Chapter 3 THEORETICAL FRAMEWORK
This chapter sets the stage for the thesis to tackle the theoretical and methodological challenges raised in Chapter 1. It has a dual purpose: to develop a theoretical understanding of openness and its constituting dimensions based on the literature, and to build a research model with a multi-level approach for studying the relationship between openness and the practice of open source innovation in firms. It reviews the literature of innovation management, community-based innovation and knowledge sharing to build a theoretical framework around the research question. It then constructs an actionable research model and a list of sub-research questions to lead the proposed investigation.
THE THEORY OF MULTI-LEVEL RESEARCH
Following the footstep of Foss (2007), the thesis adapts the research theory founded by Coleman (1990) in his publication titled “Foundations of Social Theory.” Coleman states that the primary function of social science is to explain social phenomena. Accordingly, there are two approaches to explain system behaviour. The external analysis relies on sampling cases of system behaviour or collecting longitudinal data on the behaviour of the system as a whole. The internal analysis involves examination of processes internal to the system including its component parts, or units at a level below that of the system. He finds the latter approach is more appropriate for social science since most studies, like economics and sociology, naturally collect data at the level of units below the system level where the phenomena exist. It is a common practice to explain a system beginning at the level where data is collected, then deriving the system behaviour by aggregating the actions and orientations of those lower level units.
Moreover, if the understanding of system behaviour could lead to policy implications, then any interventions would be more useful if the implementation occurs at the lower level where the actions and orientations take place that determine the consequence of the system. Also, the internal analysis could yield a more stable and general explanation than the external analysis when the proximity of system level variables is low. Alternatively speaking, the system behaviour comes from the actions and orientations of its parts, and so understanding how the behaviours of the lower level being aggregated into the system behaviour provides a greater predictability than statistical explanation on the system level variables. For instance, the study of actions and orientations at an individual level could develop a richer theory of firm’s innovation behaviour than the firm level explanation (Gupta et al., 2007).
Finally, he explains that the external analysis often builds social theory from the notion of social norm, whereas the internal analysis bases their theoretical foundation with the individual as the starting point. The problem with theories driven by social norm is that individual behaviour would only be considered conforming or deviating from the norm, but not explaining the system behaviour (Granovetter, 1985).
THE RATIONALE OF THE LITERATURE REVIEW
The literature review begins with a brief coverage of some of the core definitions, typologies and concepts in innovation studies. The purpose is to contextualize the use of community-based innovation (Baldwin & von Hippel, 2011) and knowledge sharing (Foss et al., 2010) perspectives as the two main bodies of literature forming the theoretical framework in this thesis.
Firms have always taken the leading position in innovation at a societal level (Fagerberg, 2005). However, as the complexity of creating new products and services grows (Chesbrough, 2003); and the need to balance between incremental improvement and radical change gains more managerial attentions (Boer et al., 2006), it becomes increasingly difficult for firms to innovate just based on their own internal effort. It is important for firms to obtain external knowledge to complement their internal knowledge (Caloghirou et al., 2004; Granstrand et al., 1997). To tackle this issue, some researchers look closely to the network of interfirms (Powell, 1990; Powell et al., 1996) including strategic alliance (Grant & Baden-Fuller, 2004; Ireland et al., 2002; Lavie, 2006; Mowery et al., 1996), joint venture (Lam, 1997; Park, 2010) and collaborative R&D (Braun et al., 2012; Husted & Michailova, 2009, 2010; Johnson, 2002). For this stream of literature the means to obtain external knowledge is through commercial partnerships with other firms that they have a tie with (Lazega & Pattison, 1999). But the demand of external knowledge will often exceed the knowledge base of a firm’s existing relationships, and the challenge is to search more widely (Almirall & Casadesus-Masanell, 2010; Granovetter, 1973). Therefore there is a growing collection of scholarly studies under the banner of community-based innovation (Baldwin & von Hippel, 2011), where firms not only collaborate with whom they know but anyone including firms, communities and individuals that they have no prior relationship with (Botero et al., 2009; Pisano & Verganti, 2008).
Hence, the review continues with the studies of community-based innovation, which are divided into three popular research areas: user innovation (Baldwin et al., 2006; Franke & Piller, 2004; Franke et al., 2006; Hienerth, 2006; Luthje et al., 2005; Raasch et al., 2008; von Hippel, 2005), open innovation (Chesbrough, 2003, 2006; Dahlander & Gann, 2010; Elmquist et al., 2009; Gassmann & Enkel, 2004; Henkel, 2006; Torkkeli et al., 2009; van der Meer, 2007; West & Gallagher, 2006) and open source innovation (Dahlander & Magnusson, 2005; Fitzgerald, 2006; Goldman & Gabriel, 2005; Grand et al., 2004; Gruber & Henkel, 2006; Henkel, 2008; Krishnamurthy, 2005; Pénin, 2011). The studies of user innovation make us aware that not only producer innovates but in many cases users innovates too. These two types of innovator have different motivations behind their actions (Riggs & von Hippel, 1994). When the user innovators collaborate and create new things together based on the public knowledge they share among themselves (von Hippel & von Krogh, 2006), evidently this forms the basis of a community-based innovation (Baldwin & von Hippel, 2011; Lee & Cole, 2003). The literature of user innovation brings our attention to these innovating individuals. The studies of open innovation advocate a systematic approach (West & Gallagher, 2006) for firms to interact with any kind of outside innovators. Firms have to open up their boundaries and simultaneously use both internal and external knowledge among their innovation activities (van de Vrande et al., 2010). The literature of open innovation focuses on these innovating firms that are effectively members of a larger community of innovation (West & Lakhani, 2008).
Coincidentally, researchers from both user innovation and open innovation utilize open source as their foundational evidence to support their theoretical arguments. Hence the studies of open source innovation have many joints and overlaps with these two research areas when they three collectively describe the concept of community-based innovation. But as the review progresses, it shows some clear variations that differentiate open source innovation as a field of study. This thesis positions open source innovation as the study of a firm phenomenon through internal analysis of the actions and orientations of the individuals. The primary objective of reviewing the literature of open source innovation is to provide the necessary theoretical ground for the research question, and in particular to understand the concept of openness. Following the logic of Coleman (1990), open source innovation could be thought as combining the perspectives of open innovation and user innovation (Brown & Duguid, 1991): the openness at a firm level could be observed from the former, whereas the openness at an individual level could be observed from the latter.
The argument for the increased use of external knowledge also directs the attention to studies of knowledge sharing (Foss et al., 2010). The paradigmatic transition from traditional innovation concepts towards the principle of community-based innovation (Baldwin & von Hippel, 2011; Lee & Cole, 2003) involves a lot of changes in our thinking and practice of innovation. Knowledge sharing becomes increasingly important for innovating firms (Muller & Pénin, 2005; Spaeth et al., 2010; Spencer, 2003) even at first that seems paradoxical to their natural behaviour (Bogers, 2011). This body of literature covers issues related to how firms participate in knowledge sharing (Arikan, 2009; Foss et al., 2010), how knowledge characteristics could impact the transferability of knowledge (Grant, 1996), and the motivation at both firm and individual levels to share their knowledge with outsiders (Bock et al., 2005; Cabrera et al., 2006; Sáenz et al., 2009).
FUNDAMENTALS OF INNOVATION
This section covers the fundamentals among innovation studies to outline the core conditions for innovation; but the brief account is by no mean comprehensive comparing to the magnitude of knowledge generated in this space over the last few decades. Starting with how innovation is observed and defined among academia and practitioners, it describes the common characteristics of innovation including the dimensions, processes, outcomes, and models; where these vocabularies provide the taxonomical mean to conceptualize innovation. It also focuses on innovating firms and individuals, and provides the links to later sections on community-based innovation and knowledge sharing.
DEFINITIONS AND CHARACTERISTICS
The one thing that differentiates human is our ability and affinity to invent and innovate to solve problems. The distinction between the two is often subtle: an inventor creates something new; while an innovator brings something new to the market that would be paid for (Huff et al., 2013). The two could be closely linked or widely separated by time (Rogers, 2003). The study of innovation becomes popular as a multidisciplinary research topic since the mid-twentieth century (Fagerberg, 2005) when production is no longer a real issue to our society (Galbraith, 1998).
Conceptually, innovation is a catalyst for economic and social change (Fagerberg, 2005) through the creation and adoption of newness (Knight, 1967). Economists describe it as a force of creative destruction that directs economic development forward through entrepreneurial activities (Carlin et al., 2001; Metcalfe, 1998; Schumpeter, 1942). Under the assumption of competitive market, innovation brings us technological and knowledge advancement to fuel the growth of firms (Penrose, 1959) and the entire economy (Rosenberg, 2004; Solow, 1994). Successful innovation could disrupt markets and transform lives; but early triumph might also become the root of future failure (Christensen, 1997). Therefore, innovation is an effective evolutionary mechanism (Nelson & Winter, 1982) to redistribute resources to their best utilization (Arrow, 1962b) while the old and new knowledge are constantly competing within and across generations. The entrepreneurial function in innovation is to eliminate inertia and resistance towards new ways (Tushman & O’Reilly, 1996).
Practically, innovation is the development and diffusion of novel artefacts and knowledge to the market (Rogers, 2003) through new combination of existing or new resources (Schumpeter, 1942). They are purposeful actions carried out by the innovators. According to the guidelines from the Oslo Manual published by the OECD (2005):
“Innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.”
Judging from the tremendous amount of literature studying innovation management in organization, it is universally accepted that firm takes a leading role in innovation (Fagerberg, 2005). Therefore this definition describes mostly what firm-based innovation is through different dimensions. While each single firm innovates for the purpose of competition, holistically their collective actions allow the market to grow and the society to evolve.
There are different types of innovation including product innovation (Trajtenberg, 1990), process innovation (Davenport, 1993) and business innovation (Evans, 2003). Between the first two types, product innovation delivers improved or new goods or services, and process innovation advances the efficiency of production or delivery of them. The concept of innovation patterns (Abernathy & Utterback, 1978) explain that industrial competition often forces firms to race against rivals with product innovation. But after the market is saturated and stabilized, firms tend to focus on process and business innovations to cut their costs down. This continues until a new market is emerged with a new product idea, and then the cycle repeats. In other words, there seems to be some clustering in the supposedly chaotic world of creation (Schumpeter, 1942), when the innovator, the innovation and the innovating environment are shaping among each other interdependently (Daft & Weick, 1984). Hence the atmosphere or the culture in the innovating environment among the innovators is changing back and forth from time to time (Gebert & Boerner, 1999; Herzog & Leker, 2010).
Chapter 1 Introduction
1.1 Community-based Innovation
1.2 Open Source Innovation and Knowledge Sharing
Chapter 2 Open Source Software Firm
2.3 The Case Study
2.4 Discussion and Conclusion
Chapter 3 Theoretical Framework
3.2 Fundamentals of Innovation
3.3 Community-based Innovation
3.4 Knowledge Sharing
3.5 THE RESEARCH MODEL FOR STUDYING OPENNESS
3.6 Overview of the multi studies
Chapter 4 Dual Allegiance & Knowledge Sharing in Open Source Software Firms
4.2 Theoretical Background
4.4 Case Presentations
4.5 Analysis of Dual Allegiance in Open Source Software Firms
4.6 Discussion and Implications
Chapter 5 Conceptualizing Openness in Innovation
5.2 Theoretical Background
5.3 Conceptual Model
5.4 Discussion and Conclusion
Chapter 6 Absorptive and Desorptive Capacity
6.1 Introduction and Overview
6.3 Desorptive Capacity: Definition, Components and Sources
6.4 The Interaction of AC and DC in Knowledge Transfer
Chapter 7 Conclusion
7.1 The Purpose of the Thesis
7.2 Open Source Software Firm
7.3 Theoretical Framework
7.4 Conclusions from the Research Papers
7.6 Future Research
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