The Paradox of Openness: How Product and Patenting Experience Affect R&D Sourcing in China?

Abstract

External R&D sourcing may help firms compete in an environment characterized by rapid technological changes. Yet, prior studies have produced conflicting findings on how a firm's technological experience affects the extent to which the firm engages in external R&D sourcing. Although many highlight that firms with extensive technological experience are equipped with more technological knowledge, collaborative skills, and absorptive capacity, encouraging greater levels of external R&D, others suggest the opposite due to potential exchange hazards and partnership conflicts. Adopting an external partner's perspective, the current study reconsiders this “paradox of openness” by analyzing how a focal firm's product experience and patenting experience affect an external partner's tendency to provide external R&D services to the focal firm. Specifically, this study explore how a focal firm's knowledge protectiveness and tacitness embedded in its product and patenting experience influences the external partners' motivation for knowledge transfer. This study predicts that a firm's product experience increases the focal firm's external R&D sourcing because it provides high levels of knowledge tacitness and external openness and can encourage external partners to share and exchange knowledge with the focal firm. In contrast, a firm's patenting experience decreases the focal firm's external R&D sourcing because it denotes knowledge explicitness and protectiveness and may discourage external partners to share and exchange knowledge with the focal firm. This study further predicts that patenting experience has a negative moderating effect on the relationship between product experience and external R&D sourcing. Using a data set of 575 high‐tech firms in China, this study finds support for our predictions. Our findings contribute to the growing literature on the knowledge‐based view and technology entrepreneurship in emerging markets.

The Paradox of Openness and Value Protection Strategies: Effect of Extramural R&D on Innovative Performance

“…Concerns have been raised over the 'paradox of openness' (Laursen and Salter 2014;Wang et al 2016), and the problems associated with firms having to reveal, and potentially risk losing, their proprietary knowledge to external actors. An increased emphasis on extramural R&D presents an additional conundrum: while its benefits seem compelling, potential loss of proprietary knowledge is a source of concern.…”

“…By providing access to diverse and complementary knowledge, extramural R&D reduces the risks involved in experimenting, stimulates a firm's innovation engine, and provides greater flexibility when attempting uncertain, radical innovations (Tsai and Wang 2008). However, despite the benefits to 'opening' firm boundaries to external knowledge (Cassiman and Veugelers 2006), some studies warn about the paradox of openness (Laursen and Salter 2014;Wang, Libaers and Park 2016) and the risk of losing proprietary knowledge while engaging with external collaborators (Grimpe and Kaiser 2010;Weigelt 2009). !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!…”

Perspective: Leveraging Open Innovation through Paradox

“…Too much control may negatively affect the motivation and creativity of external contributors. Too much openness can put at risk the efficiency and value capture that firms seek from open innovation collaborations (Arora, Athreye, and Huang, ; Raasch, Herstatt, and Lock, ; Wang, Libaers, and Park, ). This article cross‐fertilizes open innovation research and paradox concepts used in organization theory (Lewis, ; Luhmann, ), and develops a novel perspective on leveraging open innovation through paradox.…”

“…Second, the theme of incorporating involves integrating contributions generated through open innovation collaborations into the focal firm’s innovation activities by directing and coordinating those contributions (see Dahlander and Piezunka, ; Foss, Laursen, and Pedersen, ; Lakemond, Bengtsson, Laursen, and Tell, ; Markus, ). Third, the theme of commercializing means value capture and the appropriation of knowledge created through open innovation collaborations (see Almirall and Casadesus‐Masanell, ; Belderbos, Cassiman, Faems, Leten, and Van Looy, ; Laursen and Salter, ; Wang et al, ).…”

“…Alexy and Leitner () found that extrinsic motivation, such as monetary rewards, has a positive effect on external contributors’ total motivation. However, other studies have argued that extrinsic motivation might push out contributors’ free sharing of knowledge (e.g., Osterloh and Rota, ), and that the focal firm’s control can discourage and decrease external collaboration (e.g., Shah, ; Wang et al, ).…”