Tuesday, July 04, 2006

How do you develop an innovation network?

Innovation networks are hard to define and present in multiple forms (e.g. instantiations of communities of practice, collaborative alliances between organizations, etc) and at multiple levels (individual, group (or team), organization, and inter-organizational). Moreover, the networks can involve a homogenous or heterogonous set of partners and may have different kinds of governance. Since innovation networks are often partnerships without firm hierarchies or well-understood methods of interaction, they often must be created and maintained without relying on familiar structures. However, regardless of the type of innovation network one is building there are a few good practices that one should consider.

The paper “Orchestrating Innovation Networks,” by Dhanaraj, C. and Parkhe A., (Academy of Management Review, 2006, 31 (3), 659-669) offers an interesting view of how to operate and sustain innovation networks. First, they define a "hub" organization as one that is key for reasons of size, reputability, trust, market dominance or other factors. They assert that there is always at least one hub organization, which sets the tone and orchestrates the network without the benefit of formal authority.

The authors examine the issues of innovation networks at the inter-organizational level (i.e. how do multiple organizations engage in a network structure). By examining collaboration among organizations, the authors go well beyond the simple dyadic form of alliances, and also push the readers to think beyond the social networking type studies. In this paper, the authors assume that network members (organizations) actively seek their interests and claim that there are hub firms that take lead roles by orchestrating a series of network activities that contribute to produce innovations. The hub firms use their power and status to effectively and efficiently engage the resources and capabilities of network members.

The hub firm is responsible for three network management activities: knowledge mobility, innovation appropriability, and network stability. Mobilizing knowledge is an important task, since knowledge is the key asset. Knowledge mobilization is the series of activities of acquiring, sharing, and deploying knowledge between the network members. It is important for maximizing innovatory output, since specialized knowledge needs to be unlocked from organizational boundaries and transferred across the network. Next, the hub firms engage in ensuring innovation appropriability(harvesting profits from the innovation). This involves protecting innovation from internal threats such as free-riding and outside threats such as competitors. The final task that successful hub firms engage in is ensuring network stability.

Innovation networks can be seen as loosely coupled networks, where members pursue their own self interest, which due to knowledge and technology domain overlap includes participating in the network. Hence, because of competitive pressures, networks may experience instability that may be caused by betrayal of trust among network members, loss of members - involved parties can stop collaborating with the hub firm or – even worse - engage with competing network. By supporting the three activities outlined above, hub firms can decrease the likelihood of such events. The authors develop a framework for how hub firms can conduct the orchestration process and offer propositions that explain the impact of orchestration on innovation outputs and interactions between network management activities.

One of the many outcomes of this research project will be to hopefully identify how to firms draw connections between the sources of ideas. One mechanism might well be the development of innovation networks at the individual, group, organizational, or even inter-organizational levels. Regardless of the level, the role of the hub (central connector or integrator) will be vital, as the choice of members affects the network membership and structure, on which the future success is dependent.. The three activities of the hub outlined in this paper are quite important…

[Summary Prepared by: Yukika, Caroline, Pete, and Kevin]

1 comment:

Joe said...

Great summary -- is the full paper available somewhere?

One of the interesting insights I gained from Rob Cross & Andrew Parker's book, the Hidden Value of Social Networks, is that there is much more than knowledge flowing in successful networks within organizations. Other key elements include awareness, trust, energy and serendipity. The challenges for opening up the channels for these rather intangible elements is far more challenging when the network spans organizations, especially in light of your observations about protection and competition.