How do large hierarchical organizations change their ability to

innovate?

John Skardon, Graduate Research Assistant, Strom Thurmond Institute of

Public Policy, Clemson University

Private companies may sense a need to keep up with accelerated change

in technology, adapting to unstable consumer preferences or radical
challenges to existing business models. Large agencies may be struggling
with changing demographics, the effects of climate change or perhaps a
prolonged regional drought. Whether challenged in the public or private
sector, innovation plays a key role in increasing organizational fitness
(Levinthal, 1997). A new type of collaboration paradigm called open
innovation (OI) has been proposed as a possible answer to the challenge
of increasing the rate of innovation (Enkel, Gassmann, & Chesbrough,
2009). Innovation networks are one type of inter-organizational structure
for implementing OI. In the private sector these networks can be
organized as a group of competitors facing the same research and
development challenge (Chalk, Miller, & Wagner, 2000). In the public
sector they may emerge to solve complex problems of overlapping
jurisdictions (Norgaard, Kallis, & Kiparsky, 2009).

Innovation networks can be implemented in several configurations or

typologies (Hage & Hollingsworth, 2000). One form that has gained some
traction in the marketplace is a knowledge intermediary such as
NineSigmaTM (Stern, 2005). Dhanaraj’s analysis (Dhanaraj & Parkhe,
2006) would consider these intermediaries as “hub firm’s”. Hub firms may
seek to create value by organizing and operating innovation networks as a
two-sided market (Rochet & Tirole, 2004) Both principal-agent theory
(Keast & Hampson, 2007) and transaction costs (Gulati, Nohria, & Zaheer,
2006) are relevant lenses to study the institutional economics of
collaborative networks. This paper examines how trust, which has many
possible institutional roles, may be critical to the successful operation of
innovation networks and hub firms in particular. A special focus is on
private-public partnerships organized to facilitate innovation in
organizations with traditionally closed innovation models.

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1
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Dhanaraj, C., & Parkhe, A. (2006). Orchestrating innovation networks.

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Enkel, E., Gassmann, O., & Chesbrough, H. (2009). Open R&D and open
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presented at the Presentation at EPO-OECDBMWA International
Conference on Intellectual Property as an Economic Asset: Key Issues in
Valuation and Exploitation, 30

Download copies of COINs 2009 research and industry papers at

ScienceDirect.

2
Link: http://www.sciencedirect.com/science/issue/59087-2010-999979995-
2182758

Procedia - Social and Behavioral Sciences, Volume 2, Issue 4, The 1st

Collaborative Innovation Networks Conference - COINs2009. Edited by
Kenneth Riopelle, Peter Gloor, Christine Miller and Julia Gluesing.

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