Industrial Marketing Management xxx (xxxx) xxx–xxx Contents lists available at ScienceDirect Industrial Marketing Management journal homepage: www.elsevier.com/locate/indmarman Research paper Managing the challenges of business-to-business open innovation in complex projects: A multi-stage process model ⁎ Andrei Gurcaa, Mehdi Bagherzadeha, Stefan Markovicb, , Nikolina Koporcicc,d a Department of Strategy and Entrepreneurship, NEOMA Business School, 59, rue Pierre Taittinger, 51100 Reims, France b Department of Marketing, Copenhagen Business School, Solbjerg Plads 3, 2000 Frederiksberg, Denmark c Marketing Department, Nottingham University Business School, University of Nottingham, Business School North Building, Jubilee Campus, Wollaton Road, NG8 1BB Nottingham, UK d School of Business and Economics, Åbo Akademi University, Vänrikinkatu 3B, 20500 Turku, Finland ARTICLE INFO ABSTRACT Keywords: Research shows that knowledge sharing and system integration are two major challenges posed by openness to Open innovation business partners in complex innovation projects. However, there remains limited research on the micro- Project complexity foundations (i.e., actions and practices) underpinning the organizational capabilities required to address these Knowledge sharing challenges. Drawing on a case study of a pioneering electric vehicle manufacturer, we develop a multi-stage System integration process model showing how these capabilities are developed and phased out in terms of the organizational Microfoundations principles (e.g., hierarchical product architecture) and actions and practices (e.g., sharing knowledge by de- puting staff to/from business partners). Our study contributes to the literature by taking a microfoundations approach to unpack the ‘black box’ of organizational capabilities critical for managing complex innovation projects into actions and practices, and emphasizes the importance of firms' internal preparedness for managing openness. 1. Introduction Despite these benefits, openness to business partners is also likely to generate certain challenges that can hinder the successful completion of In the current, highly competitive business environment, innova- complex projects (Felin & Zenger, 2014; Fujimoto, 2007). The man- tions are increasingly emerging within ecosystems of upstream and agement literature highlights two main challenges. First, decomposing downstream contributing firms that engage in interdependent activities complex projects into separate subsystems is not an easy process, as it to enhance the value proposition (Ganco, Kapoor, & Lee, 2019; often involves designers' guesses regarding the ‘true’ underlying struc- Lehtinen, Aaltonen, & Rajala, 2019). As the complexity of innovation ture of the project (Ethiraj & Levinthal, 2004). Moreover, subsystems projects (projects, hereafter) increases and numerous, highly inter- must be optimized (i.e., integrated) with the designs of other sub- dependent elements, components and subsystems interact to deliver systems by mutual adjustment (i.e., system integration) (Fujimoto, functionality (Fernandes & Simon, 1999), many firms lack the knowl- 2007). Thus, in complex projects, assigning the task of designing and edge and capabilities to complete their projects independently developing subsystems to business partners is a risky practice that can (Takeishi, 2002). Therefore, firms are increasingly engaging in purpo- result in costly delays, and even failures, if the focal firm does not seful, collaborative efforts with different business partners (i.e., busi- understand the subsystems designed by its partners or does not know ness-to-business open innovation – B2B OI) at various stages of their how to integrate them (Hobday, Rush, & Joe, 2000; Takeishi, 2002). complex projects (e.g., Markovic & Bagherzadeh, 2018; Najafi-Tavani, For example, in Boeing's 787 Dreamliner project, despite the many Najafi-Tavani, Naudé, Oghazi, & Zeynaloo, 2018). The benefits of benefits provided by a wide network of business partners (e.g., Mitsu- opening up to business partners include access to valuable external bishi, Spirit, Alenia, Rolls Royce, Kawasaki), Boeing faced a major resources, risk sharing, reduced costs, and improved time-to-market challenge when trying to integrate the key subsystems designed and (e.g., Chesbrough, 2003; Du, Leten, & Vanhaverbeke, 2014; Ind, developed independently by its partners (e.g., wings, wingtips, thrust Iglesias, & Markovic, 2017; Markovic, 2016). engines) (Tang, Zimmerman, & Nelson, 2009). Consequently, Boeing ⁎ Corresponding author. E-mail addresses: [email protected] (A. Gurca), [email protected] (M. Bagherzadeh), [email protected] (S. Markovic), [email protected] (N. Koporcic). https://doi.org/10.1016/j.indmarman.2020.05.035 Received 29 August 2019; Received in revised form 28 May 2020; Accepted 28 May 2020 0019-8501/ © 2020 Elsevier Inc. All rights reserved. Please cite this article as: Andrei Gurca, et al., Industrial Marketing Management, https://doi.org/10.1016/j.indmarman.2020.05.035 A. Gurca, et al. Industrial Marketing Management xxx (xxxx) xxx–xxx delayed the launch of the 787 Dreamliner by almost three years (Smith, Randhawa et al., 2016), as projects are highly heterogeneous even 2015). within the same firm (Brunswicker et al., 2016). Therefore, the effective Second, complex projects require deep knowledge sharing among management of openness requires the adaptation of inter-firm govern- the business partners involved (Felin & Zenger, 2014; Nickerson & ance, practices, and interactions to specific project attributes Zenger, 2004). Sharing knowledge across organizational boundaries (Bagherzadeh, Gurca, & Brunswicker, 2019; Bagherzadeh, Markovic, & among upstream and downstream business partners (i.e., inter-firm Bogers, 2019). Third, while previous research has largely focused on knowledge sharing) represents a challenge, due to the potential lack of the challenges of inter-firm collaborations and knowledge exchanges shared practices, language, and identity required for effective com- (e.g., Majchrzak, Jarvenpaa, & Bagherzadeh, 2015), we contribute to munication and interactions. Moreover, the successful completion of the OI literature by also showing the importance of the firm's internal complex projects involves the integration of externally and internally preparedness (i.e., implementation of principles, actions and practices) sourced knowledge sets that are often tacit and immobile, and thus to successfully manage openness to business partners in complex pro- particularly difficult to transfer across organizational boundaries. These jects. Finally, we provide managers with a multi-stage process model to claims are generally supported by an extensive body of research (e.g., better plan and execute B2B OI in complex projects. Arrow, 1974; Hobday et al., 2000; Kogut & Zander, 1992, 1996; Nickerson & Zenger, 2004; Nonaka & Von Krogh, 2009) that has long 2. Theoretical background argued that the focal firm's raison d'être consists of its “advantage over the market to coordinate, combine and integrate a variety of specialized OI, defined as “a distributed innovation process based on purpo- knowledge, independent of transaction and monitoring costs” sively managed knowledge flows across organizational boundaries” (Takeishi, 2002, p. 324). (Chesbrough & Bogers, 2014, p. 17), has become a popular innovation Yet, despite the above-presented challenges, empirical evidence mechanism (e.g., Bagherzadeh, Gurca, & Brunswicker, 2019), especially shows that many complex projects, such as technologies for rendering by involving business partners (i.e., B2B OI) (e.g., Markovic & animations (Brunswicker, Bagherzadeh, Lamb, Narsalay, & Jing, 2016), Bagherzadeh, 2018). According to the Boston Consulting Group's 2016 electric vehicles (Gurca & Ravishankar, 2016) and commercial aircraft report of most innovative companies, some 66% of the surveyed firms (Tang et al., 2009), have been completed successfully through B2B OI. embrace strategic partnerships with other firms in order to achieve This seems to indicate that, despite its challenges, openness to business their innovation objectives (Ringel, Taylor, & Zablit, 2017). Collabor- partners is useful for conducting and completing complex projects. ating with different business partners is likely to provide the focalfirm Moreover, firms capable of effectively sharing knowledge andin- with diverse external resources (e.g., knowledge, components, sub- tegrating systems within loosely coupled networks of business partners systems), complementary to the internal ones, and required for com- are likely to attain sustained competitive advantage (Pil & Cohen, pleting internal projects successfully (Iglesias, Markovic, Bagherzadeh, 2006). To understand how firms manage B2B OI in complex projects, it & Singh, 2020; Markovic & Bagherzadeh, 2018). Therefore, firms en- is critically important to study the microfoundations (i.e., actions and gaging in B2B OI need to develop organizational capabilities for practices) underpinning the organizational capabilities required for handling such external resources effectively. Specifically, they must be effective knowledge sharing and system integration (see Felin, Foss, capable of integrating external knowledge, components and sub- Heimeriks, & Madsen, 2012; Salter, Criscuolo, & Ter Wal, 2014). systems. However, so far, scholars have mainly regarded these organizational To understand what such organizational capabilities entail, we