What S New in Innovation? a Contribution

What’s new in innovation? A contribution to the novelty of innovation management approaches

Daniela Isari  Andrea Pontiggia Department of Business Economics and Management Ca’ Foscari University Venice Venezia, San Giobbe 813, Italy [email protected]  [email protected]

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1. Introduction: Innovation Modes and Innovative Outcomes

In the managerial tradition it’s quite rare to find topics that show a strong and continuous inter- play between managerial practices and academic theories and frameworks (Palmer, 2009; Holm- ström, 2009; Starkey and Madan, 2001). On the contrary, a singularity of the innovation management field is that it has been characterized by a sort “dialectic” between practices experimented by companies and practitioners, and approaches from academic research. Another uniqueness of this field is that, in this period of crisis, there is a convergency on the idea that innovation may play a crucial role in recovering from the crisis itself. Independently from the sources of the present crisis (financial and industrial), innovation acquires a “pre-eminent” position among other issues, and is seen as the recipe to overcome the present difficulties. (OECD, 2009; Vinnova Analysis, 2009). These peculiarities affect positively the relevance of innovation management. Nevertheless, the discourse on innovation management today appears to be at a turning point and faces the risk to underestimate the distinction and the relationship between two substantial but differing aspects of innovation: the first refers to the modalities through which the process of innovation is organized (innovation modes); the second aspect refers to the results of the innovation processes (innovation outcomes). Literature on innovation management tends to distinguish and deal with these two aspects in a separate way, without considering that modes and outcomes are strongly interlinked. This paper analyzes these two sides of managerial decisions on innovation: first the choices regarding innovation modes, second the choices concerning innovation outcomes protection/ accessibility (Intellectual Property Strategy), providing a framework which takes simultan- eously into account these two sides of managerial decisions for innovation strategy and management. The two sides of innovation management have become more and more tricky and complex because in the last decades innovation strategies changed deeply. Focusing on innovation modes, recent studies have compared “closed” and “open” modes to organize the innovation process (Chesbrough, 2003a; 2006). They acknowledge some transformations of competition and techno-

2 logical dynamics: the increase of knowledge sharing and trading among companies; the role of users and users communities in the innovation process; the transformation of customers-suppliers relations along the value chain, competition based on diffusion of standard adoption. Looking to innovation outcomes, managerial decisions seem to be more and more devoted to innovation ownership and strategic initiatives to protect from imitation or illegal appropriation (this concern has resulted in increasing scope and content of legal protection through Intellectual Property Rights and in more attentive strategic conduct towards IPR management). At the same time we observe the diffusion of practices based on free knowledge sharing and information disclosure. In this view the strategic choices regarding the outcomes of innovation can be characterized by a range of degrees of “protection”, from high level of IP defence to open accessibility. Following a well known classification of appropriation strategies, innovation outcomes can be exploited according to private, collective or mixed private-collective models (Von Hippel and von Grogh, 2003, 2006). To clarify these two sides of managerial strategic decisions, we distinguish on one hand the strategies regarding innovation modes, on the other hand the strategies regarding innovation outcomes protection/accessibility. The main categories that we refer to are defined as “closed” versus “open” (Cheesbrough 2003a) and “private” versus “collective” (Von Hippel and von Grogh, 2003, 2006). We apply the first categories to analyze the innovation modes and the second taxonomy to classify the innovation outcomes. We provide a framework which proposes a classification of the components of the managerial choices. The sustainability of innovation initiatives and advantages (Teece, 1986; Chesbrough, 2003a) and the strategies to protect or to share innovation outcomes (Davis, 2004; Pisano and Teece, 2007) suggest the development of a framework using a configurational approach. Each possible configuration is defined by combinations of different innovation modes and outcomes. The paper is organized as follows: a summary of the main turning points of the literature on innovation modes and on appropriability of innovation outcomes; a classification of the components of the double managerial choice regarding modes and outcomes. Finally we discuss the implications for managerial decision-making and we provide some directions for a future research agenda using a configurational approach to the different strategic combinations available.

2. How to innovate: innovation modes

3 In the last decades the turning points of studies on innovation management are dealing with the concepts of internal/external innovation sources and actors; closed/open innovation models; private/collective incentives to innovate. In the past, the innovation process was seen as vertical integrated model adopted by firms. Innovations were discovered, developed and commercialized internally (the so-called Chandlerian model). This model has been recently labelled as “closed innovation model” (Chesbrough, 2003a). A different perspective emerges in the eighties. Nelson and Winter (1982) provide a description and a model for the firm’s decision to search for new technology and knowledge outside its own boundaries. Von Hippel (1988) shows that a production network presenting strong knowledge-transfer mechanisms among manufacturers, users and suppliers, can be more effective. Powell (1990) observes that various new kinds of inter-firm agreements, collaborations, partnerships give the way to collaboration relationships more articu- lated and intense than in the past. The previous model was undergoing a transformation based on collaboration among firms, where externally generated knowledge was as important as internal knowledge. In the nineties, the term “Networks of innovators” became more and more popular (Freeman, 1991). In this view, internal capability and external collaboration are not mutually ex- clusive, but show strong complementarities (Arora and Gambardella, 1994). From a knowledge- based perspective, Cohen and Levinthal (1990) propose the concept of ‘absorptive capacity’, to describe the organizational abilities necessary in order to innovate beyond firm’s boundaries. Absorptive capacity includes “The ability to recognize the value of new information, assimil- ate it, and apply it to commercial ends” (p. 128) and it is critical to the overall innovative and dynamic capabilities of the firm. March (1991) considering the trade offs between exploration and exploitation, emphasize the risk of learning based on internal codes reproduction and sustains the importance of variability within knowledge creation. A particular stress on the role of users in innovation and on changing roles of manufacturers and customers is recalled by Von Hippel (1976; 1986). The growing importance of users leads to the definition of “democratization of innovation” (Von Hippel 2005). The role of single users and users communities was expressed in a paradigmatic form in the Open Source development movement, studied as an example of a new, participated way to create and gain returns from innovation (Von Hippel &Von Krogh, 2003; 2006). In recent years, Open Innovation has been proposed as a “new paradigm” for the management of innovation (Chesbrough, 2003a). It is defined as ‘the use of purposive inflows and out- flows of knowledge to accelerate internal innovation, and to expand the markets for external use

4 of innovation, respectively.’ (Chesbrough et al., 2006, p. 1). It includes both outside-in (or in- bound) and inside-out (outbound) flows of technologies , knowledge and ideas. This model fully recognizes that competitive advantage is inextricably linked to the management of inter-organizational relationships with a bundle of actors external to the firm (customers, competitors, suppliers, research institutions) aimed to exchange knowledge, technology and skills. The problem of external validity and condition for sustainability of Open Innovation has been recently posed by the same authors of the model (Chesbrough and Crowther, 2006; West and Gallagher 2006). An important dimension concerns the validity of the paradigm across industries (Chesbrough & Crowther,2006). Another dimension refers to firm size. Open innovation so far has mainly been analyzed in large, high-tech multinational enterprises. Few studies have started to explore open innovation in small and medium enterprises (Van De Vrande et al., 2009). As Gassmann (2006) notes, although a trend towards open innovation can be observed, open innovation is not an imperative for every company and every innovator. Instead, there is a need for a contingency approach regarding the management of innovation: which of the factors that drive higher performance are preferred by open and which by closed innovation models need to be determined. A neo-contingency approach also implies that firms might follow “blended strategies” to innovation, building a mixed innovation architecture making closed and open modes of innovating coexisting. In our view firms can evolve their innovation modes through time, according to changes in a set of conditions, following an evolutionary path between different innovation configurations.

3. Innovation outcomes

We look at the outcomes in terms of protection of intellectual property. The focus concerns the alternative choices and strategies to defend-protect-share the results of the innovation process. This issue is getting more and more relevant today, since “the open innovation paradigm goes beyond just utilizing external sources of innovation such as customers, rivals, and universities (…) and is as much a change in the use, management, and employment of IP as it is in the technical and research driven generation of IP” (West and Gallagher 2006, p.320). The ownership of the results seems to be less clear and more ambiguous. Innovation modes based on the involvement of different subjects, blending different sources, enhance the complexity of appropri-

5 ability of innovations. However the mode of innovation can be distinguished from the methods to protect intellectual assets created through the innovation process, since it is not to be taken for granted that an “open mode” for creating innovation necessarily drives to outcomes which are equally open to external access and use, available as “public good” (Olson, 1967), generating incentives coherent with a “collective model” (Von Hippel and Von Krogh, 2006). If we assume a direct relationship between innovation mode and outcome protection we reduce implicitly the range of possible strategic options. If it is true that there are successful or even dominant players in some industries, then we must ask ourselves if this market position is the result of the innovation mode adopted, or results from the protection strategies of the outcomes, or is the consequence of the specific relationship (or combination) between the innovation mode and the outcome protection strategy adopted. Firms’ opportunity to protect the returns from their innovation activities—appropriability—has been identified as a key incentive for innovation (Arrow, 1962; Levin et al., 1987), and as a justification for the intellectual property rights system itself (Kultti et al., 2006). Nevertheless, IPRs represent essentially just one of the possible tools for fostering innovation (Arrow, 1962). Other means of protection, like lead time to market, secrecy, exploiting learning curve advantages, complementary investments represent economically rational alternatives, under specific conditions, to IPRs (Levin et al., 1987). Litera- ture on strategy underlines as well (Teece 1986) that the characteristics of the appropriability regime is one of the critical factors which determines the firm’s decisions on how to capture value from innovation. The opportunities offered by the availability of legal means of protection of knowledge (IPR) and the growing relevance of knowledge and information, have been the premises for the growth of knowledge trading among firms. This phenomenon has been explored in literature using various labels, like markets for know-how (Teece, 1998) markets for technologies (Arora, Fosfuri, Gambardella 2001), markets of ideas (Ramello 2005, Davis 2008). As Aro- ra et al. (2001) point out, the increasing opportunities of transactions for the use, the diffusion and the creation of technology and knowledge have enlarged the “strategy space” of firms, un- derlying the increasing importance of strategic IP management and suggesting that a proactive management of intellectual property is critical for firms success. Not surprisingly, then, in recent years literature on IP management and strategy has flourished (Benkler 2002; Sherry & Teece 2004; Davis, 2004; Pisano &Teece 2007, Lichtentaler 2007). As Davis points out (2004), while IPRs have become more and more important and the content and scope of legal protection has

6 broadened, IPRs seem to have partly changed their strategic role: patents, for example, are not considered by firms as more effective in motivating research and development. These new roles have little to do with motivating R&D: to block or ‘enclose’ rivals, to signal plans to enter market, to facilitate cross-licensing, indicate stock market value, enable evaluations for mergers or acquisitions. Recent studies on strategic management of intellectual property describe the conditions under which IPRs are effective: for example the firm size or industry-specific characteristics (Cohen et al., 2000). Some authors developed critical analyses of IPRs effectiveness as incentives to stimulate innovation. Ramello (2005) underlines that current technological develop- ments are challenging IPRs, by multiplicating tools for the duplication and dissemination of information. Moreover, the current IPR framework has allowed behaviors which have little to do with authentic investment in innovation, like accumulation of IPRs, sleeping patents, brand pro- liferation. Studies on Open Source Software practices describe how incentive structures based on social gains (Lerner &Tirole, 2002) represent alternative or complementary incentives para- digms, co-existing with the IPR system. The debate on substitutes to IPRs has been ignited by authors studying collective invention, free revealing behaviors and private-collective models for innovation incentives, demonstrating that also free-revealing behaviors pursued by firms are economically rational (Harhoff, Henkel and Von Hippel 2003; Von Hippel &Von Krogh 2003, 2006; Gault & Von Hippel 2009). Firms may rationally decide to reveal proprietary knowledge for free because they seek for other incentives which reveal to be preferable under a series of conditions (Haroff et al., ibidem): avoid costs of IP protection, reputational gains, market en- largement, development of related services, learning, developing informal standards). Von Hippel &Von Krogh (2003, 2006) propose a private-collective model for incentives to innovate, where innovators can “gain higher profits then free riders from free revealing because some sources of profit remain private” (Von Hippel &Von Krogh , 2006, p.304). A wide range of alternative and complementary choices, related to various degrees of protection of innovation outcomes are available: protection through IPR system; IP protection through informal methods; knowledge trading based on IPR system; knowledge sharing based on voluntary spillover and free revealing; mixed degrees of protection.

7 4. Innovation management: A framework built around the granularity of modes and outcomes notions

A continuum of innovation modes ranging from two extremes: the “closed” approach and the “open” approach sets the strategic space for managerial choice. We aim at understanding hy- brid or mixed innovation modes. To achieve this goal we need to define and explore each ele- ment of the possible configurations; this leads to a combinatorial approach for designing and im- plementing innovation modes. Regarding innovation outcomes, innovators can choose among multiple options to protect and capture value from innovation, from “private models” (based on IP legal protection mechanism or on informal IP protection methods, or a mixture of the two) to “collective models” (based on free revealing or voluntary spillovers options leading to various types of social and market returns), to mixed “private-collective” models (in which innovators gain from freely-revealed innovations because some sources of profit remain private). These different strategic options can be described along a continuum based on the degree and type of IP protection. If we define a configuration as a distinct and specific combination of discrete factors, then, in order to describe different configurations, first of all we need to identify the single factors which can be combined.

4.1 Granularity of innovation modes Consistently with the definition of open innovation by Chesbrough, indicators of openness developed and used in empirical studies are mainly based on the number and the variety of external subjects which represent a source of knowledge and ideas for the firm’s innovation process (Laursen and Salter 2004; Poot, Faems and Vanhaverbeke, 2009; Leiponen and Byma 2009). On the other side, studies on networks (Katz and Shapiro, 1994) organizational sense-making (Weick 1976, 1982a, 1990), organizational learning (Cohen and Levinthal, 1990); transaction cost analysis (Williamson, 1991) convey the assumption that the properties of the relationship among the different subjects, or nodes of a network or components of a system are important to qualify the nature and the properties of the network (system) itself. In spite of this, very few contributions take in considerations a more granular analysis of the relationship among the different actors involved in an open innovation process: Laursen and Salter (2004), for example, introduce

8 the concept of “depth” as a component of openness (defined as the extent to which firms draw intensively from the different external sources, developing deep relationships with external part- ners). We develop a more granular definition of the different degrees of openness, based on the following factors: the number and variety of actors; the intensity of the relationship among the actors; the longevity of the relationship among the actors. These factors are strictly related to three main strategic questions on how to innovate: who contributes to the innovation process (how many and what type of actors)? How should they contribute (what rules and type of contributions)? How long should the cooperation last? 1. Plurality and variety of actors involved in the innovation process. Plurality. According to current definitions, in order to be “open” an innovation activity must involve one or more external actors (outside the firm’s institutional boundaries). Closed innovation modes refer to innovation development based on internal resources (i.e. knowledge and know how), while open ways to innovate imply the cooperation with at least one external actor . The relevant strategic question is about how many external subjects to involve. The nature of open innovation, which involves a plurality of subjects, seems to remind the image of the network. The size in term of numbers of nodes participating may influence the innovation capacity. The higher the number of actors involved, the higher the degree of openness. Variety. Literature on open innovation shows that actors involved in open innovation may be as diverse as suppliers, customers, users, competitors, universities, research institutes, technology vendors and suppliers. The relevant strategic question is about what type of external subjects to involve. The production of knowledge and learning processes are enhanced by the variety of stimula and knowledge sources .We assume that there is a positive relationship between the degree of openness and the variety of external actors. 2. Intensity of the relationship among the actors Another relevant strategic question is about how the different subjects involved should mutually contribute to the innovation process. To define the intensity of the relationship among different actors in an open innovation process, we adopt the well known distinction (Karl Weick,1976; 1982a) between loose coupling and tight coupling among the elements of a system. These quali- ties of the linkages (dense and tight or, on the contrary, loose) have been applied both to the study of single organization and to the study of inter-organizational linkages (Orton and Weick, 1990). The definition of loose coupling includes the notions of “weakness in mutual effects; “im-

9 permanence”; “separateness” and characterize those systems where elements may be tied either “weakly” or “infrequently”, “tacitly”, with “relative absence of regulations and high delegation of discretion” or with minimal interdependence (Weick, 1976). The configuration of the relationship among the different actors of an innovation process is described by the tightness of regulation, coordination mechanisms and authority. Regulation of access to the innovation process. Different organizational and regulatory mechanisms (such as rules, norms, contractual clauses and procedures) may govern the participation of different actors to the innovation process. Here the focus is on the set of mechanisms concerning the access to the innovation process. Access can be managed in order to allow anyone willing to participate to participate (and leave whenever they want), as in the case of users communities, or it can be limited and regulated through specific contract and agreements, as in the case of joint ventures between companies. Three more frequent modes follow: I. Participation is completely voluntary and there are no formal entry barriers (i.e. Wikis; users communities; participation of firms to developers communities). II. Participation is limited and regulated, based on contractual and legal mechanism (i.e. joint ventures; cross licensing agreements). III. The innovation mode includes mixed strategies for access regulation. This is the case when there are some rules that govern participation but the contribution is not mandatory, it is left free for each subject. Volun- tary access is a more loose modality, in which different actors can decide to participate to or to leave a project at any moment, based on their individual preference; the use of formal access rules and agreements, on the contrary, implies specific requests and obligations, thus demanding more intense involvement. Nature of the contribution of each actor to the innovation process. Literature on team work suggests a classification of activities that distinguish four main types of contribution expected from subjects involved in the innovation process: first, an informative contribution. This is the case when a participant provides useful knowledge, know how, information (for example, when users describe some product defects on a brand’s user’s community). Second, a task contribution, when a participant is in charge for accomplish specific tasks of the innovation process; the tasks are defined by the activities (operation and actions) and by a desired or expected outcome. For example, users develop specific modifications to a product and post technical details on a brand’s user’s community. Third type of contribution deals with decisional role. This is a part of the decisional effort accomplished (or offered) by a participant both on individual basis or on

10 collective participating to a social decision making process. Last type of contribution is defined by individual behaviors devoted to keep or improve the relations among contributors/participants, improving the level of integration and managing different orientations and preferences of the individuals involved in the innovation process. This contribution is named relational. We propose that the wider the range and type of contributions an actor provides to the innovation process, the more complex and intense mutual relationships are. Ways to confer resources for innovation. Participants may confer various types of resources: knowledge, labour, instruments/ plants, financial ones. Different actors can offer their resources on voluntary base for free, or based on contractual transaction at a certain price. Two situations are recognizable at least: I. Free conferring (for example this is the case of developers volunteer labor and free knowledge sharing in OSS projects); II. Use of licensing mechanism or, general speaking, formal agreements or contracts regulating the transaction. Free conferring is a more loose modality, because the conferring of resource can start and stop at any moment based on individual preference, and because the amount and quality of resource allocated is discretionary; the use of formal agreements, on the contrary, implies specific requests and obligations, thus demanding more intense involvement of the parties. Regulation and governance mechanisms This factor describes how the actors organize the innovation activities or phases of the process. It is useful to focus on three organizational issues: the coordination rules (management of interdependences), the labour division (specialization of labour and task allocation) and the decision making (authority and delegation). A well accepted taxonomy identifies the formal versus informal nature of the rules. Ia. Actors contribute and cooperate according to informal rules emerging from the social interaction (i.e. OSS development projects). Ib. Actors contribute and cooperate according to formal and written rules (i.e. rules are established in contracts and formal agreements). IIa. Actor’s roles are informally established, on voluntary basis. IIb. Actor’s roles are formally established, based on formal role system (i.e. role of supervisors in wikies; roles established by contractual agreement). IIIa. Actor’s decision power is informally established, on voluntary basis. IIIb. Actor’s decision power is established based on formal roles and formal rules. The setting of formal coordination rules, formal role systems and a formal allocation of decision power requires complex bargaining, decision and formalization processes among the act-

11 ors, and requires them to comply with formal rules, reciprocal expectations and obligations, thus demanding a more intense involvement to all parties. Appropriability of resources conferred by actors. Individuals can contribute resources to the innovation process on different basis. Independently from the type and content of the individual contribution, the resources conferred can be used freely or not. In this perspective who particip- ates and has access to the process can appropriate some resources. Resources may be seen as the initial contribution (input) coming from different subjects or resources created/generated as an output of specific phases of the process. We consider the possibilities to get access to specific resources conferred during the process. The two options are: I. Free access to initial resources or intermediate results of process; II. Subjects involved who confer resources are allowed to get only the final output of the innovation. The first is a more loose modality, since it allows subjects involved to reap benefits of resource sharing at very early or intermediate stages, thus allowing free riding behaviours or the interruption of the collaboration. On the contrary, when actors are allowed to appropriate and use only the final output of the innovation process, this motivates continuous contributions to the project. 3. Longevity of the relationship The duration and recurrence of collaboration among subjects matters when we decide modes of organizing the innovation process. Von Hippel (1988) shows that the sharing of know-how often requires the establishment of long-term relationships in which exchange occurs within common codes, and the importance of developing mutual adjustment in time in order to combine internal and external sources is also acknowledged in knowledge- based approaches. The related questions for the decision makers are: should we establish long term relationship with external subjects? Should we cooperate with the same subjects on several projects in time? Should we involve an external subject in single phases of the innovation project or in several phases? We introduce the dimension of longevity of the relationship among actors, considering two aspects: Duration of the relationship with external actors. We define short term relationship a situation in which an external subject contributes to on one single innovation project; we define long term relationship a situation in which an external subject contributes to more projects. Number of phases involving an external subject. The external subject can be involved in a single phase of a research project, or can contribute to two or more phases of the achievement of an innovation.

12 Table 1 summarize the framework for innovation modes. The components of the managerial choice are described by three main factors: number and variety of actors; intensity and longevity of the relationship among actors. These factors and their combinations highlight the strategic choices and moves of firms as far as how to design the innovation activity. Table 1_Granularity of modes of organizing innovation activity Factors Sub-factors Variables Plurality Plurality of actors Number of external subjects involved in the innovation and Variety involved in the in- process of actors novation process. Variety of actors in- Number of different types of external subjects (i.e. sup- volved in the innova- pliers; customers; competitors; research institutes and tion process universities). I. No formal entry barrier, open access based on volun- Regulation of ac- tary participation (i.e. users communities) cess to the innova- II. Limited access based on contractual regulation (i.e. tion process joint ventures; cross licensing agreements) III. Mixed strategies Intensity I. Informative contribution: (i.e. users describing of the rela- product defects on a brand’s user’s community) Nature of the contri- tionship II. Task contribution bution of actors to III. Decisional contribution (i.e. a wiki contributor open- the innovation pro- ing a new field /entry of the wiki) cess IV. Relational contribution (i.e. moderators in blogs and forums) I. Free conferring (i.e. OSS projects developers volunteer Ways to confer re- labour and free knowledge sharing) sources for innova- II. Formal agreements based on contracts, licensing tion mechanism Regulation and go- Actors contribute and cooperate according to: vernance mechan- Ia. Informal rules (i.e. OSS development projects) isms Ib. formal rules (i.e. rules are established in contracts and formal agreements)

13 IIa. Actor’s roles are informally established, on voluntary basis IIb. Actor’s roles are formally established, based on formal role IIIa. Actor’s decision power is informally established, on voluntary basis IIIb.Actor’s decision power is established based on formal role and formal rules Appropriability of I. Free access to any intermediate inputs/ results of in- resources conferred novation process by actors II. Access allowed only to the final innovation outputs I. long term relationship (on more projects) Longevity Duration of the rela- II. short term relationship (on one single project) of the relationship with extern- tionship al actors

Number of phases in- I. number of phases of a innovation project involving an volving external act- external subject ors

4.2 The granularity of innovation outcomes Along the continuum between the two extremes “collective” and “private” model, the factors concerning innovation outcomes appropriation reflect the basic strategic questions for the managerial choice. The main questions an innovator can use as a guideline in order to describe alternative protection options are fundamentally related to : Who should be allowed to acquire and use the innovation outcome and how (what are the conditions and restrictions of acquisition and use)? Who should be allowed to re-distribute it to third parties and how (what are the conditions and restrictions of distribution)? Who should be allowed to modify the innovation outcome and to what extent (what are the conditions to modify it)? These questions are consistent with organizational learning processes: Huber (1991) highlights the process of knowledge acquisition, by which knowledge is obtained; the process of information distribution, by which information is

14 shared; the process of information interpretation by which distributed information is subject of sensemaking. The same questions underlie IP license terms and clauses (i.e. license to use, to distribute, to modify an artefact) which regulate the protection/ diffusion of knowledge and innovations. Based on this classification, we propose three main factors for managerial choice: 1.Availabilty to acquisition and use. This factor refers to different degrees of availability/ protection of innovation outcomes. We distinguish three degrees: I. Completely free use. Innovation outcomes can be used without paying any royalties or prices, as in the case in free revealing behaviours (Von Hippel 2003, 2006) or copyleft clauses (i.e. OS Software). II. Availability is restricted by informal methods of IP protection. Secrecy, speed time to market, learning curve advantages, complementary investments in marketing and customer service are examples or such methods (Levin et al., 1987), as well as protection systems based on professional norms (Fauchart and Von Hippel 2007). III. Legal IP protection. In this case the outcome availability is restricted by IPRs (patents, copyrights, re- gistered trademarks, design registrations), thus available to use through licence mechanisms, by paying royalties or other fees. This may also include a temporal limitation to access and use (think to the software products which are subject to a trial period: in this case the use is limited on temporal basis). 2. Re-distribution to third parties I. Free re-distribution. In this case, any user can diffuse the innovation to anyone. An example from Open Source Software is the copy-left clause, conceived to allow users not only to use the software for free, but also to make copies and distribute it for free to whoever is interested. II. A second modality is when the innovation is distributed from subjects who participate to the innovation process to other subjects (adopters and users) not involved in it. III. A third modality con- sists of restrictions to re-distribution to any user: as an example, artefacts protected by copyright like music files or books cannot be copied and redistributed without paying royalties. We expect to observe significant different path of innovation diffusion according to the free or ruled re-distribution modes. 3. Innovation outcome modification We distinguish two basic modes: I. Third parties are allowed to modify the innovative artefacts without any formal or legal obligation (as in OSS developers communities). II. At the opposite it

15 is not possible to modify some or all the features of the innovative artefact. Barriers may be technological or legal (i.e. users may loose the guarantee in case they modify some components).

Table 2 summarizes the framework for innovation outcomes. The components of the managerial choice are described by three main factors : availability to acquisition and use; re-distribution; modification. These factors and their combinations highlight the strategic choices and actions of firms regarding protection or disclosure strategies.

Table 2. Granularity of innovation outcomes Factors Variables I. Free availability (i.e. free revealing behaviours) II. Constrained availability through informal methods of IP pro- Availabitily to acquisition tection (i.e. secrecy, speed time to market, learning curve ad- and use vantages, complementary investments, norm-based IP) III: IPR protection mechanisms (i.e. patents, copyrights, re- gistered trademarks, design registrations) I. Free reproduction and re-distribution (i.e. copyleft mechanism in OSS) Reproduction and re-distri- II. Free reproduction and re-distribution only by subjects in- bution volved in innovation process III. Reproduction and re-distribution constrained by IPR (i.e. copyright on music pieces and books; trademark on fashion and design products ) I. adopters and users are allowed to modify without any formal Innovation outcome modific- or legal obligation ation II. modification by adopters and users are limited by legal or technological barriers

16 5. Innovation modes and outcomes: managerial implications and future research

The framework provides a set of dimensions useful as guidelines for choices and judgements about innovation strategy. These dimensions come from an analysis of the granularity of two notions: innovation modes and innovation outcomes. The framework is built around three factors for innovation modes (plurality and variety of subjects, intensity of relationships and longevity of relationships) and three factors which describe innovation results (availability to adopt and to use, reproduction and re-distribution, and modification of the innovation outcomes). On one hand these factors correspond to managerial choices on how to organize the innovation process, and on the other hand, on how to implement IP protection or disclosure strategies. The configurational approach shows the degrees of strategic freedom and opportunities to adopt innovation policies that blend “closed-open” with “private and collective”. It may support the exploration and exploitation of mixed strategies. The framework also offers some insights on relationships between “modes” and “outcomes. A configurational approach leaves room to a logic where different combination of “modes” and “outcomes” can take place: open innovation modes can, for example, lead to proprietary outcomes as well as closed innovation modes can be associated with free revealing strategies of previous proprietary knowledge. Open modes of innovation don’t necessary drive to outcomes which are equally open to external access and use, available as “public goods” or generating incentives consistent with a “collective model”. Assumptions of direct relationships between innovation mode and outcome protection reduce the range of strategic options. Finally, the factors allow: i. to combine different degrees of openness and different degrees of protection, affecting positively the strategic opportunities of innovators; ii. to assist the evaluation of some essential strategic questions and issues on how to manage the openness/closure and the collective/private dimensions. The management of IP cannot be thought either as a way to simply defend innovation from imitation nor as naïve application of knowledge openness and information disclosure to competitors. The future development of this work requires to test the validity of the factors and the con- sistency and completeness of the framework proposed. Next step in the research agenda is towards the development of complete and consistent configurations, based on a deeper comprehen-

17 sion of the relationships between innovation modes and outcomes and on the regularities that characterize the “fit” between modes and outcomes. Last step is to test the framework as an effective research “platform” to integrate three theoretical streams: organizational dynamic capabilities, property rights theories, resource based view models.

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