framing the ideas arising from the collaboration as an opportunity for the firm (Howell and Shea, 2001). Crossing inter-organization boundaries introduces reciprocal task interdependence between the corporate and NPO, and so the need to integrate their knowledge and ambitions into a distinct innovation subsystem will be strong. While sources outside the firm are useful in generating novel ideas, sources inside are useful in providing problem-solving and integration capabilities (Tushman, 1977). Increasing the firm’s absorptive capacity in this manner requires inter-organizational coordination (Lawrence and Lorsch, 1967), satisfied by the role of the boundary spanner (March and Simon, 1958). Broad responsibilities associated with this role are akin to technology transfer, collating information and configuring internal resources to provide processing capabilities ultimately for the sense-making and knowledge-creation processes that follow.
6. Implications for Open Innovation Chesbrough’s principles of open innovation (Chesbrough, 2003) have implicitly underpinned the general practice of firm–NPO collaborations that this research has witnessed. Our understanding is that that those principles have been derived from the experiences of organizations working together and ultimately ‘for profit.’ From our sample of firms, it has become apparent that open innovation is a general philosophy that may have unique and separate messages for the dual ‘research’ and ‘development’ aspects of R&D. Our research findings would indicate that the notion of ‘value’ articulated in R&D Management 39, 4, 2009
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Sara Holmes and Palie Smart Chesbrough’s principles might include social and societal value, in addition to that which is purely economic. What is upheld to be a valuable outcome for each collaborator will shape the nature and basis of their exchange, and inevitably their engagement efforts. An open mode of innovation is one that is likely to heighten collective learning and knowledge production (both about collaborative processes and outcomes) for the parties involved, and so can improve search capabilities to locate new sources of innovation. These capabilities may be further enhanced by a more mindful application of search strategies. Laursen and Salter (2006) found that firms that search widely and deeply tend to be more innovative, but the relationship with performance is curvilinear, suggesting that there is a certain point beyond which search leads to diminishing returns. One might conjecture from this that firms need to become more sophisticated in deploying different configurations of search tools and strategies to fit their innovation strategy. It is worth noting that organizations faced with 3601 search range and territory cannot keep a constant watch in all areas. Certain areas will demand frequent and rapid surface scanning, some might require a more occasional and cursory glance, others a wider and random look while other areas will need a narrow, yet deep exploration. Clearly, there are different ways to conduct search and the potential to develop this capability is enhanced under an open innovation paradigm. We proffer that by investigating the practice of open innovation in different contexts (e.g. profit and nonprofit) we will begin to observe its subtle distinctions with other concepts such as ‘distributed innovation’ and ‘user innovation’ and draw bridges to more emerging concepts such as ‘social entrepreneurship’ and ‘social innovation’, to better inform a more general theory. For management scientists this will undoubtedly aid the development of different archetypal forms of open innovation over time (Gassmann and Enkel, 2004) and their associated levels of maturity. Open innovation elevates management challenges to an inter-organizational level concern, both in terms of strategy and operations, and thus is suggestive of the need for new mental models for managing innovation across organizational boundaries. Therefore, the implications for organizations and their innovation managers are that they must acknowledge that the shifting locus of knowledge generation, innovation and ultimately value creation will increasingly have provenance beyond the boundaries of a single firm in a multi406
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organization domain of diverse stakeholders. This research demonstrates corporations embracing this shift to different levels, and so Chesbrough’s notion of open innovation is in danger of being of limited value to research and practitioner communities if it is only conceptualized in binary terms. Organizations are not simply open or closed, but rather they collaborate with a certain degree of ‘openness’. This might be contingent on the extent to which collaborative capabilities have penetrated various parts of a business and how organizations construe value creation. Our study shows that such capabilities are not confined to traditional co-development partners such as R&D departments, but others, including CSR groups, are increasingly engaged in outward-facing missions that open up new channels and pathways to pursue innovation. While the strategic importance of external search activity is clearly emphasized by the open innovation protagonists, the implications for practice at an operational level should not be underestimated. What are the organizational routines that buttress search behaviors to support the innovations on the incremental to discontinuous continuum? Should our typologies of innovation be scrutinized beyond the well-known product, process, business model types based on a ‘for-profit’ motivation, to encompass ‘nonprofit’ contexts in which so-called social innovations resemble characteristics traditionally associated with those of a public good? Finally, organizations may search all they want, but they should exercise caution and not risk doing so, without instating the necessary processing and pattern recognition operations to make sense of the search information gathered, in the hope of revealing innovation opportunities, blind-spots, threats and early warning and weak signals for change. Outreach underpinned by an open innovation paradigm raises the need for a holistic and in-depth understanding of what might best be described as organizational vigilance, perhaps an emerging capability in practice.
7. Conclusions NPOs are emerging as major stakeholders in the business arena, as the traditional antagonism of nonprofits towards businesses is replaced with collaborations to address environmental and social issues through corporate responsibility mandates. This research demonstrates the value of an open innovation approach to such co-operations, driven by the need to address issues other than those of a r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd
Exploring open innovation practice in firm-nonprofit engagements purely economic nature. These collaborations broaden a firm’s search activities and deliver innovations in exchange for enhanced social legitimacy – acting innovation capital for future enterprising activities and market advantage. Two generic approaches to open innovation were witnessed: firstly, a more exploratory approach to dyadic engagement activities that resulted in an emergent innovation process; and secondly, a focused and pre-determined search activity to exploit the resources of the nonprofit partner that demonstrated a more planned innovation process. Two distinct boundary-spanning roles were identified: in dyads exhibiting few organizational linkages, the role was associated with formal responsibilities from senior management to ‘manage’ innovation opportunities and outcomes. In dyads exhibiting high linkages, there was no such formality; the role was a ‘conduit’ to facilitate search and exploration to locate opportunities for innovation through idea exchange. As it stands, this research ignores environmental contextual factors that might also have a role in firm innovation from NPO engagement, for example, changes to regulatory requirements that impact on firms’ responses to social issues, and this could be usefully examined in a subsequent study. Furthermore, an initial cursory examination of the cases reveals that the majority of the NPOs involved in these dyads were breaking new ground in the way they worked with their corporate partners. Studying the relationships from a nonprofit standpoint could yield further insights into the concept of open innovation.
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Note 1. The innovation in dyad 2 is also considered emergent, despite the engagement having a narrow defined scope at the outset. This finding is due to the formalized role of the main corporate boundary spanner in this case. As a retail general manager, she had a wide scope of activities under her control and did not need to access other parts of the firm to facilitate the innovation.
Sara Holmes is a doctoral researcher at Cranfield School of Management and a member of the
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Cranfield Corporate Responsibility Network. Sara’s research focuses on cross-sector collaboration between firms and charities. Related research interests include stakeholder theory and corporate philanthropy. Dr Palie Smart is a senior lecturer in strategic innovation management at Cranfield University, UK. She received her PhD in integrated new product development team-working from Cranfield. Her work has appeared in British Journal of Management, International Journal Of Operations and Production Management, Technology Analysis and Strategic Management, International Journal of Production Economics; International Journal of Technology Management and Proc IMecheE, Journal of Engineering Manufacture. Palie’s current research interests focus on open innovation, innovation leadership and innovation networks.
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