Scott Gallagher

Challenges of Open Innovation: The Paradox of Firm Investment in Open-Source Software

Open innovation is a powerful framework encompassing the generation, capture, and employment of intellectual property at the firm level. We identify three fundamental challenges for firms in applying the concept of open innovation: finding creative ways to exploit internal innovation, incorporating external innovation into internal development, and motivating outsiders to supply an ongoing stream of external innovations. This latter challenge involves a paradox, why would firms spend money on R&D efforts if the results of these efforts are available to rival firms? To explore these challenges, we examine the activity of firms in open source software to support their innovation strategies. Firms involved in open source software often make investments that will be shared with real and potential rivals. We identify four strategies firms employ — pooled R&D/product development, spinouts, selling complements and attracting donated complements — and discuss how they address the three key challenges of open innovation. We conclude with suggestions for how similar strategies may apply in other industries and offer some possible avenues for future research on open innovation.

The Complementary Role of Dominant Designs and Industry Standards

Models of competition in innovative and standard-based industries have advanced considerably in recent years. Two terms that have become important competitive considerations are dominant designs and industry standards. This paper describes the potential for confusion between dominant designs and industry standards and attempts to clearly delineate between them. The role of standards is narrowly driven by the relative importance of network effects while dominant designs are persistent architectures with established implications for industries. However, standards are often important elements of dominant designs. There are many implications of this distinct, yet complementary, relationship between standards and dominant designs for managers. Perhaps the most important is that while dominant designs have been shown to presage industry shake outs, standards do not. In addition, a firm that establishes a dominant design does not often appear to reap competitive advantages from it, though one that establishes a standard may. Other implications for managers from this distinction are also discussed, including corporate strategy and first mover advantage

Innovation and Learning in High-Reliability Organizations: A Case Study of United States and Russian Nuclear Attack Submarines, 1970–2000

Given their complexity and tight coupling, one of the most serious challenges high-reliability organizations (HROs) face is how to innovate, learn, and adapt without upsetting the internal processes that lead to their reliability. This paper describes the success of the United States Navy in using a ldquoplatform strategyrdquo to facilitate modular innovation in its attack submarine program while maintaining high reliability. We compare the United Statespsila submarine development program against that of the Soviets, who innovated by building a number of different types of nuclear attack submarines to test their new design concepts and thereby aggressively push both manufacturing and performance limits. We illustrate that, by adopting a platform strategy, the U.S. development program was able to sustain reliability by controlling factors that derived from four classes of concern: (1) operational; (2) manufacturing and design; (3) resource limitations, and (4) cultural constraints. The use of a platform strategy assists in maximizing system-wide organizational learning, which helps enrich a culture of reliability. However, at the same time, a platform strategy can hinder revolutionary and architectural innovation and reduce operational flexibility. Finally, we consider whether an HROs innovation strategy is partially shaped by its decision-making process.

A strategic response to Friedman's critique of business ethics

Purpose – This paper is designed to provide a practical response to the question of “why be ethical in business” framed around the classic critique of business ethics and corporate social responsibility penned by Milton Friedman.Design/methodology/approach – The primary method is logical reasoning along the following line: Social Environment – > Ethical Norms – > Legal (and especially future legal requirements or consequences). While Friedman argues that the key is to focus on current legal requirements this paper argues that strategic advantages are gained by being ethical and going beyond legal requirements since a firm insulates itself from changes that can result in new or even retroactive legal requirements.Findings – Based on its reasoning the paper argues that acting ethically can serve as a form of insurance or a “strategic shock absorber” for firms. Examples are cited.Practical implications – The problems of Enron and other firms have increased attention on the role of business ethics. However, s...

Creativity and Team Environment: An Exercise Illustrating How Much One Member Can Matter

This experiential exercise is designed to explore the effects of positive and negative group environments on creativity. It asks students to undertake a creative activity (i.e., draw a picture) in groups with a member predesignated to offer either positive or negative comments. Students in the two different types of group environment produced dramatically different drawings. The exercise can be used to discuss the role of positive and negative work environments on teams and how students can use their skills to effectively handle negative environments.

The impact of different forms of IPO firm legitimacy on the choice of alliance governance structure

We analyze the effects of four different types of firm legitimacy - managerial, technological, local community legitimacy and business press endorsement - on the choice of alliance governance structure in partnerships with newly public biotechnology firms. We expand current research to differentiate between non-equity, minority equity and joint venture alliance structures. We find that IPO firms with higher levels of managerial legitimacy and local community legitimacy are more likely to enter into joint ventures than minority equity alliances and non-equity alliances. IPO firms with higher technological legitimacy and business press endorsement are more likely to use a less hierarchical governance structure.