Page - (000039) - in Knowledge and Networks

29 more recently in continental Europe, innovation nonetheless largely remained an in-house activity. Around the turn of the twenty-fi rst century, fi rms began external- izing innovation , in part as deepening vertical disintegration (associated with fl exi- ble accumulation) gradually produced unanticipated benefi ts for large fi rms, namely the possibility of learning from suppliers and making use of innovations they devel- oped—a trajectory facilitated by the increasing ubiquity of personal computer hard- ware and software (Gawer & Cusumano, 2002 , p. 5). Further, as availability of venture capital from venture capital fi rms declined over the last decade, many large fi rms internalized venture capital programs (corporate venture capital, CVC) to invest in small to medium-sized fi rms (SMEs) to develop innovations pertinent to their (the large fi rms’) competencies (Van de Vrande, Vanhaverbeke, & Duysters, 2011 ). 5 Push factors for open innovation included the increasing costs of technology development, which have prompted fi rms across the size spectrum to develop strate- gies to spread expenses to reach beyond their boundaries for problem solving and intellectual property. Further, many large fi rms lack suffi cient internal expertise, in part as a vestige of lean management in the 1980s, when fi rms laid off many person- nel, including researchers; accordingly, fi rms increasingly access expertise exter- nally (Chesbrough, 2006a , p. 190). The goal set by Proctor and Gamble’s newly appointed chief economic offi cer in 2000 is telling: to acquire 50 % of the compa- ny’s innovations from external sources (Huston & Sakkab, 2006 ). Beyond the development of innovative capabilities among suppliers in the context of relations between large and small fi rms, open innovation also entails interfi rm relations among large fi rms that interlink business models based on new innovations, notably in industries that produce multi- component products (Chesbrough, 2006a , 2006b ; Cooke, De Laurentis, MacNeill, & Collinge, 2010 ; Gawer, 2009 ; Gawer & Cusumano, 2002 ). The main imperative in open innovation is to continually move to new innovative activity in concert with other fi rms produc- ing related products and services. 6 The management of innovation across the spectrum of fi rms practicing open innovation has occurred in the context of the development of a relatively new demand environment: customized demand , which requires combinations of exper- tise that cannot be anticipated (Goldman, Nagel, & Preiss, 1995 ). Although, in prin- ciple, fi rms under such circumstances can continually add to their repertoire of skill through mergers, acquisitions, and continual hiring of experts, the high costs of 5 For a survey in 2013 of the top 50 Forbes Global 2000 fi rms with CVC programs, see Battistini, Hacklin, and Baschera ( 2013 ). 6 Intel’s activity in the 1990s serves as an instructive example of interlinked activity among fi rms and novel strategies to coordinate innovativeness (see discussion in Gawer & Cusumano, 2002 ). By the late 1980s the pace of Intel’s innovation in its core product, computer microprocessors, exceeded the pace of innovation in IBM’s personal computer (PC) architecture. In response, Intel staffed a new lab with software engineers to fi nd new uses for its hardware (microprocessors), in turn to stimulate demand for a new generation of personal computers that require Intel’s core prod- uct. Its strategy in the next decade and into the twenty-fi rst century has been “to establish the technologies, standards and products necessary to grow demand for the extended PC through the creation of new computing experiences” (cited in Gawer & Cusumano, 2002 , p. 25). 2 Reversing the Instrumentality of the Social for the Economic