Organizing for Open Innovation: Incorporating the Externality of Control with Diversity of Contribution

Abstract

With whom should firms join forces (diversity of contributions, DoC) and how should they share decision-making power with external actors (externality of control, EoC)? Despite the growing importance of open innovation, there is no unifying framework explaining the different ways in which firms can organize to acquire external contributions and exploit them. This conceptual article introduces a new framework according to which the relationship between DoC and a firm’s innovative performance is moderated by (1) the characteristics of a project, such as the disparity between a specific problem and the firm’s existing knowledge base, the problem’s modularity, and the tacitness of the anticipated solution; and (2) EoC. With regards to project characteristics we argue that (a) the disparity between a specific problem and the firm’s existing knowledge base moderates the DoC–performance relationship positively; (b) the problem’s modularity moderates the DoC–performance relationship positively; and (c) the tacitness of the anticipated solution moderates the DoC-performance relationship negatively. We argue that EoC moderates DoC’s impact on performance positively.