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Shaking hands with knives behind their backs?

Open innovation amongst industry laggards in the auto industry

T. J. Hannigan, Temple University

Marcelo Cano-Kollmann, Ohio University

Ram Mudambi*, Temple University

Snehal Awate, Indian School of Business

Abstract

In oligopolistic industries, periods of technological discontinuity are characterized by two key elements: technological uncertainty and heterogeneity in the performance of the constituent firms in exploratory innovation. Technological uncertainty presents incumbent firms with a set of real options, and the optimal strategy is to take a position in each one corresponding to the probability of its becoming the dominant one. Heterogeneity in exploratory performance means that in each new technology the oligopolists are divided into leaders and laggards. Leaders are incented to go it alone to prevent knowledge leakage while laggards are driven to collaborate with one another in order to avoid being frozen out of a potentially dominant technology. In this paper, we study the case of hybrid drivetrains in the auto industry. Toyota’s early dominance of this technology was followed by the Global Hybrid Alliance amongst GM, Chrysler, Daimler-Benz and BMW. We argue that the diversity of partner capabilities and their product market rivalry ensured that the alliance was highly unstable so that its stated goal of developing a successful hybrid drivetrain was never a realistic objective. However, all partners learned from the alliance. Some directly applied knowledge generated, while others learned that alternative technological paths were better suited to their capabilities. Such negative learning is an important outcome of such “close but adversarial” open innovation programs.

Introduction

Oligopolistically competitive industries comprise a significant proportion of global

business activity. Innovation is a key element of such competition, especially as dominant

technologies mature. Such periods are characterized by a transition from the exploitation of

extant knowledge to the exploration for new knowledge1. Firms with the competencies to

* Address for correspondence: Ram Mudambi, Department of Strategic Management, Fox School of Business, Alter Hall, Temple University, Philadelphia PA 19122, USA Email: ram.mudambi@temple.edu

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appropriately manage this transition have been shown to exhibit superior innovation and

financial performance2.

Such transition periods are characterized by two key elements that will form the building

blocks of this paper: technological uncertainty and heterogeneity in the performance of the

oligopolists in exploratory innovation. Technological uncertainty presents incumbent firms with

a set of real options, and the optimal strategy is to take a position in each corresponding to the

probability of its becoming the dominant one. Heterogeneity in exploratory performance means

that in each new technology the oligopolists are divided into leaders and laggards.

Integrating the aforementioned dynamics gives us a fundamental understanding of the

nature of innovation strategy in oligopolistic industries. Analyzing these periods of technological

transition is important because it is precisely in these periods that incumbent firms face the

greatest risks. Developing the right approach to implementing a real options strategy can be the

key to successfully transition from one technological regime to the next.

Performance heterogeneity implies that it is unlikely to be cost effective for the firm to

“go it alone” in a technology space where it is a laggard. Therefore we predict an asymmetric

outcome with leaders and laggards following different innovation strategies. Leaders are likely to

go it alone and rely more on internal capabilities with a framework of closed innovation. In

contrast, laggards are likely to form a coalition – a form of open innovation – as they strive to

catch up with the leaders. Such open innovation amongst laggards becomes more likely the

greater the cost involved with developing and commercializing each technology option. In

virtually all oligopolistic industries from aircraft and pharmaceuticals to automobiles, this cost

has been escalating over the last few decades.

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The cooperative open innovation coalition often occurs at the upstream end of the value

chain, with the constituent firms continuing to compete vigorously in downstream markets.

When companies involved in collaboration are also competitors, co-opetition ensues3. We argue

that open innovation of this form is fraught with difficulties. A co-opetitive scenario may lead to

“learning races”4, in which firms that form an alliance for learning, end up learning at different

speeds. As in all oligopolistic cooperative games, these collaborations between firms with

heterogeneous resources and levels of absorptive capacity are likely to be be unstable, with

"winners" and "losers". The end result is a "close-but-adversarial" set-up in which formal

commitment is accompanied by non-cooperative behaviour. Thus, the nature of competition

along the entire value chain enters into the pricing of the real option.

Technological leadership is typically composed of a combination of innovative

commercialization capabilities5. However, the path to a dominant design is by no means linear,

and firms compete vigorously for the technological high ground. The question we address here is

how firms organize to compete in the face of an emerging dominant design – and the timing of

their response.

The onset of significant innovation brings about a discontinuity in technology markets,

leading to an era of ferment. During this period of great uncertainty, success among early

adopters in the nascent, first generation technology does not always translate into continuing

success in the mainstream market. The best technologies may not always prevail (e.g., Betamax

vs. VHS), and firms with seemingly insurmountable advantages may fail to “cross the chasm”

that separates technology enthusiasts and early adopters from the majority of consumers,

succumbing along the way6. This provides compelling incentives for firms to utilize real options,

in order to minimize their response time along any technological trajectory.

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As the period of ferment progresses, the field of viable technologies thins, and

competitive positions harden. For those on the outside, technological uncertainty means that a

pure imitation strategy is not optimal. However, the laggards cannot afford to ignore the

technology that has achieved early success. In the automotive sector, these dynamics are

especially acute. The explorative R&D that is germane to the early formation of technologies is

enormously expensive7 and no firm, no matter how big or cash-rich, can afford to undertake

closed innovation strategy encompassing every one. Thus leaves a fundamental tension: laggard

firms can’t afford to attempt catch up along every technological avenue, but as industries evolve

and the pace of technological change increases, they cannot afford to be left behind either.

As Ili et al. have noted8, the automotive sector, which has traditionally internalized much

of its core R&D, stands to benefit from a greater open innovation stance. The pressing questions

that follow this suggestion are: under which conditions might firms be more likely to pursue

open innovation, and what competitive dynamics that emerge from this? In a period of

technological transition, the uncertainty of future dominant design, the very high costs of

exploration and the complexity of inter-linkages among factors of production are key drivers that

cause laggard firms to pursue a unique type of open innovation: horizontal coalitions.

Open Innovation: Tracing the Roots of External Knowledge

Open innovation breaks apart the vertically integrated model of R&D that was so central

to the success of large firms in much of the late 19th and 20th centuries. Large, profitable firms

invest in in-house sizeable R&D projects in order to remain competitive9, thus building on

foundations laid by filling in public research10. The inclusion of external knowledge sources as

fully integrated components of the firm’s creative endeavor represents a fundamental shift in the

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practice and study of innovation11. The basic notion that the firms that discover technology may

not have advantages – or capabilities – in the commercialization process creates powerful

incentives for collaboration with users, buyers, suppliers, competitors, universities and other

entities outside the firm12.

By partnering with a diverse set of external actors, firms increase the likelihood of

gaining access to valuable new knowledge and complementary assets, boosting their innovative

performance13. In the case of a horizontal open innovation coalition, partners’ interactions are

driven by both technological and strategic factors. Their contributions may vary based on the

level of complementarity and transferability of their technologies, but may also be motived by

opportunism14. Horizontal partners are more likely to misuse collaborative relationships to access

and exploit their rivals’ knowledge for their own advantage. The likelihood of opportunism

increases with the similarity between firms’ structures, processes, cultures, and knowledge

bases15. In other words, the process of knowledge search and transfer from outside of the firm to

final integration and commercialization is impacted by both technological realities and

competitive dynamics.

Looking for new ideas outside of the firm involves fortifying the core knowledge base in

one of two ways: (a) further specialization (deepening) or (b) integrating related knowledge

(widening)16. It is important to recognize that these are not strategic alternatives. Indeed, the

advance of science involves a delicate balance between the two17. There is enormous path

dependence in the search for new ideas: the routines of the firm can be very helpful in the

exploitation of its existing knowledge, but often constrain the exploration of new areas18.

Therefore catalyzing exploration often requires going beyond the boundaries of the firm and

view the entire external environment as a rich source of new ideas19.

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The open innovation paradigm recognizes collaboration amongst horizontal

configurations of competing firms as one important structural form20. However, there is a paucity

of research examining the precise nature and cooperative dynamics of such open innovation

coalitions. Even industries that display seemingly unremarkable competitive environments can

witness the emergence of very unlikely sets of coalition partners. While collaborating with

competitors inevitably carries with it the fear of opportunism and knowledge leakage, these

concerns can be outweighed by the fear of simply falling too far behind in what could be the

industry shaping technology space. The laggard firms in such technologies face three

fundamental choices: (a) attempt catch up alone; (b) remain behind; or (c) band together and

open up. Strategically, options (a) and (b) are fraught with firm-extinguishing risk. Paraphrasing

Arthur Conan Doyle’s famous character Sherlock Holmes, once you eliminate the impossible

what remains, no matter how unpalatable must be the preferred option.

Open Innovation Amongst Lagging Rivals: A Path to Real Options

What happens when a group of lagging rival firms has little choice but to band together

and open their R&D practices? Two crucial factors may shed light on the underlying incentives

that permeate horizontal open innovation coalitions. First, while top management may place

great importance on firm-wide technological prowess, in practice knowledge transfer often

occurs at the R&D project level21. Open cooperation among rivals is likely to be focused on very

specific project level R&D outcomes. In other words, the collaborators are very mindful for their

product market rivalry, so that openness is contained within a well-defined technological space.

Second, the laggard firms in an emerging technology are likely to differ in terms of their broader

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resource bases as well as their objectives. Thus, the members of the coalition expect to reap

different rewards from the open innovation alliance.

The real options approach is the appropriate lens to analyze situations of technological

uncertainty with high commitment costs22. However, in mature oligopolistic industries, each

explorative technology path is prohibitively expensive, so that laggard firms are forced to

collaborate in order to ensure that they cover all feasible options. Hence the real options

approach in this context takes on a unique form

In a traditional real options model of innovation, a single firm that takes beachhead

positions in range of nascent technologies. However, in the framework we have outlined, a group

of laggard firms takes a position in a single technology in which a leader has already established

a firmly defensible position. The common goal of overcoming laggard status serves as a unifying

framework under which all participating firms invest in what may be called a ‘catch up real

option’ which is a fundamentally open process. The convergence of these three factors suggests

that when a laggard position drives open innovation, the prism though which collaborative action

takes place is one of real options.

Real options theory suggests that firms can make R&D investments in uncertain

environments in sequential manner, rather than committing to a full program23. In other words,

firms can place bets on explorative R&D in such a manner that the substantial portion of the

investment is postponed until much of the technological uncertainty dissolves. Investments are

motivated strongly by the need to keep pace with the innovation trajectory of competitors: firms

face the prospects of being locked out at key junctures of technological emergence24. The ability

to make investment decisions in key stages of R&D programs allows firms to pursue a broader

explorative stance. However, the structured nature of the investments can sometimes inhibit

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creative uses of research findings25, especially when the scale of the project is such that going it

alone is infeasible and the framework must be extended to encapsulate a group of rivals.

Real Options and Open Innovation: Bound by Close-But-Adversarial Relationships

The modern reality of global business is that firms maintain a series of close and

interwoven relationships as value chains are dispersed to efficient locations around the world26.

In many such arrangements take on a “close-but-adversarial” dynamic: firms possess formal

mechanisms for cooperation, but short term profit incentives bring about opportunistic behavior.

In other words, collaborators arrive knowing full well that their activities outside of the project at

hand are subject to intense rivalry.

We argue that an appropriate framework for analyzing a horizontal open innovation

coalition is the game-theoretic close-but-adversarial model as described by Mudambi and

Helper27. Within this model, partners in a horizontal open innovation coalition enter into formal

cooperative agreements whilst retaining their focus on their individual payoffs. In this

framework, formal collaboration is likely to be accompanied by opportunistic behavior. To the

extent that all firms may sign up for an alliance structure, different partners may gain from

different outcomes. Thus, open innovation policies may have heterogeneous incentives as

knowledge is developed and integrated. Thus, the real options framework emerges as participants

limit their investments in an adversarial-but-necessary open innovation alliance.

Empirical Setting: The Global Automotive Industry and Hybrid Electric Drivetrains:

The auto industry has long reached a mature stage, which is characterized by a large

market with slow growth rates, at least in developed economies. In the U.S., the car business as a

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whole (including manufacturers, suppliers and dealers) employs at least seven million people and

accounts for more than 3% of the GDP28. In such mature industries, R&D is typically

incremental and process innovation tends to be at least as important as product innovation. In the

auto industry in particular, barriers to entry are very high, due to economies of scale and the

extraordinary cost to build manufacturing plants while developing and launching new platforms

and engines. In terms of technology, the industry had been relatively stable from the 1970s

through the the latter part of the following decade. Beginning in the 1990s, growing concerns

about the environmental impact of the internal combustion engine pushed governments to pass

increasingly strict mandates regarding mileage and emissions. While tighter fuel efficiency

standards motivated the search for new types of powertrain technologies and alternative fuels, it

also opened a period of uncertainty. At this point, many technological options were being

explored at the same time and there was no clarity as to which one would eventually dominate.

Hybrids were just one of several potential solutions being pursued.

Although the electric motor vehicle predated the internal combustion engine, it never

became the dominant technology that drove the automotive industry for the bulk of the 20th

century. A renaissance in alternative fuel technologies began in the early 1990s, and centered

around hybrid gasoline-electric engines. In a very general way, hybrid electric vehicles (or

HEVs) rely on a dual powertrain, driven by the marriage an internal combustion engine (running

on either gasoline or diesel) with an electric motor. The energy is stored both in the fuel of the

internal combustion engine and a battery set. HEVs can drive just with the electric engine but

when the batteries run low, the internal combustion engine starts. The internal combustion

engine is not used to move the vehicle, but rather to turn the alternator to power up the batteries.

Additionally, HEVs generally benefit from a more integral use of the energy generated by the

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car, through mechanisms such as "regenerative braking". Instead of just applying brake pads,

HEVs can run their engines in reverse, allowing the wheels to power the engine to turn the

alternator and produce more electricity, which slows the car while charging the batteries. This

energy is wasted in a regular vehicle, which simply turns the motion of the wheels into heat. The

end result is a vehicle that still uses fossil fuels but obtains significantly increased fuel efficiency.

During the 1990s, four major automakers, Toyota, General Motors (GM), Honda and

Ford took the lead in the development of hybrid technologies (Figure 1). By 1995, GM was

leading knowledge generation in the industry, with a stock of 23 patents in hybrid vehicles (vs.

17 for Toyota, 16 for Ford and 8 for Honda). By 2000 however, Honda and Toyota had distanced

themselves from the American automakers: Honda had accumulated 170 patents in the areas

hybrid drivetrain technology and Toyota had amassed 166. Meanwhile, Ford had 85 and GM 56.

Despite the early investments in hybrid electric R&D, a crucial distinction remained.

Knowledge generation does not equate innovation as a whole. While the innovation process

starts with ideas, abstract concepts or discoveries derived from basic research, this is only the

first step of the process. The next stage – invention - is the act of transforming those discoveries

into an actual new product or process, or a modification or recombination or an existing one. To

transition from invention to innovation (i.e. commercialization), companies need to overcome a

number of obstacles. Some obstacles are technical (testing that the technology is free of major

problems, ensuring it can be manufactured at a viable cost), but others are commercial, like

finding a suitable market and making sure the product satisfies the needs of the majority of

consumers, beyond the early adopters. In sum, the path from discovery to commercialization is

fraught with difficulties – and is usually expensive, demanding significant resources.

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As Figures 3 and 4 show, being a leader in technology is a necessary but not sufficient

condition to be a leader in the market. The volume of knowledge generation does not necessarily

correlate with sales. Toyota took the market lead early on, with the launch of the successful

Prius, of which 5,000 units were sold in 2000; only five years later, Toyota sales of all HEVs had

multiplied almost 30 times, to more than 146,000 units per year in the U.S. alone. Honda’s

Insight, which had been launched almost simultaneously with the Prius, never took off in the

market, but Honda was able to achieve moderate success with the Hybrid Civic, which

positioned the brand in a clear but distant second position in the American market, with 43,000

HEVs sold in 2005. Ford was in third place with less than 20,000 units sold in 2005. On the other

hand, GM, which had accumulated a significant volume of hybrid patents, had completely failed

to commercialize that knowledge. GM would only sell its first HEVs in 2007, and then with only

modest success. The resulting market structure was that of a technology-driven oligopoly, with

Japanese firms in a strong insider position.

Therefore, by the early 2000s, the development of hybrid vehicles was split into two clear

groups of companies. The first was the group of dominant players that had an early start in the

technology and in addition were able to successfully commercialize it to introduce hybrids to the

American market: Toyota, Honda and Ford. The second group can be characterized as laggards

which comprised two types of companies. The first type was composed of firms that had

developed technology, but failed to launch successful hybrid or electric vehicles. Examples of

this were GM, with its unsuccessful EV1 in 1996, and Chrysler, with the Dodge Hybrid minivan

in 1992. The second type of outsiders were those that had committed to other technologies. For

instance, BMW had focused its efforts on diesel and hydrogen engines instead.

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For the group of laggard firms, the compelling urge to catch up with the insiders

competed with the need to explore other technological options. As a noted industry analyst put it,

"BMW can't afford not to look at other choices to learn which is the most economic and cost-

efficient.”29 It is common that in times of technological change, several technological paths are

explored, only to be abandoned once a clear dominant technology emerges. In the automotive

industry however, path dependence and switching costs make hopping between technologies not

only time consuming but also very costly. The magnitude of the strategic commitment needed to

explore each and every technology, both in terms of financial and human resources, is simply too

expensive for any companies to take unilateral action. Therefore, alliances may bring about a

‘real options’ approach, in which firms pool their resources and share the financial burden and

investment risk, in order to access the technology when and if needed.

When the BMW Group, DaimlerChrysler AG (and later, Daimler AG and Chrysler

Group) and General Motors Corporation signed a $1 billion deal in September 2005, to pool their

resources for the development of a two-mode hybrid drive system, the three companies came

from different backgrounds and brought different things to the table. GM was clearly the most

knowledgeable partner, but what GM had in knowledge, it lacked in resources. With $12 billion

in accumulated losses and much larger liabilities on its balance sheet, GM was in no condition to

pursue this venture alone. On the other hand, the BMW Group, had no observable knowledge on

hybrid technology, but held nearly 5 billion euros in cash and in 2004 had come off of a very

successful year, with more than one million vehicles sold and more than 2 billion euros of net

profit30. Similarly, DaimlerChrysler held $9 billion in cash and had accumulated net profits of

$19 billion over the previous four years31. Conversely, the leading firms enjoyed a much more

solid position, with Toyota having been very profitable for a long period of time (Figure 5).

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The formation of the alliance can be characterized as a case of open innovation, which is

defined as a “purposive exchange of inflows and outflows of knowledge between a firm and

external parties, in order to accelerate internal innovation”32. As stated in the intentions of the

alliance partners, the goal was to share knowledge and resources in order to benefit from the

technologies created. This group of laggard firms were keenly aware of the need to catch up to

the technological frontier, and knew that an open innovation stance would be necessary.

According to Peter Savagian, Director at General Motors, “competition between the companies

was less important than the challenge of getting a new product to market quickly”33 and for Prof.

Burkhard Göschel, Board Member at Bayerische Motoren Werke AG (BMW), “the creation of a

shared technology platform for hybrid drives would allow for the alliance partners to more

quickly integrate the best technologies on the market and would therefore exploit and strengthen

the innovative potential of all participating companies”34. Forecaster and industry analyst Phil

Gott of Global Insight, called the hybrid alliance an “excellent strategy that lets three rivals’ pool

resources and tailor the system to their own vehicles”35.

By late 2007, GM’s two-mode hybrid vehicles had been launched. Automobile Magazine

lauded it as ‘Technology of the Year’. GM launched the two mode hybrid on its Chevy Tahoe,

Yukon and Cadillac Escalade models earning much praise for its systems and for achieving fuel

economy of about 25%. Chrysler followed a year later by bringing along two full-size SUV

hybrids the Dodge Durango and Aspen with similar hybrid systems. BMW was the last to join

the fray with its 2010 BMW ActiveHybrid X6. All three partners, GM, DaimlerChrysler and

BMW, eventually launched at least one product using the two mode technology.

While extensive sharing of components and production facilities and the collaborative

relationship with suppliers would enable all alliance partners to achieve significant economies of

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scale and associated cost benefits, the actual resources contributed by each partner to the alliance

were highly uneven. Nearly eighty percent of the inventors in the patent pool, including every

one of the top ten (by number of patents), worked for General Motors, and 97% of them were

based in Michigan or neighboring states (Ohio and Indiana). BMW and DaimlerChrysler, on the

other hand, provided material resources but little human capital to the endeavor. While it was

touted as an ‘alliance of equals’, the allies’ contributions were complementary rather than

agglomerative.

The nearly 500 engineers working in the Global Hybrid Development Center in Troy,

Michigan did not try to reverse engineer Toyota’s hybrid technology. They worked to develop

their own modular system along with the individual components - electric motors, high-

performance electronics, wiring, safety systems, energy management, and hybrid system control

units. The overall system integration and project management were also within the Center’s

responsibilities. Over the period it was in force, the Global Hybrid Alliance was granted 115

patents by the USPTO. On analyzing the knowledge base by referring to the backward citations

for these 115 patents granted to the Cooperation (Figure 7), a significant percentage was sourced

from General Motors’ own patent database (22%). The second highest set of backward citations

were sourced from within the patents developed by the Global Hybrid Alliance’s own database

(13%). The amount of knowledge sourced from close competitors was rather small. Ford (7%),

Toyota (6%), Honda (3%) and Nissan (3%) were the external (to the Alliance) knowledge

sources utilized in developing the two-mode hybrid technology.

The Global Hybrid Alliance was ultimately dissolved in 2011. DaimlerChrysler indicated

that one of the reasons it was pulling out was the excessive investment relative to expected

vehicle production volume. Daimler was to focus on modular hybrid building blocks with

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scalable lithium-ion batteries, based on technology developed in a separate collaboration with

BMW for the S-class and 7-Series sedans. No new products have emerged from the knowledge

created within the coalition. It appears that GM directly exercised the catch-up real option to

develop the Chevrolet Volt plug-in hybrid, whereas Daimler and BMW learned from the

experience that an alternative technological path was preferable. Hence we observe divergence

not only in terms of the partners’ contributions (BMW and Daimler only contributed money, GM

contributed knowledge), but also in terms of their options calculus – some coalition partners

directly used the knowledge generated within the alliance, while others did not. Sales data

through 2012 seems to show that the Global Hybrid Alliance did not dramatically alter the shape

of the hybrid sector of the auto industry.

The hybrid engine technology space offers a particularly appropriate context in which to

test our theory. During periods of technological transition, numerous competing technologies are

being developed and the future industry standard is not yet clear. Horizontal open innovation

coalitions are a viable way for laggard companies to share efforts in new technology

development, when the cost of conducting the development in-house is prohibitively high and

the ability to source the technology in the market is severely limited due to the high rivalry

typical of oligopolistic industries. This form of open innovation is operationalized through what

we have termed “catch-up real options”. These allow laggards with heterogeneous resources and

capabilities to collaborate within the coalition and to exit along a range of different trajectories.

These range from directly commercializing the knowledge created within the coalition to

learning that other technology paths are better suited to their capabilities. Finally, such “close but

adversarial” collaboration inevitably incorporates a fear of opportunism that places restrictions

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on the process of knowledge sharing. Hence, it is more focused on limiting the size of

technology gap between the laggards and the leaders rather than on catching up per se.

Discussion

Open innovation among rival firms is an under-researched topic. It has emerged in a

number of knowledge-intensive oligopolistic industries ranging from pharmaceuticals to

automobiles, and the data indicate that such horizontal R&D alliances are growing in both

number and scale36. We argue that one of key reasons underlying this surge is the increasing

pace of technological advance and the concomitant shortening of technology life cycles. This

implies that technological discontinuities with the associated uncertainties regarding future

industry trajectory become more common.

In each potential new technology, the firms in the industry become divided into leaders

and laggards. The latter are forced into horizontal open innovation coalitions by (a) the scale of

investments required; and (b) the impossibility of ignoring potentially promising technologies.

This form of horizontal open innovation coalitions enable laggards to pursue what we call a

“catch-up real option” strategy to cover all potential future technologies. This particular form of

real option has unique characteristics. All the laggard firms have a common interest in the focal

technology, but they bring different resources – and therefore different incentives – to the

coalition. Some bring cash, while others bring knowledge.

The “close but adversarial” nature of these open innovation coalitions makes assessing

outcomes problematic – some members may exercise the option by directly commercializing the

knowledge produced, while others may use it more indirectly. In other words, those that do not

exercise the option directly have also likely gained from the coalition in terms of the complex

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outcomes of this particular form of real option. However, given the diverse objectives of the

coalition members, the stated goal of technology catch-up is often never achieved.

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Appendix

19

20

21

22

23

Figure 6: Global Hybrid Alliance: Distribution of Inventor-Firms and Inventor-Locations

0%

20%

40%

60%

80%

GM BMW DaimlerChrysler Unidentified

I N V E N T O R L O C AT I O N S :

M I C H I G A N : 8 7 % O H I O : 3 %

C A L I F O R N I A : 4 % I N D I A N A : 6 %

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Figure 7: Global Hybrid Alliance: Knowledge Sources

46%

3%3% 6%7%

13%

22%

General Motors GHC Alliance Ford Motor Company ToyotaHonda Nissan Others

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Notes

1 V. Gilsing and B. Nooteboom, "Exploration and exploitation in innovation systems: The case of pharmaceutical biotechnology." Research Policy 35/1 (2006): 1-23.

2 R. Mudambi, T. Swift, and T.J. Hannigan, “Sometimes cutting R&D spending can yield more innovation”, Harvard Business Review (Digital), January 8, 2015, <https://hbr.org/2015/01/sometimes-cutting-rd-spending-can-yield-more-innovation>

3 D.R. Gnyawali and B.R. Park. "Co-opetition between giants: Collaboration with competitors for technological innovation." Research Policy 40/5 (2011): 650-663.

4 T. Khanna, R. Gulati, and N. Nohria. "The dynamics of learning alliances: Competition, cooperation, and relative scope." Strategic Management Journal 19/3 (1998): 193-210.

5 D.J. Teece, "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy." Research Policy 15/6 (1986): 285-305.

6 G.A. Moore, Crossing the chasm: Marketing and selling high-tech Goods to mainstream customers (New York: Harper Business 1991).

7 K.B. Clark and T. Fujimoto. Product development performance: Strategy, organization, and management in the world auto industry. (Boston: Harvard Business Press 1991).

8 S. Ili, A. Albers, and S. Miller. "Open innovation in the automotive industry", R&D Management 40/3 (2010): 246-255.

9 J. Schumpeter, Capitalism, socialism and democracy (2nd edn) (New York: Harper and Row 1942).

10 K. Arrow, “Economic welfare and the allocation of resources for invention” In The Rate and Direction of Inventive Activity: Economic and Social Factors. (Princeton: NBER and Princeton University Press, 1962, 609 – 625).

11 H.W. Chesbrough, Open innovation: The new imperative for creating and profiting from technology. (Boston: Harvard Business Press 2006).

12 J. West and M. Bogers. "Leveraging external sources of innovation: a review of research on open innovation." Journal of Product Innovation Management 31/4 (2014): 814-831.

13 L. Dahlander and D.M. Gann. "How open is innovation?." Research Policy 39/6 (2010): 699-709.

14 J.H. Dyer and H. Singh. "The relational view: Cooperative strategy and sources of interorganizational competitive advantage." Academy of Management Review 23/4 (1998): 660-679.

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15 J.H. Dyer, J. H., and W. G. Ouchi. "9 Japanese-style Partnerships: giving companies a competitive edge." Japanese Business, 3.1 (1998): 200.

16 K. Laursen and A. Salter. "Open for innovation: the role of openness in explaining innovation performance among UK manufacturing firms." Strategic Management Journal 27/2 (2006): 131-150.

17 R. Mudambi, T.J. Hannigan, and W. Kline. "Advancing science on the knife's edge: integration and specialization in management Ph. D. programs", Academy of Management Perspectives 26/3 (2012): 83-105.

18 R.R. Nelson and S.G. Winter. An evolutionary theory of economic change. (Boston: Harvard University Press 1982).

19 J. West and M. Bogers. "Leveraging external sources of innovation: a review of research on open innovation." Journal of Product Innovation Management 31/4 (2014): 814-831.

20 H.W. Chesbrough, Open innovation: The new imperative for creating and profiting from technology. (Boston: Harvard Business Press 2006).

21 U. Andersson, P.J. Buckley, and H. Dellestrand. "In the Right Place at the Right Time!: The Influence of Knowledge Governance Tools on Knowledge Transfer and Utilization in MNEs." Global Strategy Journal 5/1 (2015): 27-47.

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