Open Innovation Adoption in global ICT SME firms: The Role of the Entrepreneurial Founder

Open Innovation (OI) is a management paradigm, founded on the assumption that valuable ideas can come from outside as well as inside the firm. Those firms that source or commercialise innovative products or services from... [ view full abstract ]

Open Innovation (OI) is a management paradigm, founded on the assumption that valuable ideas can come from outside as well as inside the firm. Those firms that source or commercialise innovative products or services from external resources, are said to conduct the practice of OI (Chesbrough, 2003, Chesbrough et al., 2006).  Much of the research into the OI paradigm has focused on large enterprises within high technology industries (van de Vrande et al., 2009, Gassmann et al., 2010) leaving small to medium sized enterprises (SMEs) a mainly neglected area of research until recent years (Lee et al., 2010, Vanhaverbeke, 2012, Brunswicker and Ehrenmann, 2013, Spithoven, 2013). The aim of this research is to focus on OI adoption within global Information Communication Technology (ICT) SME firms from the entrepreneurial founder perspective.   The founder and ‘human’ perspective on the adoption of OI practices has been for the most part ignored to date (Ahn et al., 2017, Wynarczyk et al., 2013, Salter et al., 2014) and thus, this study has the potential to offer novel insights into the adoption of OI.

There is consensus within the literature that SMEs are important actors in innovation, contributing to knowledge creation and technological advancements whilst also engaging in radical innovation (Acs and Audretsch, 1987, Henderson and Clark, 1990, Hoffman et al., 1998, Schneider and Veugelers, 2010). However, given their ‘liability of smallness’ and their deficit of resources, skills, knowledge and experience (Rothwell, 1991), the innovation challenges for SMEs are substantial. Thus, SMEs are required to develop new products and services more effectively and efficiently to overcome these challenges (Parida et al., 2012).   Similarly, SMEs that wish to internationalise their operations, typically struggle to do so (Wynarczyk et al., 2013).  OI offers SMEs an opportunity to access valuable resources, experience and knowledge, which facilitates the scaling and internationalisation processes.

The role of the entrepreneurial founder is explored in this research study.  The founder is the primary leader, key decision maker (Arendt et al., 2005) and holds responsibility for the outcomes of the firm (Finkelstein and Hambrick, 1996). Also, it is their perception and interpretation of events that are likely to influence their sense of reality (Saunders et al., 2012) and the strategic actions of their organisation.   The upper echelons theory (UET) strengthens the connection between the entrepreneurial founder and his/her firm’s strategic focus (Hambrick, 2007, Hambrick and Mason, 1984).  It is in recognition of these said limitations in the literature that the following research question is asked:  how the entrepreneurial founders’ characteristics have influenced the adoption (or not) of open innovation?

We employ an exploratory multiple case comparative study based on seven Irish case studies within the ICT industry. Ireland has one of the highest concentrations of ICT activity and employment in the OECD.  Nine of the world’s top ten ICT companies are located in Ireland and the industry employs over 100,000 people in Ireland[i].  The ICT sector is a key driver of growth for the future (Forfas, 2013).  The purposefully selected cases adhered to a predetermined list of criteria including: globalisation from or near inception; innovative product or service; entrepreneurial founder who was still involved in leading the business with an oversight of strategy decisions and also these cases represented different organisational life cycles (Smith et al., 1985).  Primary data was gathered by conducting semi-structured, face-to-face interviews with the founders from each firm. Each interview typically lasted forty-five to ninety minutes. The interviews were conducted over the course of one year, from March 2014 to March 2015 by a single interviewer and were audio recorded and transcribed verbatim.  To enable triangulation, considerable secondary data was collected. The case study narratives and a timeline of key events were shared with the research participants and feedback has been received.  Primary and secondary codes have been identified and themes have emerged.   Within and cross case analysis is complete.

Five of the seven ICT cases in this study are open in terms of their innovation practices.  The main findings of this research suggest that, first; it is the entrepreneurial founder’s strategic choice, which determines the SME’s openness.  Second, it is the entrepreneurial founder characteristics, (i.e. founder background, career experiences, industry knowledge, network linages, innovation practices) which determine the OI mechanisms adopted (i.e. the OI mode, form and the collaboration partner).   The founders of the two closed ICT cases believe firmly in their own technical capabilities and industry knowledge and therefore deemed accessing external sources of innovation capabilities as unnecessary.  The findings clearly indicate that the role of entrepreneurial founder is a key determinant in the adoption of OI practices.

This paper extends the UET theory proposing additional observable founder characteristics.  This paper also assists us to understand the role of the entrepreneurial founder and how their characteristics have influenced the adoption (or not) of OI.  This is a valuable lens for OI research as it is the founder’s decisions, which influence the competing long versus short-term organisational demand in the SME.  From a practitioner perspective, a knowledge and understanding of these characteristics will help managers to assess what is required from a ‘human’ perspective to adopt OI practices. 

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