Developing technological capabilities for Industry 4.0 adoption: An analysis of the role of inbound open innovation in small and medium-sized enterprises

To keep up with rapid technological change, firms are pushed to acquire new competencies and resources, often leveraging the external networks in which they are involved. The paper examines how firms' engagement in inbound open innovation (OI) enables the adoption of Industry 4.0 (I4.0) technologies in small and medium-sized enterprises (SMEs) through the deployment of technological capabilities. We combine the OI and dynamic capabilities frameworks to assess how the absorption of knowledge from different actors impacts the necessary technological capabilities for adopting I4.0 technologies. The capabilities are categorized in technological sensing, seizing and reconfiguring. The study is based on in-depth case studies of two selected SMEs from the footwear industry. The cases show that engaging in external collaborations, particularly with universities, pushes SMEs to renew the bundle of competencies underlying their technological capabilities. However, this effect is influenced by the OI modalities adopted by both companies. While in Company A OI takes place through a broader array of formal and informal linkages that contribute to the exploration of distant knowledge bases and the experimentation of more diverse technologies, such as the Internet of Things, Company B relies on informal networking concentrated in its own field of specialization for the adoption of manufacturing-specific I4.0 solutions, such as automated robots and 3D printing.     

Digital transformation in entrepreneurial firms through information exchange with operating environment

Changing digital technologies and innovation threaten established business models. Increasing uncertainty in the operating environment often drives the need to transform the core business model of firms through a process of digital business transformation (DBT). In this study, we conduct a longitudinal study of two digital startups in the crowdfunding domain and identify the core attributes driving such transformation in digital ventures. We build a framework that examines how DBT takes place in entrepreneurial firms through information exchange with the environment. This research will help entrepreneurs and managers of such firms design and develop reactive business models for market success.     

Beyond the Generation of Ideas: Virtual Idea Campaigns to Spur Creativity and Innovation

Firms striving to maintain high rates of innovation need a continuous flow of new ideas. This is resulting in the establishment by large firms of IT platforms to generate ideas for innovation, and to encourage employees and customers to participate in innovation contests. However, there has been little published research on the use of IT platforms for idea generation by employees, and it is unclear whether they facilitate in‐house innovation. The purpose is to investigate how firms use IT platforms internally to generate ideas, and how their use contributes to the innovation process in large firms. We rely on data from two collaborative research projects in the automotive industry: Volvo Cars and Renault. We found that both firms used IT platforms as campaigns to promote innovation and to involve employees in the innovation process. The findings suggest that these virtual idea campaigns support innovation in large firms mainly by (1) encouraging employee creativity in idea generation and (2) involving employees and top managers simultaneously in the innovation process. This paper contributes to idea management systems theory by highlighting the importance of virtual idea campaigns for the firm's innovation process, and their dual role.     

Alliance Formation in the Automobile Sector during an Era of Ferment

When developing radical innovations, firms often form collaborative relationships with external organizations to have access to additional resources. Therefore, alliance formation is influential in innovation and plays a key role in industrial change. However, most studies have not distinguished between individual alliances and instead aggregated collaborations when analysing firm external R&D efforts. Our research sought to explore manufacturer use of alliances to acquire expertise in key knowledge areas as they developed and commercialized electric vehicles. Alliances from 24 manufacturers were analysed according to type (explorative or exploitative), key knowledge area, and firm type (incumbent or start‐up). The results show distinct alliance formation patterns in different key knowledge areas. Heterogeneity of alliance formation in key knowledge areas indicates that developing a radical innovation is not as simple as acquiring new expertise. Rather it is a complex process where firms seek to develop their own knowledge base and use the expertise of other companies. This likely stems from a desire to develop technologies connected to core business models. Analysing alliance formation according to key knowledge area provides a rich account of how firms approach knowledge acquisition as they develop radical innovations during a time of industrial uncertainty.     

Successful Patterns of Internal SME Characteristics Leading to High Overall Innovation Performance

Small and medium‐sized enterprises (SMEs) struggle with the paradox of developing new products and technologies on the one hand and minimizing costs on the other. These SMEs must be innovative to survive and grow. However, compared to large firms, SMEs have several problems in their innovation process, which negatively influence their overall innovation performance. This research explores successful patterns of internal SME characteristics that lead to high overall innovation performance. Cluster analyses were conducted to find patterns in the internal characteristics of SMEs with high overall innovation performance. We find that companies that focus on incremental innovation and that achieve high overall innovation performance indeed share a pattern in their internal organization, when controlling for innovation type. The paper adds to the current body of knowledge by comparing high‐ and low‐performing companies based on competence differences. Because real‐life organizations consist of multiple organizational characteristics, we also contribute to management practice by simultaneously addressing multiple organizational characteristics for the successful organization of innovation.     

Consultancies and capabilities in innovating with IT

When firms innovate with information technology (IT), they frequently retain consultants, who presumably bring certain capabilities to the process. But what capabilities are these and why do they seem to be so needed? In this essay, I consider several different consultancy specializations – business strategy, technology assessment, business process improvement, systems integration, business support services – and how they facilitate an IT innovation process both within and across firms. For each specialization, I examine the consultancy’s capabilities and contributions both to the client (within an engagement) and to the broader support of the innovation (across and beyond engagements). The analysis suggests a number of conjectures as to the influence of consultancies on an IT innovation’s adoption, diffusion and eventual institutionalization.     

Exploring Networks of Activism on Corporate Social Responsibility: Suggestions for a Research Agenda

One increasingly important development for which firms need to find innovative solutions is the growing attention to corporate social responsibility (CSR). The shaping of CSR can be seen as a process in which firms and a variety of other actors are involved. This paper highlights the role of activists, and especially the role of networks of activism, in the process of (re‐)defining, and sometimes innovating, the role of firms in issues of CSR. This can be seen as a process of institutional change in which norms are changed. Therefore, this paper contains a short theoretical examination of three relevant literatures (social movements, institutional theory and social network analysis) to flesh out some of their commonalities in order to develop proposals for a further research agenda for understanding how networks of activist groups (and firms) operate in shaping corporate social responsibility – an issue highly relevant in understanding the changing role of business in society. In addition, such insights can also contribute to understanding the role of activists in influencing innovation trajectories.     

The impact of e-retail characteristics on initiating mobile retail services: A modular innovation perspective

The rise and challenges of m-commerce have led to an urgent need to examine how firms adopt the emerging sales channel. Early studies mainly discussed the differences between e-commerce and m-commerce. Our study shows the modular innovation from e-retailing to m-retailing, which changes the core component of service delivery but keeps the operations intact, provides more opportunities for well-entrenched firms. Using a dataset of e-retailers, we find e-retail characteristics have an impact on firm's migration to the mobile domain. Firms with online service competencies, economies of scale, and physical outlets are more inclined to exploit opportunities provided by mobile technologies.     

Smart Innovation Engineering: Toward Intelligent Industries of the Future

ABSTRACT

Knowledge-based engineering systems are founded upon integration of knowledge into computer systems and are one of the core requirements for the future Industry 4.0. This paper presents a system called smart innovation engineering (SIE) capable of facilitating product innovation process semi-automatically. It enhances decision-making processes using the explicit knowledge of formal decision events. The SIE system carries the promise to support the innovation processes of manufactured products in a quick and efficient way. It stores and reuses past decisional events or sets of experiences related to innovation issues, which significantly enhances innovation progression. The analysis of basic concepts and implementation method proves that SIE system is an advanced form of cyber physical systems. It is flexible, systematic, fast, and supports customization. It can play a vital role toward Industry 4.0 development.     

The role of users and customers in digital innovation: Insights from B2B manufacturing firms

Diffusion of digital technologies into the manufacturing industry has created new opportunities for innovation that firms must address to remain competitive. We investigate the role of customer and user knowledge in the digital innovation processes of three global B2B manufacturing companies. We find that the B2B manufacturing industry's characteristics influence how users and customers may be leveraged. Customers making the purchasing decisions are considered for knowledge about short-term changes in market needs, while users working directly with the products provide long-term guidance for digital innovation. We identify practices for acquiring, distributing, and using customer and user knowledge for digital innovation.     

Innovation in IT firms: An investigation of intramural and extramural R&D activities and their impact

This research examines how intramural activities that are developed internally within the firm and extramural activities that are undertaken in collaboration with an external partner lead to product and process innovation. We use hierarchical regression analysis on data collected for European and Chinese firms and determine that intramural activities have a profound positive impact on process innovation, whereas their impact on product innovation is positive only for large firms. We discover that process innovation positively impacts product innovation but not vice versa. The results are important for managers who guide the R&D activities of a firm to product and process innovation.     

How interfirm collaboration benefits IT innovation

Many studies have observed that close interfirm collaborations have positive effects on a firm's innovation. Yet, they have not shown how the collaboration contributes to this process. Higher innovation rates could be a result of revolutionary improvements, evolutionary improvements, or both. We investigated changes in the innovation process. Longitudinal data from 23 top IT firms across 9 years were collected and analyzed. Results suggested that close interfirm collaborations were associated with evolutionary but not revolutionary improvement. Results also suggested that the longer the IT firms had engaged in close interfirm collaboration, the larger the effect on IT innovations.     

Innovation among different classes of software development organizations

Software development organizations (SDOs) innovate in diverse ways. In this paper, based on an extensive review of innovation typologies, we develop a theory‐driven typology of SDO innovator classes. We theorize about the driving forces behind these classes, with specific attention given to knowledge‐based dispositions that relate to the SDO's knowledge‐based competencies in technology appropriation, technology generation, and network intensity within ecological niches. Through a survey of 136 SDOs, which adopted Internet technologies during 1995‐2006, we empirically verify that these classes also determine different ways that SDOs innovate around software services they provide to their clients. Our findings suggest that the knowledge‐based dispositions of different SDO innovator classes impact how they innovate. Overall, the study involves theorizing around different types of innovation behaviours and associated knowledge‐based factors that influence the way SDOs innovate.     

Low‐Cost versus Innovation: Contrasting Outsourcing and Integration Strategies in Manufacturing

This paper analyses how two different outsourcing manufacturing strategies relate to plant performance and innovation capability when taking into account the organizational integration of design and manufacturing as well as product complexity. The study discriminates between low‐cost‐oriented outsourcing and innovation‐oriented outsourcing. The empirical data used is based on a survey of 267 engineering firms, of which half have outsourced manufacturing. We found that the two outsourcing strategies do have different effects, which illustrates that outsourcing represents a trade‐off between improving innovation capability and lowering costs. The study furthermore shows that manufacturing and supplier integration in product design processes is mainly beneficial when applying innovation‐oriented outsourcing, and in particular when products and manufacturing processes are complex.     

Managing the Innovation of a Corporate IT‐based Cable Design System

Managing new Information Technology innovations requires an understanding of factors that influence organisational choice. When large firms invest in new IT applications such as Computer Aided Design, there is reason to doubt that they adequately understand user needs. Empirical investigation in a UK cables producing Multinational Company highlights the practical challenges faced by such designers, when designing bespoke systems technologies. In addition to understanding end market requirements, it is imperative to understand existing organisational practices and constraints. Evidence from this in‐depth innovation study points to the need to develop integrative theoretical accounts, which include insights from the innovation adoption process as well as the innovation design process.     

Internet computing as a disruptive information technology innovation: the role of strong order effects1

A cross‐sector survey study was conducted between 2004 and 2005 among 121 software firms that adopted internet computing for the presence of strong order effects, which explain how, why and in which order radical innovations in information system (IS) are adopted. The following strong order effects were detected: (1) the amount of base innovations positively and directly influenced the amount of service innovation and the amount of process innovation, while the amount of service innovation partially mediates the impact of base innovation on process innovation; (2) the radicalness of base innovations directly and positively influences the radicalness of service innovation, while the impact of the radicalness of the base innovation on the radicalness of process innovations is fully mediated by the radicalness of service innovation; (3) the predominant sequence of initial adoption of radical information technology innovations is first in base innovations, followed by service innovations and finally by process innovations. Our study helps to better understand how and why radical innovations are adopted in ensembles by software firms. In consequence, software organizations should orchestrate flexible innovation strategies that recognize that radical innovations are interconnected and heterogeneous.     

Identifying IT sustainability performance drivers: Instrument development and validation

IT firms vary in their performance to improve the environmental sustainability of their own operations and in their ability to provide products and solutions that enable and transform the environmental sustainability of other industries. In the parlance of the balanced scorecard, performance has two dimensions, that is, “drivers” and “outcomes”. The drivers, also known as leading performance indicators, refer to learning and innovation, processes, and customer value propositions. The outcomes, also known as lagging performance indicators, refer to financial results. This study has developed and validated an instrument to measure the environmentally sustainable IT performance (eSITP) drivers. We established the nomological network of the eSITP by drawing from several theoretical domains in the areas of innovation antecedents and values, balanced performance measurement and IT and eco-sustainability. Based on a survey of 133 IT firms, we developed and validated a four-dimension, 17 items eSITP instrument covering eco-learning, eco-process, eco-brand and eco-value governance. The instrument is validated by following a seven step rigorous process. The paper breaks new ground from both research and practice perspectives. The instrument makes it easier for other researchers who wish to explain the leading (drivers) and lagging (outcomes) of IT firms’ environmental sustainability and for IT business managers who want to improve their environmental sustainability performance.     

How Award‐Winning SMEs Manage the Barriers to Innovation

Much attention has been focused on increasing the so‐called ‘innovation quotient’ of national manufacturing economies. In particular, there has been widespread interest in revealing and examining those barriers that impede innovation, the suggestion being that the removal of such barriers constitutes a prerequisite for successful innovation. This study reports on the experiences of eight firms who had received a UK Design Council ‘millennium product’ award for ‘groundbreaking’ innovation. The implication of the award is that these firms should have overcome any barriers they faced and therefore act as exemplars of how to manage innovative new product development. However, the research shows that the firms were as likely to ignore barriers as they were to address them. Living with a barrier as an alternative to overcoming it is clearly an acceptable strategy for a number of these award winners. The study reports on how the firms managed the various barriers that they encountered.     

A knowledge-focused perspective on the diffusion and adoption of complex information technologies: the BPR example

This paper presents a knowledge‐focused perspective for the development of a model to explain the diffusion and adoption of complex integrating technologies. Business process re‐engineering (BPR) is used as the example to illustrate the model. However, while BPR is used to illustrate our argument, the model that is developed is relevant to understanding the innovation processes surrounding any complex IT‐based innovation. It is argued that the strength of this diffusion model is that it focuses not on the spread of particular technological artifacts (whether it is BPR or any other IT‐based innovation), but on the spread of the ideas and knowledge underpinning the technology. In particular, the model draws attention to the ways in which technology suppliers commodify knowledge and present ‘packaged’ solutions. This creates problems for potential users who need to unpack this knowledge and integrate it with existing organizational knowledge. The diffusion and adoption of innovations is thus seen as a process of integrating knowledge across disparate communities. Such knowledge integration, however, is difficult. This can help to explain the apparent contradiction between the limited success rate of BPR and its widespread diffusion among western firms.     

Disruptive information system innovation: the case of internet computing

Abstract. Information system (IS) innovation can be defined as a novel organizational application of digital computer and information communication technologies (ICT). This paper discusses how modalities of applying ICT technologies in their form and scope exhibit radical breaks, which are introduced herein as ‘disruptive IS innovations’. This notion of disruptive IS innovation is developed by drawing upon and extending Swanson's (1994) theory of IS innovation as well as the concept of radical innovation. Disruptive innovations strongly influence the future trajectory of the adoption and use of ICT in organizational contexts and make the trajectory deviate from its expected course. In doing so, these disruptive innovations distinctly define what an IS is and how it is deployed in order to address current and future organizational and managerial prerogatives. Such changes are triggered breakthroughs in the capability of ICT that lead to the revision and expansion of associated cognitive models (frames) of computing. Disruptive IS innovations are those that lead to changes in the application of ICT that are both pervasive and radical. The pervasive nature implies that innovative activity spans all innovation subsets of the quad‐core model of IS innovation introduced herein. Innovation types include: IS use and development processes; application architecture and capability; and base technologies. Radical in nature, disruptive is innovations depart in significant ways from existing alternatives and lead to deviation from expected use and diffusion trajectory. This paper demonstrates the importance of a concept of disruptive IS innovation by investigating how changes triggered by internet computing (Lyytinen et al., 1998) meet the conditions of a disruptive IS innovation defined herein. The analysis also affirms both the pervasive and radical nature of internet computing and explains how internet computing has fundamentally transformed the application portfolio, development practices and IS services over time. The analysis demonstrates that, with the concept of disruptive IS innovation, we can fruitfully analyse ‘long’ waves of ICT evolution – an issue that has largely been overlooked in the IS community. On a theoretical plane, the paper advocates the view that we need to look beyond linear, unidirectional, and atomistic concepts of the diffusion of IS innovations where innovative activity takes places in a linear fashion by oscillating between small technological innovations and small organizational innovations. In contrast, IS innovation can exhibit fundamental discontinuity; we need to theoretically grasp such disruptive moments. The recent influx of innovation, spurred by internet‐based technology, offers one such moment.