Value Creation through Research Collaboration and Networks

1
Value Creation through Research Collaboration and
Networks

• Presentation to the Workshop on
• Performance Assessment of Public Research,
  Technology and
• Development (RTD) Programmes
• organised by the European Commission in
  co-operation
• with the Washington Research Evaluation Network
• Brussels, June 17-18, 2004
• by
• Ove Granstrand
• Chalmers University of Technology
• Dept. of Industrial Management and Economics
• Center for Intellectual Property Studies
• SE-412 96 GÖTEBORG, Sweden
• Phone [phone]
• Fax [phone]
• ovegra_at_mot.chalmers.se
• www.mot.chalmers.se

Note Much of the enclosed material draws on
Granstrand , O. The Economics and Management
of Intellectual Property Towards Intellectual
Capitalism. Edward Elgar Publ., 2000. Technology
Collaborations in Corporate Innovation Systems.
Co-authored with Sven Lindmark. Final report
submitted to Vinnova (121 p.), December,
2002. The research support from Vinnova is
gratefully acknowledged.
2
Types of strategies for the technology-based firm
Source Granstrand 1999
3
(No Transcript)
4
Trends in Technology Collaborations(last century
quarter)(Source MERIT-CATI database)

• The number of partnerships has increased
  dramatically from about 10 annually in the 1960s,
  to 30-40 annually in the early 1970s to around
  600 and more in 1990s. A rapid increase took
  place during the 1980s (just as has been reported
  for partnerships in general).
• The share of collaborations involving equity
  investments has been reduced from more than 80
  research corporations in the early 1970s to less
  than 10 in the late 1990s. This is probably
  related to high organizational costs combined
  with high failure rates.
• The share of international collaborations has
  decreased slightly but steadily from over 60 to
  some 50. This decrease seems to be mainly
  related to increases in US domestic
  collaborations in IT and biotechnology.
• The share of high-technology collaborations (e.g.
  IT, pharmaceuticals, aerospace and defense) has
  increased dramatically from about 30 in the
  1960s to over 80 in the late 1990s. It is not
  clear how this increase relates to RD spending
  in the respective sectors.
• The share of intra-triad collaboration decreased
  from 95 to 80, the decrease attributed to
  collaboration with partners from South East Asian
  countries, involving non-high technology fields.
  Intra-triad collaborations dominate more in
  high-technology fields.
• Collaboration seems to be more common and intense
  in the early phases of the evolution of
  technologies, when both technological and market
  uncertainty is high and competition is yet not
  fully developed.

5
Some Advantages of Technology Collaborations

• Accessing complementary technology/specialized
  skills
• Reduction of RD duplication
• Promotion of technical standards
• Raising entry barriers
• Enlarging markets
• Raising strategic flexibility and creation of
  investment options
• Reduction/sharing of costs and risks associated
  with RD
• Monitoring technological activities of others
• Capturing of tacit knowledge of partners
• Internalization of knowledge spillovers
• Reducing time to market
• Facilitating entry to foreign markets
• Accessing finance
• Coopting competition

6
Some Disadvantages of Technology Collaborations

• Lack of compatibility with core technological
  interests of a firm
• Limiting parallel approaches to uncertain
  technological problems
• Too much reliance on external sourcing of
  technology may lead to a deterioration of a
  firms technology base
• Too much reliance on other parties abilities to
  perform is also risky
• Management difficulties may instead increase
  costs and time to market

7
Some Disadvantages of Technology Collaborations
(cont.)

• Also, although the bulk of evidence suggest an
  increasing role of collaboration, a majority of
  studies point at considerable difficulties for
  organizations in gaining mutually satisfactory
  outcomes. Further to it, it is difficult to
  consider what constitutes success in managing
  technology collaborations, since firms
  expectations and other circumstances vary
  considerably. Technology collaborations often
  change over time in terms of aims and bargaining
  power of the partners, obsolescence of the
  original reasons of forming the collaborations or
  due to an initial focus on the wrong set of
  issues. Another source of difficulties lies in
  the fact that the more different the
  organizations are, the more attractive they are
  for collaboration, but the greater the risk for
  miscommunication and misunderstanding because of
  the differences.
• From a societal point of view it has been argued
  that RD cooperation can correct market failures
  and increase the rate of technological progress
  and diffusion of technological knowledge in
  industry and among research institutes and
  universities. The basic rationale has rested on
  traditional market failure arguments and
  emphasizing insufficient incentives for
  individual firms to undertake uncertain and
  imperfectly appropriable research at the
  societally optimal level. Other arguments include
  better access to recourses and markets. Negative
  effects include that collaboration may be in
  conflict with competition. Collaboration can
  raise barriers to entry, exclude competitors
  and/or be subject to anti-trust legislation.

8
Some Success Factors Behind Technology
Collaborations

• The presence of a champion
• Understanding resources and needs of partners
• Long term horizons
• Based on strategic commitment
• Technological complementarities
• Demarcation of potential markets
• Mutually supporting technology and business
  strategies
• Equal level of competence among individuals

9
Some Failure Factors Behind Technology
Collaborations

• Differing strategic views among participating
  firms
• Management difficulties
• Risks of sharing proprietary know-how
• Desire for control by individual partners
• Problems with different time-horizons
• Disagreement on design specifications
• Government policies
• Insufficient scale of RD commitments
• Insufficient quality of RD commitments
• Expectation mis-match
• Divergence or obsolescence over time
• Partner differences overshadow complementarities

10
Collaboration Models/Examples
VCR licensing/tech transfer family
(video) (technology platform licensing for
standard support) NMT coopetition family
(mobcom) GSM coopetition family with black sheep
(mobcom) 3G (what went wrong?) Traditional
telecom inter-monopoly collaboration/exchange/agre
ements (telecom) Open source movement (software,
e.g. Linux OS) HUGO-project (genomics) Subcontract
or/lead supplier development hierarchies
(automotive) RD firm/institute with lead
user/application collaboration (e.g. Svenska
Rotor) Systems technology procurement (e.g.
aircraft) Collective RD (e.g. forestry,
textiles) RD consortia (e.g. US
semiconductors) State-led industry projects (e.g.
Japan's VLSI-project) University-industry
collaborations (e.g. Astra/Hässle) Internet
collaborations and e-Research
11
Lessons from the VCR-case

• 1. Create a de facto standard by generous
  licensing (JVC).
• 2. Drive down the learning curve jointly with
  your licensees (JVC)
• 3. Identify key functionalities (playing
  pre-recorded software) and killer applications
  (porno software) (JVC) and design the product
  accordingly (technical performance allowing 2 hr
  playing time).
• 4. Support complimentary products/services
  (software) (JVC).
• 5. Be careful about initial conceptualisations of
  the product and its key functionalities and be
  prepared to reconceptualize. (VCR as a time
  shift machine improper conceptualisation) (Sony,
  Philips).
• 6. Be humble and don't fall victim of innovator
  hubris (Sony, Philips).
• 7. Listen to your local intelligence units
  (Philips).
• 8. Trying to catch-up by hi-tech crash programs
  is risky in case of late mover disadvantages
  (Philips).
• 9. Keep product RD and production closely
  integrated (Philips).

12
The Corporate Innovation System for Developing
the Mobile Telephony System NMT
13
Basic features of open source RD collaborative
models
a) Community (club) of distributed users and
developers with free entry and exit
b) Network communications (Internet) c) Shared
development goal for non- or semi-proprietary
development d) Explicit or implicit licensing
scheme regulating information exchange
e) Non-pecuniary exchanges and incentive system
f) Informal management structure providing
leadership, division of labor, status and quality
control g) Professional subculture (shared
ideology, lifestyles, values, professional norms,
language, problem priorities etc.) h) Cohesion
through common enemy, anti-sentiments, under-dog
position and/or competitive vision
14
Remedies for the IP Assembly Problem (in case of
patents)
15
Policies/incentives for stimulating technology
collaborations/CIS formation
  Technology procurement contracting Public
(public lead contractor) Private (private to
private contracting)   Subsidies to collective
RD institutes/networks   Fostering of networks
of excellence (e.g. through conditional or
selective grants, multilateral umbrella
contracting   Matching grants   Relaxation of
anti-competitive regulation   Collaborative RD
tax credit/deduction schemes   IPR clearance
assistance/helpdesk   Licensing/pooling
exemptions   Fostering of open source schemes
and various forms of regulated/unregulated
(public) disclosure   Fostering of collaboration
tools/attractors (e.g. Internet, databases,
facility sharing) Fostering of collaboration
brokerage/management firms
16
Cases for workshop discussion

• Large firm/Small firm
• How to manage a portfolio of (strategic/tactical
  long/short term domestic/international
  large/small firm university/industry technology
  marketing etc. collaborations?
• How to manage IP flows from/to/within a
  portfolio of technology collaborations?
• How to manage IPRs related to background/foregroun
  d/sideground/postground knowledge?
• Why/when/where/how to collaborate?
• Alternative/complementary strategies to
  technology collaborations?
• Other economic/managerial issues?