Innovation product management question & excel

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 1. 

First, read the new innovation product information and stage-gate process, and how the stage-gate process used in the new innovation product.

  

Then, write 2 pages word document for following question: 

Based on the new innovation product and the stage gate process been considered. 

Discuss how to source your project and what customers should be engaged when developing the product. Additionally, discuss the strategic network and alliances that must be considered for this project. 

Must read the following course material before writing the 2 pages word document.

· Chapters 4 & 5 in Dekkers, R. (2018). Innovation management and new product development for engineers, volume 1: Basic concepts (pg. 119-176)

· https://www.youtube.com/watch?v=miKIlk-iezk

· https://www.youtube.com/watch?v=-iO91mPKBqs

· https://www.youtube.com/watch?v=HDjNmFiBzyQ

 

MUST be formatted in APA Style 7th edition.

MUST follow the written assignment rubric. 

MUST provide 0% of AI detention and plagiarism report.

2. 

Create an excel document of potential suppliers that would be required for your new innovation project. There are three required columns: The supplier name, what you’d utilize the supplier for, and a backup plan if there was an issue obtaining the product or service from this supplier.

chApter 4

sourcing for innoVation

The previous two chapters have dealt mostly with methods, tools, and
processes for new product and service development with the aim to con-
vert ideas and inventions into innovations. What has been left out is that
people, working independently or in organizations, have originated many
of these ideas and inventions. Merely enhancing the generation of ideas
and inventions is key to creating commercially successful products and
services, but at the same time, not enough. A report by Targeting Inno-
vation (2008, p. 14) states: “good management with average technology
is preferable to average management with good technology”. Neverthe-
less, any innovation starts with an idea or invention. An invention can be
described as a unique or novel device, method, or process, either as an
improvement upon a machine or product or a new process for creating an
object or a result. An invention that achieves a completely unique function
or result may be a radical breakthrough. No matter how the term invention
sounds, serendipity plays but a small role in innovations. A case in point
is the story of the negative feedback amplifier by Harold Stephen Black
in the 1920s, though documented later (Black 1977); it was only through
many steps, rethinking, and hard work that the concept of this specific
amplifier was realized. These inventions are based on ideas; Subsection
1.2.2 has shown how many ideas are necessary for one successful product
or service. Hence, getting ideas that might result in inventions is not
enough, but a starting point. To this purpose, this chapter also discusses
how actors can be best involved for generating ideas and inventions.

Who are behind the ideas and inventions, and thus are sources for
innovations, and how they can be involved in new product and service
development are the topics of this chapter. Section 4.1 starts with the
inventors, a category of people who easily grab the attention when speak-
ing about innovation. The following section, 4.2, pays attention to users.
In addition, it looks at how customers and users can be best involved in the

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120   •   innovAtion MAnAgeMent And npd for engineers

development of new products and services. Section 4.3 discusses suppli-
ers and commercial research organizations as source of innovation; how
suppliers are best integrated in new product and service development is
also presented. Universities are another source of innovation, and Section
4.4 will look at their role. Section 4.5 considers how employees contribute
as source of innovation. Section 4.6 will contemplate on the dual role of
competitors for generating ideas and inventions.

4.1  inventors

The first group that ideas and technological advancements can come from
are inventors. Examples of famous inventors are abound; in addition to
those mentioned in the introductory chapter, a few more are listed here.
The first one to mention is Thomas Alva Edison (1847–1931), who was
an American inventor and businessman. He developed many devices that
greatly influenced life around the world, including the phonograph, the
motion picture camera, and the long-lasting electric light bulb. Another
inventor is Johannes Gensfleisch zur Laden zum Gutenberg (1398–1468),
a German blacksmith, goldsmith, printer, and publisher, who introduced
printing to Europe. His introduction of the mechanical movable-type
printing to Europe started the printing revolution and is widely regarded as
the most important event of the modern period. Yi Xing (683–727), born
Zhang Sui, was a Chinese astronomer, mathematician, mechanical engi-
neer, and Buddhist monk of the Tang dynasty (618–907). His astronomical
celestial globe featured a clockwork escapement mechanism, the first in a
long tradition of Chinese astronomical clockworks. Abū al-Qāsim Khalaf
ibn al-‘Abbās az-Zahrāwī (936–1013), popularly known as Al-Zahrawi,
was an Arab Muslim physician and surgeon who lived in Al-Andalus. He
is considered the greatest medieval surgeon to have appeared from the
Islamic World and has been described as the father of surgery. His great-
est contribution to medicine is the Kitab al-Tasrif, a 30-volume encyclo-
pedia of medical practices. His pioneering contributions to the field of
surgical procedures and instruments had an enormous impact in the East
and West well into the modern period, where some of his discoveries are
still applied in medicine to this day. These are just examples of inventors
whose inventions have been documented, and they show to some extent
the diversity of inventions and innovations.

Whereas there are many inventions that have been turned into com-
mercial success, there are also many inventions that did not make it. The
fact that many ideas and inventions do not end up in commercialization is
captured by the innovation funnel (see Subsection 1.2.2 and Figure 1.4);

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sourcing for innovAtion   •   121

subsequent stages of new product and service development see only infea-
sible ideas and inventions being weeded out. For the first stages of the
innovation process, this means that, although an inventor may have ideas
for new products, new services, or improvements to existing processes,
these are not considered an innovation until the ideas have been trans-
formed into something real, such as a prototype with the potential for
practical application. Even then, some of these are not commercialized;
Box 4.1 captures some failed inventions and ideas. This shows that market
acceptance plays a large role for the success of an invention turned into an
innovation (see also Subsection 3.3.5).

These are just a few example of inventions that failed for a variety of
reasons:

AVE Mizar, a roadable aircraft based on combining the rear of
a Cessna Skymaster to a Ford Pinto, built between 1971 and 1973.
Inventor Henry Smolinski and the Vice President of AVE, Harold
Blake, were killed in a crash during a test flight; this was attributed to
the right wing strut base mounting attachment to a body panel of the
car that failed.

The Bell Rocket Belt was a very promising invention for the U.S.
army in the 1950s and 1960s. The rocket pack was designed so that it
helped a person leap for a short distance. President John F. Kennedy
was even given a personal demonstration, but the belt only put a person
in the air for 21 seconds at a time, enough to reach a mere 120 meters.
So, along with the limited potential altitude, the army also lost interest.

Cinerama was the predecessor to the modern-day IMAX screens,
but it was more complicated. Projecting the movie required three per-
fectly synchronized projectors all aligned with each other. This was in
the age before digital technology, so it meant that three very skilled
projectionists has to sit in the projector boxes to make everything work.
Most theaters did not want to put up the investment to upgrade nor did
they want to have to pay more staff to play a movie. Ultimately, few
movies were ever recorded in this format and this invention soon died.

Thomas Alva Edison invented an electric pen, which would make
copies of documents people were writing by creating stencils as they
wrote. It had some initial success, but could not compete with other
inventions, such as the typewriter. The basic design was later reused
for another invention, a much less efficient way of creating documents:
the first electric tattoo needle in 1891.

Box 4.1. Examples of Failed Inventions

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122   •   innovAtion MAnAgeMent And npd for engineers

Perhaps, for this reason, some inventors just remain inventors,
whereas others become entrepreneurs and founders of corporations. For
example, Thomas Alva Edison did not only invent, he also turned these
inventions into business opportunities for his own company. Other well-
known inventors who have become founders of large corporations include
Alexander Graham Bell (founding the Bell Telephone Company, later
AT&T), George Eastman (Eastman Kodak Company), and the Wright
brothers (airplanes, Wright Company, later successively, Wright-Martin,
Wright Aeronautical, Curtiss-Wright). That some do get involved in firms
can be attributed to the very different nature of inventing and innovat-
ing. Due to the nature of their work, inventors are technology- and solu-
tion-oriented, and thus tend to work autonomously, whereas innovators
focus on markets and stakeholders (including investors), and are therefore
collaborative-oriented. This different orientation might explain why only
few inventors eventually found firms based on their own inventions.

Even if inventors, for whatever reason, are not commercializing the
products and services themselves, it is still beneficial to involve inventors
during the later stages of the innovation process. Studies by Braunerhjelm
and Svensson (2010) and Fahimi-Steingraeber (2015) point out that the
involvement of the original inventor during the successive stages of devel-
opment of patents is of paramount importance to successful commercial-
ization. The study by Braunerhjelm and Svensson (2010) even suggests
that commercialization of inventions might have more chances of being
successful when the original inventor is not involved in the commercial-
ization. Hence, the involvement of the inventor during commercialization
stages of the innovation process should be considered with care.

The Intellivision is Mattel’s video game console creation released
in 1979 in order to compete with the Atari 2600. The console was not
exactly the worst thing in the world, but it ended up failing and almost
bankrupting the company.

The ill-fated Smell-o-Vision gimmick, funded by Mike Todd Jr.
in 1960, was an elaborate system that allowed a film reel to trigger the
release of bottled scents that were piped to the audience in sync with
pivotal moments in the movie. The only film to make use of Smell-
o-Vision was 1960’s Scent of Mystery, written specifically with the
gimmick in mind. The results, predictably, stunk, and Smell-o-Vision
was never used again.

Box 4.1. (Continued)

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sourcing for innovAtion   •   123

4.2  custoMers And users

The second group that might bring about technological advances are
customers and users. In the context of this book, user-led innovation refers
to innovation by intermediate users (for example, firms that are using out-
put of another firm, such as machinery) or consumer users (for instance,
individual end-users or user communities, those who are buying the
products and services), rather than by suppliers (producers or manufactur-
ers). Customers might be individual people buying a product or organiza-
tions when asking for new requirements and functions to be fulfilled by a
product or service; an example of the latter is a firm buying an enterprise
resource planning system and requiring it is tailored to its business model.

4.2.1 uSeR-leD innovaTion aS Beneficial

During the commercialization as the final stage of development, con-
sumers and users start engaging with new product and services. Some of
these products and services may have been initiated by users, and some-
times, these new products and services are not entirely fit for purpose.
This leads to many products and services being at least refined, and some
developed, by customers and users, at the site of implementation and use
(see Von Hippel 2001). Often, user innovators will share their ideas with
manufacturers and providers in the hope of having them produce the
product or service, a process called free revealing. Consequently, these
ideas and modifications are fed back into the network of product and
service development. A case in point is the European manufacturer of
manipulators for foundries and forges (85 employees). Most of its inno-
vative solutions are generated on request by firms in this supply chain
to automate the production processes; for this reason, it does not have
its own R&D department, though the solutions are often very innova-
tive. This means that the concept of user innovation is a core part of the
argument against the linear innovation model (Williams and Edge 1996,
p. 893), the first-generation innovation process (see Section 3.4), that is,
new products and services are generated through research and develop-
ment, then marketed and diffused to users and consumers. Instead, new
product and service development is a non-linear process involving actors
with possible innovation occurring at all stages. This means that users
and consumers can constitute a base for the generation of new ideas and
their involvement might be happening during all stages of new product
and service development.

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124   •   innovAtion MAnAgeMent And npd for engineers

There are some compelling examples of user-led innovation. The
development of Linux is one of the most prominent examples of free
and open-source software collaboration. The underlying source code for
the software may be used, modified, and distributed—commercially or
non-commercially—by anyone under the terms of its respective licenses.
Its origins can be traced back to the development of the operating sys-
tem Unix in 1969, and it was a result of MINIX developed by Andrew
Tanenbaum that Linus Torvalds started developing Linux as open-source
software in the beginning of the 1990s. The development of the software
now depends on developer and user communities, even though compa-
nies build commercial applications on it; the Android operating system for
mobile applications is a case in point. Another example is the implemen-
tation of enterprise resource planning systems by organizations; enterprise
resource planning is software that allows organizations to use integrated
applications to manage processes across procurement, manufacturing,
service, sales, finance, and human resources. This software is often pur-
chased from vendors who deliver standard or standardized applications.
Often, organizations have to integrate this software in their business
processes, leading to adaptations and complementary applications (for
example, shop floor scheduling). This has led to the large vendors of enter-
prise resource planning systems to make their software modular so that
applications developed by customers can be better integrated, and even-
tually these vendors taking on the development of these applications. The
final example here is sports. Von Hippel (2001, pp. 82–83) provides the
example of using foot straps for windsurfing to control the surfboard when
in the air. Thus, the three examples show that user innovation can lead to
innovations in products and services.

Lead users have a particular place in user-led innovation. Von Hip-
pel (1986) advocates the lead user method that can be used to system-
atically learn about user innovation in order to apply it in new product
and service development. Lead users are to be seen as those users who
present needs that will become more spread among a class of users in the
future. In this view, in addition to trying to fill the needs they experience,
they might also provide firms with new product and service concepts
and data for designing these; hence, these users are positioned to benefit
significantly by obtaining a solution to their needs. Figure 4.1 shows the
steps for involving lead users (derived from von Hippel 1986; Urban and
von Hippel 1988). An example is the development of hygienic protec-
tive coverings and a microbial-treated incision foil that was developed
by working together with doctors, particularly surgeons, and users in
analogous fields, such as micro-biologists and make-up artists. Another
specific type of lead user is the creative consumer (Long 2004, p. 65).

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sourcing for innovAtion   •   125

These are consumers who adapt, modify, or transform a proprietary
offering as opposed to creating completely new products and often have
deep knowledge about products, services, and the context they are used
in; some home owners fall in this category. However, innovation ini-
tiated by lead users differs from user-led innovation, because for the
first companies develop new and products and services, whereas for the
latter, the users are the actual developers. Henceforth, the identification
of lead users and creative consumers may assist companies in identify-
ing future needs for products and services, finding novel concepts for
products and services, and learning about new applications for existing
products and services.

While the lead user methodology has its merits, there are contexts in
which it may be less effective for product and service development. For
example, it will be less applicable to highly secretive industries where
lead users may not feel comfortable or may not be able to disclose infor-
mation and knowledge. Also, the lengthy nature of user-led innovation
can prevent this method from being applied effectively in industries with
short-term cycles for new product and service development or where short
time-to-market is required. Hence, the method is better suited to meet the
needs of the industrial goods market, rather than consumer goods market
as lead users of industrial goods can typically be identified more reliably
than lead users of most consumer goods. Whereas the lead user method
can lead to breakthroughs, adopting the approach can be difficult for some
organizations and within specific contexts.

4.2.2 PaRTiciPaToRy DeSign

Different but somewhat similar to user-led innovation, participatory
design, also called co-design, is an approach to new product and service
development that attempts to actively involve all stakeholders in the
design process to help ensure the result meets their needs and is usable;
these stakeholders span from employees, partners, customers, citizens to
end users. Originally, it was called co-operative design, mainly used for
the design of information systems, particularly their interfaces (Bødker
et al. 2000). The approach is used in a variety of fields, for example,

Figure 4.1. Method for involving lead users.

Stage 1
Start-up

• Interdisciplinary team
• Definition target market

• Goals of lead user involvement

Stage 2
Identification of needs and trends
• Interviews with experts markets
• Interviews with technological experts
• Scanning of literature, databases, etc.
• Selection of most attractive trends

Stage 3
Identification of lead users

• Networking-based search
• Investigation of analogous markets

• Screening of first ideas and solutions
(generated by lead users)

Stage 4
Design of concepts
• Workshop with lead users to
generate or improve product concepts
• Evaluation of concepts

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126   •   innovAtion MAnAgeMent And npd for engineers

architecture, graphic design, health care, landscape architecture, prod-
uct design, software design, sustainability, and urban design. Participa-
tory design is an approach that is focused on processes and procedures of
design and is not a design style. For some, this approach has a political
dimension of user empowerment and democratization. In this sense, it has
parallels with critical systems thinking (see Dekkers 2017, pp. 291–93;
Ulrich 2000). For others, it is seen as a way of abrogating design responsi-
bility and innovation by designers. This means that participatory design is
a useful method for eliciting ideas and requirements from users and other
actors, but also that it requires adequate product and service development,
not solely relying on these sources.

An example of participatory design is the Whittington Hospital
Pharmacy (Design for Europe 2017). The Whittington Hospital employs
4,000 staff who provide care for more than 500,000 people across North
London; the chief pharmacist knew that collecting a prescription at the
hospital was not a pleasant experience for patients. They entered the
pharmacy often feeling unwell and anxious, and these feelings were
exacerbated by long waiting times and lack of communication. Previous
efforts to improve the situation, such as user questionnaires, had resulted
in poor levels of patient participation and provided no clear insights into
what should be changed. A designer began by introducing core design
concepts to patients, staff, doctors, and senior management. From this,
larger groups were engaged until a shared definition of the problem
was developed in addition to establishing consensus on the priorities
for improvement:

• Enhancing the patient experience.
• Developing ways to use the space to promote health care messages.
• Offsetting expenditure by increasing pharmacy sales.

Working with the Whittington team, the designer turned these priorities
into a detailed design brief. Contracting an architectural co-design expert
Studio TILT and a service design agency meant the designers’ focus was
on allowing pharmacy users to collaboratively create a space that would
work best for them. This began by establishing a program of workshops
with representatives from patient, staff, and management groups; 38
patients and staff took part in codesign workshops. Together, they came
up with new ideas for how the space could work; see Figure 4.2. These
ideas were then tested and retested; first in model form, then at half
scale, and finally, at full scale within the pharmacy itself. The feedback
from the project was overwhelmingly positive, providing new insights
and lessons that have changed how the pharmacy space is used. As a
result, the queue of patients at the registration area has been shortened,
prescription tracking has been introduced, and new areas for confidential

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sourcing for innovAtion   •   127

consultations have been created. The work has measurably improved
the patient experience, boosting staff morale, and increasing sales at the
pharmacy. This case of the co-design of a hospital does not only show
the merits of participatory design, but also that it should be approached
from a process perspective.

4.2.3 cuSTomeR involvemenT

In a more generic sense, the involvement of customers in new product
and service development will have positive effects. The potential bene-
fits from customer involvement (Koukou, Dekkers, and Jespersen 2015)
reported are:

• Better identification of customers’ needs and requirements.
• Increased engagement of customers during new product and service

development results in increased adoption of these new products
and services.

• Reduced uncertainty of product and service designs.
• Increased number of ideas and solutions (see also previous

subsection).
• Improved planning of new products and services through improved

insight.
• More relevant prioritization of product and service requirements.

Figure 4.2. Mock-up for early design.

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128   •   innovAtion MAnAgeMent And npd for engineers

• More adequate analysis of competitive products and services.
• Reduced cost for development of new products and services.
• Reduced time-to-market.
• Identification of new markets.
• Enhanced communication between departments involved in new

product and service development and their commercialization.
Though these potential benefits are many, how they are achieved depends
on how new product and service development is undertaken.

Customer involvement in new product and service development
can take many forms; moreover, the methods and tools are applied in
different phases of this process. The overview of methods and tools for
customer involvement related to the phases of new product and service
development is found in Table 4.1. It is distinguishing three categories
for the interaction. The first one is the class of indirect methods, which

Category/
method

Idea
generation

Product
concept

Develop-
ment

Testing Launch

Indirect
methods
Feedback • •
Interviews • • • •
Observation • •
Questionnaires • • •
Surveys • • • •
User clinics • • •

Direct methods
Brainstorming • •
Evaluation
sessions

• •

Focus groups • •
Inspirational
stories or
cards

• • •

Living labs •
Mock-ups and
prototype
testing

• •

Table 4.1. Overview of methods for customer involvement for each
phase of development

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sourcing for innovAtion   •   129

means that there is no direct interaction with the users to generate ideas or
concepts. Besides interviewing, conducting surveys, and using feedback,
it features observation of users and user clinics. The latter are where
potential users are introduced to the subject by experienced moderators
at sequentially arranged stations; generally, there is support from prod-
uct managers, engineers, psychologists, or marketing experts from the
innovating company. The second category is the direct methods, in which
there is face-to-face contact with product and service designers. In addi-
tion to brainstorming, focus groups, presentations, and workshops, this
includes the use of inspirational stories (and visualization with picture
cards) and living labs; the concept of living labs is discussed in the next
subsection. The third category is that of those methods that are enabled
by using web technology. There are indirect methods in this category,
such as interviews, surveys, and for a, but also specific ones to this class,
for example, open-source software, virtual design platforms, and wikis.
Though these methods can be beneficial to the effectiveness of new prod-
uct and service development, they also take time, and therefore may
impede the time-to-market.

4.2.4 living laBS

A specific method for user involvement is the concept of living labs (see
also Subsection 9.3.1.). The emergence of these living labs originates in
the need for evaluating computing and information technologies during
the 1990s (e.g., Intille et al. 2005) and later expanded into a wider concept
for innovation with user involvement (see Dekkers 2011, p. 59). Now, it

Presentations • •
Workshops • • •

Web-based methods
Online forums • • • •
Online
interviews

Online surveys •
Open source
software

• •

Virtual design
platform

• •

Wikis • •

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130   •   innovAtion MAnAgeMent And npd for engineers

includes user-centered, open-innovation ecosystems, often operating in a
territorial context (e.g., cities, agglomerations, and regions), integrating
concurrent research and innovation processes, often in a public- private
partnership. The concept is based on a systematic user co-creation approach
integrating research and innovation processes. These are integrated
through the co-creation, exploration, experimentation, and evaluation of
innovative ideas, scenarios, concepts, and related technological artifacts
in real-life use cases. It could also involve user communities, not only as
observed subjects, but also as a source of creation. Considerations from
users in living labs may be made at the earlier stage of research and devel-
opment and through all elements of the product life-cycle, from design to
recycling. This approach of living labs allows all involved stakeholders to
concurrently consider both the performance of a product or service and its
potential adoption by users.

4.2.5 PaRaDoxeS anD conTRoveRSieS SuRRounDing
uSeR innovaTion

Though widely lauded, as one of the setbacks, user-led innovation and
customer involvement have been associated with incremental innovation.
The close proximity to lead users or customers might drive companies to
incremental innovation (Veryzer 1998), limiting the scope of new products
and services to those that already exist. In this sense, user innovation is
a variant of the second-generation innovation process (see Section 3.4),
which also points to relatively minor technological advances.

Although there seems to be a paradox that user-led innovation does not
lead to radical innovation, there are instances where it did. For example,
Truffer (2003) presents the case of organized car sharing in Switzerland.
This innovation started in two neighborhood-based experiments in the late
1980s. At the time of his publication, it was run by a professional service
enterprise, served some 50,000 customers around the country, and contin-
ued to expand at a considerable pace. This innovation was realized long
before Uber, the taxi service, started to make headlines. Nowadays, these
applications are seen as radical innovations, even though its roots can be
traced back to user innovation.

User involvement and user-led innovation are self-evident for those
firms that deliver engineer-to-order products and custom-made services.
In the case of engineer-to-order, a product or service is tailored to the
requirements of the customer (see Subsection 2.6.2). This in itself entails
the involvement of the customer. For example, machinery and tooling

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sourcing for innovAtion   •   131

normally need the input of customers from the moment an offer is made
all the way through commissioning. Thus, in some instances, user involve-
ment is a necessity, rather than a matter of choice.

4.3   suppLiers And coMMerciAL reseArch 
orgAnizAtions

A third source for ideas and inventions for new product and service devel-
opment are suppliers and commercial research organizations. These are
noted for having large innovation potential, because they know what
companies—that is, their customers—are doing and what they need, and
the mechanisms to transfer knowledge related to ideas and inventions
are generally in place. For this purpose, the first subsection will discuss
suppliers as source of innovation, the second subsection early supplier
involvement during the development process, and the third subsection
commercial research organizations as source of innovation.

4.3.1 innovaTion By SuPPlieRS

Firms can involve suppliers in various stages of their product or service
life-cycle. This involvement ranges from the earliest stages, when they may
provide ideas and suggestions, to the later stages, when suppliers may sup-
port commercialization of products and services. The benefits of involving
suppliers include shortened product development cycle times resulting in
reduced time-to-market, lower costs, and higher- quality end-products in
addition to innovation in products and services. For example, Unilever
has publicly stated that it estimates that 70 percent of its innovation is
linked to working with strategic suppliers. Another case in point is Ford’s
supplier BASF, who saved the manufacturer significant amounts of pro-
duction costs by developing a new resin to give interior components the
desired high-gloss appearance. Thus, involving suppliers in early stages
of new product and service development may lead to innovation and also
yield other benefits, such as improved performance.

Innovation by suppliers is often related to the position of their mate-
rials, parts, components, and subassemblies in the product or service
configuration (the collaboration with suppliers is described in Section
5.2). For instance, Prencipe (2000) describes how Rolls-Royce for its
aero-engines relies on innovations by suppliers; this requires Rolls-Royce
to engage and collaborate with these suppliers to integrate knowledge

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132   •   innovAtion MAnAgeMent And npd for engineers

into the overall propulsion system and to coordinate the development of
components, not only internally but also externally. This means that the
product configuration plays an important role in relation to the capabilities
of focal firms and the capabilities of suppliers. For example, some firms
use categorization, such as an ABC classification, to identify critical and
non-critical materials, parts, components, and subassemblies. Based on
the categorization, they deal with suppliers in a different way. Hence, the
interaction with suppliers is based on the position in the configuration and
to what extent they supply critical components.

This makes the selection of these critical suppliers of paramount
importance to product and service development of firms. One dimension
for selecting suppliers is the technological capability of the suppliers
relative to the focal firm. To this purpose, the classification of Roussel,
Saad, and Erickson (1991) can be used; see Subsection 3.3.1. Omta (2004)
suggests that base technologies, those that are widespread and shared,
are outsourced to suppliers. But also, suppliers might possess key tech-
nologies; in such cases, collaboration with a supplier is necessary. For
pacing technologies, collaboration with a supplier may be necessary, and
for emerging technologies, it may be necessary to monitor technological
developments. The second dimension for selection of suppliers is the risks
and level of collaboration during new product and service development.
Figure 4.3 shows the process for selection and collaboration, combining
Roussel’s classification for technologies with Handfield et al.’s (1999,
p. 65) process model for supplier integration. The screening of suppliers
is informed by strategy formation for core competencies of firms, con-
siderations of product-market combinations, and technology roadmapping
(see Section 3.5); also, specifications for materials, components, parts, and
assemblies inform the screening (depending on how the contributions of
the supplier are positioned within the product configuration). This screen-
ing is followed by a risk assessment; this covers whether the supplier is
able to meet performance requirements, such as costs, quality, and sched-
ule, and has the technological capability to contribute to new product
and service development. Based on the outcomes of this assessment, the
involvement of the supplier during the development process can be set.
In the case that the technology is not critical and does not align with the
roadmap for products, services, and technology, companies might opt not
to integrate suppliers in the process of development; in all other cases,
suppliers should become involved. Thus, the selection and involvement
of suppliers are a stage-wise process at strategic, tactical, and operational
levels covering risks and technological capabilities.

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sourcing for innovAtion   •   133

4.3.2 (eaRly) SuPPlieR involvemenT

After selecting appropriate suppliers, the integration of suppliers in various
stages of product and service life-cycles is beneficial. This involvement
may be positioned at the earliest stages of development when suppliers
may provide design suggestions or even have complete design responsi-
bility, to the later stages, when suppliers support the commercialization
of products and services and manage after-sale product quality. Based on
Figure 4.3, the phases in which suppliers will be involved in the develop-
ment process depends on the degree that the technology of the suppliers
will change and to what degree they have the capability to contribute to
the design and engineering process. In general, the increased coordination
will make suppliers more engaged with the interests of the focal company
and more motivated to invest further in this relationship. And, as suppliers
become more involved in and knowledgeable about companies’ needs,
plans, and strategies, they will feel more able to secure future business
opportunities with the companies. Thus, they will be more inclined to
work on innovative activities. However, companies can hinder the like-
lihood that suppliers will innovate if they set forth conflicting objectives
about what they want from the suppliers. They also risk this outcome if
they are too late or too demanding, when it comes to the engineering and
specification challenges that need to be met. Finally, if companies push
suppliers too hard to reduce their prices, then they also lessen the chances
that suppliers will strive to innovate. Hence, the involvement of suppli-
ers in the development process is a balancing act to meet objectives for

Figure 4.3. Map for selection and involvement of suppliers in new product
and service development.

Pool of
potential
suppliers

Screening
of suppliers

Technological
information for
product and
service

Risk
assessment

Product and technology
roadmapping

Evaluation of
alignment

Strategic level

Tactical level

Operationalization

Strategic
decision-making
for outsourcing

If not aligned, but key or
emerging technology,
then integrate supplier
in NPD or find alternate
sources and solutions

If aligned and high degree
of technological change
expected, then integrate supplier
in later stages of NPD

If aligned and low degree
of technological change
expected, then integrate supplier
in NPD, depending on
capabilities for design

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134   •   innovAtion MAnAgeMent And npd for engineers

specific projects for new products and services and to establish beneficial
long-term relationships.

4.3.3 commeRcial ReSeaRch oRganizaTionS

The same benefits can be obtained from commercial research organiza-
tions that undertake contract research for other companies. These com-
mercial research organizations can be divided in companies that provide
services to product and service development projects and companies that
develop technology. The first category can be test facilities, prototyp-
ing, testing, and so on. For example, in the pharmaceutical, biotech-
nology, and medical device industries, it is common to use so-called
contract research organizations. Such organizations may provide such
services as pharmaceutical development, biologic assay development,
commercialization, preclinical research, clinical research, and clinical
trials management depending on the capabilities of the firm that uses
these services. The second category consists of companies that develop
technology themselves, but do not commercialize this in their own prod-
uct and services. A case in point is AVL List, located in Austria. It is the
largest independent company for development, simulation, and testing
technology of powertrains for passenger cars, trucks, and large engines.
It is this latter category of commercial research organizations that is
especially important as supplier of technology to the development of
new products and services. Thus, service contract research organizations
provides services to companies that are developing new products and
services, whereas contract research organizations develop independently
technology for other companies or develop technology based on speci-
fications from other companies, from both companies can benefit, albeit
in different ways.

4.4  universities

A fourth source of ideas and inventions are universities. There is strong
evidence of complementarity between publicly funded research (mostly
taking place at universities) and private investment on R&D and corpo-
rate innovation (for example, Veugelers and Del Rey 2014, pp. 19–20).
Looking at the contribution by universities to innovation, three distinct
roles can be distinguished for their contribution to ideas and inventions
(Universities UK 2015, pp. 12–19).

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sourcing for innovAtion   •   135

4.4.1 univeRSiTieS aS knowleDge PRoviDeRS

The first role of universities comes from their engagement in a wide
range of knowledge exchange activities, such as long-term collaborative
research programs, consultancy, and bespoke training. The involvement of
universities in knowledge-exchange activities has a number of important
advantages for innovation by firms:

• By conducting long-term, speculative research, academic
researchers can create and spot upstream innovation opportuni-
ties that other players, such as customers and suppliers, might not;
these opportunities are distant from the market that companies
operate in and allow some degree of exploring without directly
needing to reap benefits. A growing body of evidence shows that
public funding for research is fundamental to enabling this, as
individual and business incentives differ from those of govern-
ments; see Box 4.2 for the development of MRI. Markets encour-
age activities that generate returns on rapid timescales. However,
this can be at odds with the basic scientific exploration that
some forms of innovation, particularly technological innovation,
depend on; these timescales for exploration are sometimes com-
mercially not viable.

• When downstream innovation opportunities have already been
identified, firms in an innovation system are not necessarily able
to procure all the expertise needed to bring the product or ser-
vice to market; these downstream opportunities for innovation are
close to market, but not always ready for the market. Sometimes,
it requires complementary peer-reviewed knowledge, highly spe-
cific skills, or experimental approaches that may only be available
in universities.

• Academic support can be easily adapted to firms of all sizes: uni-
versities’ wide portfolios of research, consultancy, and training
make it possible for them to tailor support to the needs and scale
of individual organizations. Engagement can occur through ambi-
tious, long-term collaborative R&D programs. However, it is often
done effectively on a much smaller scale, for example, through
the exchange of people, feasibility studies, or innovation voucher
schemes.

In this perspective, research commissioned by the Department of Business
Innovation & Skills (2014) highlights the substantial positive impact of
collaboration with universities and public sector research establishments
on business performance. Businesses that engage in these partnerships are

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136   •   innovAtion MAnAgeMent And npd for engineers

not only more likely to invest in R&D themselves, but tend to perform
significantly better on process and product innovation, sales of novel
products, and use of technical information than similar firms over a three-
year period. In addition, firms that collaborate with universities are more

An important early figure in the research on nuclear magnetic resonance
is Isidor Rabi, who worked at Columbia University, where in the 1930s
he developed an apparatus that succeeded in detecting and measuring
single states of rotation of atoms and molecules and in determining
the magnetic moment of nuclei. In 1946, Felix Bloch, at Stanford
University, and Edward Purcell, at Harvard University, found nuclear
magnetic resonance, the phenomenon where nuclei absorb then read-
mit electromagnetic energy. Over the next 25 years, many researchers
developed this into a sensitive probe of materials properties.

Paul Lauterbur produced the first two-dimensional image with
nuclear magnetic resonance while working at the State University of
New York at Stony Brook in 1973. A year later, Peter Mansfield, at
the University of Nottingham, filed a patent and published a paper on
image formation by nuclear magnetic resonance. Richard Ernst devel-
oped the basic technique of today’s magnetic resonance imaging (MRI)
in 1975, inspired by a talk by Lauterbur a year earlier. All three won the
Nobel prize. MRI continued to be improved; by the 1980s, performing
cardiac MRI was possible, as well as the imaging of congenital heart
disease. The National Institutes of Health have played a long-term role
in the development of MRI.

Advances in the 1990s led to new technologies based on MRI, such
as diffusion tensor MRI (DT-MRI). This is able to measure the motion
of hydrogen atoms. Unlike conventional MRI, this spin-off technology
can show white matter in the brain, providing a new tool for studying
concussions, schizophrenia, and Alzheimer’s. Peter J. Basser, James
Mattiello, and Denis LeBihan invented DT-MRI while working at the
National Institutes of Health.

Both the National Institutes of Health and the National Science
Foundation (United States) have played a role in the long-term devel-
opment of MRI, which allows enhanced diagnosis of disease and
an improved ability to monitor treatments. The National Science
Foundation supported this development of nuclear magnetic resonance
with 90 million U.S. dollars from 1955 until the 1990s.

Box 4.2. Development of Magnetic Resonance Imaging

Sources: Singer (2014, pp. 20–21).

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sourcing for innovAtion   •   137

likely to report that they introduced product innovations and more likely
to report that they introduced service innovations. As further suggested in
a report commissioned by Universities UK (2015), businesses that engage
with universities on innovation are much more likely to report a better per-
formance on product range, market share, and product quality than those
that do not. These outcomes of investigations mean that engagement with
universities for generating ideas and creating inventions is potentially of
great benefit to firms.

However, this literature also emphasizes the large time lags required,
the importance of the innovative system’s position relative to the techno-
logical frontier, the restriction of these positive effects to specific subsets
of technological fields, and the importance of geographic proximity. The
large time lag is a result of the efforts needed to establish academic knowl-
edge that eventually can result in commercialized products and services.
A case in point are technologies of the semi-conductor industry; these
also require investments in highly specialized manufacturing facilities,
and for this reason only, there has to be certainty about the application of
technologies before commercialization comes into view. Moreover, the
universities and industries should be at the leading edge of technology to
make this work. Again, look at the semi-conductor industry, in this case in
Taiwan, where universities and firms collaborate in research; the Hsinchu
Science Park is an example of such collaboration. Even though these
firms and universities are closely linked, their advances are limited to cer-
tain technological domains. Companies in the Hsinchu Science Park are
reportedly not having the capabilities to transform these products of the
semi -conductor industry in more lucrative products and services. There-
fore, the link between science and industry is neither direct nor obvious.

4.4.2 univeRSiTieS aS innovaTion faciliTaToRS
anD BRokeRS

Aside from contributing to business innovation directly by collaborat-
ing on the development of new products or services, universities also
play an important role in facilitating innovation indirectly. For example,
they provide space for innovative firms to interact closely and assist in
the development of networks. Increasingly, universities are investing in
spaces, equipment, and facilities that are open to, or shared with, the local
innovation community; for example, the University of Glasgow is creat-
ing a Research and Innovation Hub to this purpose. This is an effective
way to accommodate the needs of the local innovation community and
to help maintain the world-class facilities that are needed to attract talent

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138   •   innovAtion MAnAgeMent And npd for engineers

and investment from all around the world. For example, in the 1980s,
the United Kingdom only counted a handful of university-owned science
parks. Nowadays, about half of the around 100 United Kingdom’s science
parks are owned by or linked to universities. Furthermore, equipment-shar-
ing arrangements between universities and businesses are increasingly
common. Access to university infrastructure comes with expertise that
becomes critical to innovation processes for businesses. Most commonly,
universities use so-called technology transfer offices for the commercial-
ization of their inventions; these offices mediate between universities and
commercial organizations about inventions and patents resulting from
academic research. Thus, universities are entangled in relationships with
the local innovation community and interact with this community, rather
than just providing knowledge and inventions.

4.4.3 univeRSiTieS aS innovaTion inveSToRS

As part of their role as innovators, universities have taken steps to help
innovative ideas cross the so-called valley of death between research and
its commercial exploitation; this valley of death refers to outcomes of
research, such as new technologies and new artifacts, not being picked
up by firms to turn them into new products and services. To cross this
valley, universities may take a proactive role in the commercialization of
their research when opportunities arise, through investment in academic
and graduate spin-offs, and backing ventures that can add value and com-
plementary expertise to their internal facilities for research. A report by
Targeting Innovation (2008) shows the importance of these spin-offs for
the Scottish economy. Although these activities often generate a return
for universities, the greatest value added from these investments comes in
the form of strengthened research and commercialization skills for staff,
successful innovation by firms and other forms of ventures, and social and
economic benefits for customers, users, and beneficiaries.

Despite the fact that spin-off activities represent a small fraction of
universities’ third mission activities, they are, nonetheless, an important
vehicle for research impact and innovation. Between 2010 to 2011 and
2013 to 2014 alone, United Kingdom’s universities helped generate nearly
15,000 new graduate startups and academic spin-offs, helping many of
these with seed funding, subsidized space, mentoring, and business support
(Universities UK 2015, p. 17). In addition to spin-offs, there are further
ways in which universities are facilitating the move of ground-breaking
ideas to markets. These include activities such as creating or investing

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sourcing for innovAtion   •   139

in venture capital funds to setting up full-blown venture capital and loan
entities, individually or in partnership with other institutions. These activ-
ities are sometimes found in incubators (companies that support new and
start-up companies to develop by providing services such as management
training or office space), science parks, and licensing (see also Section
8.2). Particularly, incubators are momentarily seen as a fertile ground for
innovation. A case in point is LCFT Innovation Incubator in Lancashire
(UK) that stimulates innovation in the health care sector; two partners are
universities in the region, Lancaster University and the University of Cen-
tral Lancashire. Thus, universities in their role as investors are involved
in a broad range of activities to commercialize academic output, ranging
from spin-offs to incubators to venture capital funds.

4.5  eMpLoyees

A fifth source of innovation is found within the firm. Employees in addi-
tion to sales and marketing together make up one of the largest sources
for ideas. By virtue of experience and exposure within an industry and
its related products, employees are often the most well-informed source
for ideas and can provide detailed, structured proposals for new products
and services. This means that companies should encourage employees
to generate ideas by providing them with the necessary infrastructure to
submit new proposals. The Post-It notes, small pieces of paper with a re-
adherent strip of glue on its back, by 3M, are an example of how an idea
by an employee can turn into a commercial success, see Box 4.3. Another
example is the pharmaceutical firm Bristol-Myers Squibb, which involved
its employees in constantly seeking innovative new ideas. The company
instituted a series of ideation campaigns that generated ideas from many
sources. And, it installed tip-lines on its intranet, which enabled employ-
ees to easily submit ideas. In a typical campaign, some 4,000 individual
ideas were generated (Tucker 2003). In addition to individual employ-
ees, the sales and marketing department usually experiences the greatest
balance between customer relations and internal communication. This
allows them to easily anticipate and articulate the needs of consumers and
translate them into usable ideas. During a session about open innovation
(see Section 9.2) organized by the Centre for Engineering Education and
Development, participants relayed some worries about how ideas gener-
ated by employees are managed; particularly, when ideas are not picked
up, this may lead to demotivation (Dekkers et al. 2016). In this sense, it is
important that the process of idea generation and evaluation is transparent.

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140   •   innovAtion MAnAgeMent And npd for engineers

Once this transparency is created, the generation of ideas and inventions
by employees may be a worthwhile source of innovation.

Another view is that the generation of ideas and inventions and their
commercialization does not happen within one discipline or department,
but rather, that it emerges in the white spaces between disciplines and
departments, according to DeGraff and DeGraff (2017). White spaces are
where unmet and unarticulated needs are uncovered to create innovation
opportunities. These new products and services do not exist yet based on
the present understanding of values, definition of business, or even exist-
ing competencies. This is why it is more important to include all employ-
ees in the innovation process and build links across departments. These
links offer further opportunities to discover gaps in provision, and new
products and services. Because innovation is highly iterative, it is neces-
sary to not only allow all employees to submit ideas, but also to give them
a way to comment and participate in the ongoing process of innovation.
By doing so in an open and transparent process, the ownership of success
through innovation becomes part of the fabric of an organization, and it is
not restricted to R&D departments and engineering. The engagement of

In 1968, a scientist at 3M in the United States, Dr. Spencer Silver,
was attempting to develop a super-strong adhesive. Instead, he acci-
dentally created a low-tack, reusable, pressure-sensitive adhesive. For
five years, Silver promoted his solution without a problem within 3M
both informally and through seminars, but failed to gain acceptance.
In 1974, a colleague who had attended one of his seminars, Art Fry,
came up with the idea of using the adhesive to anchor his bookmark
in his hymnbook. Fry then utilized 3M’s officially sanctioned permit-
ted bootlegging policy to develop the idea. The original notes’ yellow
color was chosen by accident, as the lab next-door to the Post-it team
had only yellow scrap paper to use.

3M launched the product as Press ‘n Peel in stores in four cities
in 1977, but the results were disappointing. A year later, 3M instead
issued free samples directly to consumers in Boise, Idaho, with 94 per-
cent of those who tried them indicating they would buy the product.
On April 6, 1980, the notes were re-introduced in U.S. stores as Post-It
Notes. The following year they were launched in Canada and Europe.

Box 4.3. Development of Post-It Notes

Sources: Wikipedia (2015).

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sourcing for innovAtion   •   141

all employees and departments is seen as key factor for achieving a high
rate of innovation in firms.

4.6  coMpetitors

Competing organizations, leading firms, and business leaders are a sixth
source for innovation. Indicative information about their views, strategies,
and activities are often presented at industry conferences, exhibitions, and
trade shows; sometimes, this type of information is found in professional
publications, such as business magazines. By being aware of what the
competition is developing or researching, organizations can often build
on these ideas by appending or modifying them to create new products
or services themselves. Staying well-connected and networked with other
leaders in their industry, across industrial sectors, and markets is another
avenue for gathering ideas. Thus, the compilation of information from
competitors is an additional activity for sourcing ideas and inventions.

Sometimes, competitors work together for the purpose of innovation,
which is called co-opetition. Several examples are mentioned to highlight
the value these strategic alliances have brought to fierce competitors, such
as Ford and Toyota for hybrid powertrains and Boeing and Lockheed Mar-
tin for specific defense contracts. Without these collaborative efforts, these
companies would not have been able to be as competitive and innovative
as if they acted on their own, certainly for mitigating risks and alloca-
tion of resources in times of technological discontinuities (Gnyawali and
Park 2011, p. 652). Furthermore, co-opetition allows also the participating
firms to establish industry standards; think about the dominant design that
will emerge after a period of technological discontinuities (see Subsec-
tion 3.3.1). These collaborations are sometimes marred with distrust and
conflict. In that sense, a study by Bouncken and Fredrich (2011) on the
information technology industry shows that co-opetition can be associated
with increased radical innovation. However, this requires a high degree
of trust between the partners, even when they are quite dependent on the
outcomes of the collaboration. This indicates that co-opetition can lead to
success and enhance the capacity to innovate for firms.

Very differently, collaboration with competitors for the purpose of
innovation, might also serve a different purpose. Narula and Santangelo
(2009, p. 400) infer, based on an econometric analysis of 17 European ICT
firms and their alliances, that R&D alliances might be motivated more by
monitoring of competitors’ activities, rather than knowledge creation. This

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142   •   innovAtion MAnAgeMent And npd for engineers

means that, under the disguise of collaboration, companies actively seek
information about the innovation activities of their competitors.

4.7  Key points

• The generation of ideas and inventions constitute the core of inno-
vation processes and management. For these ideas and inventions,
there are six sources:
 Inventors. Both independent and entrepreneurs generate

inventions and ideas. Generally speaking, these ideas and
inventions are subsequently commercialized or sold to others
for commercialization.

 Users. According to some studies, users inspire inventions and
innovation. This happens in a variety of industries, sports being
among them. There are many ways for involving customers,
according to the stage of development of a new product and
service. User involvement is often associated with incremental
innovation.

 Suppliers and commercial research organizations. This third
source of innovation is seen as supplementing the internal
sources of innovation by a firm. The disadvantage is this source
of ideas and inventions is also available to competitors.

 Universities. Research at universities may result in new ideas
and invention that can be commercialized by firms. It is quite
common that this commercialization is supported by so-called
technology transfer offices.

 Employees. Because of their innate knowledge about the firm’s
products and services, employees are seen as a powerful source
of innovation. It is also seen as motivation to involve employ-
ees, given that idea generation and evaluation is transparent.
Others view the so-called white spaces between departments as
opportunities for new business models, products, and services.

 Competitors. This source of innovation, called co-opetition,
should be considered a component in the innovation process.
Without collaborative efforts, companies may not be able to be
as innovative as if they acted on their own.

• Historically, innovation by individual inventors is seen as a major
contribution to the development of economies by creating new jobs
and companies.

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sourcing for innovAtion   •   143

• Universities have multiple roles in innovation processes. The first
is that of providing knowledge-exchange activities, such as long-
term collaborative research programs, consultancy, and bespoke
training. The second one is providing facilities indirectly through
technology transfer offices, innovation hubs, and so on. And,
the final one is a proactive role in the commercialization of their
research through spin-offs, ventures, science parks, and so on.

• Lead users are defined as an extremely valuable cluster of
customers and potential customers who can contribute to identifi-
cation of future opportunities and evaluation of emerging concepts.
Engaging with these lead users may result in new opportunities for
products and enhancement of services.

• Co-opetition occurs when a group of competitors cooperate in
activities associated with creating mutual benefits, while at the
same time, they compete with each other in activities associated
with dividing up the benefits. Thus, there is the need to collabo-
rate on innovation with competitors when competitive conditions
in the market compel rivals to join forces for new product and
service development. However, competitors may also have ulterior
motives when collaborating.

4.8  references

Black, H.S. 1977. “Inventing the Negative Feedback Amplifier: Six years of
persistent Search Helped the Author Conceive the Idea ‘in a flash’ Aboard
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chApter 5

collaBoration for
innoVation

Not is it only important to work for ideas and inventions with external
parties, such as commercial research organizations, competitors, inven-
tors, suppliers, and universities (as discussed in Chapter 4), the collabo-
ration with these during new product and service development will also
determine the success of projects aiming at innovation, among other
factors. However, the collaboration with partners is often perceived as dif-
ficult, when speaking to firms. Particularly, this is the case for innovation,
which is associated with risks at the long run. From this perspective, often
issues such as trust and power are mentioned. This mix of risks, trade-offs
between long run and short-term benefits, trust, and power make collabo-
rations often complex and challenging for those involved.

To look at how companies can collaborate effectively, how to work
in networked organizational forms, and how to avoid pitfalls in these
collaborations are the topics of this chapter. The first section of this
chapter looks at so-called strategic networks for collaboration. This type of
networks includes alliances and joint ventures. Section 5.2 will look into
collaborations with suppliers. It covers the selection of suppliers during
new product and service development, the involvement of suppliers and
the development of the capabilities of suppliers. In Section 5.3 innovation
networks are discussed, which consist of more loosely-connected actors
that collaborate to achieve innovations. How those actors work together
is found in Section 5.4. In these collaborations the absorptive capacity of
individual firms plays a key role, according to Section 5.5. Global research
networks in Section 5.6 and innovation management in supply chains in
Section 5.7 conclude this chapter.

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148   •   innovAtion MAnAgeMent And npd for engineers

5.1  strAtegic netWorKs for innovAtion

One way of collaborating for innovation is through strategic networks.
The study of these networks as a key aspect of industrial organization
goes back to the 1980s with the seminal work of Håkansson (1990) at
Uppsala University, who defined networks as sets of more or less special-
ized, interdependent actors involved in exchange processes; this means
that these actors work together, but retain their independence. Around the
same time, the study of urban, networked organizations in the industri-
alized regions of northern Italy recognized the importance of networks
for innovation aiming at improving logistical efficiency (Camagni 1988,
1993). Simultaneously, writings appeared on strategic networks, which
are defined as long-term, purposeful arrangements among distinct, but
related, for-profit organizations that allow members to gain or sustain
competitive advantage over their competitors outside the arrangement
(Ireland et al. 2002; Jarillo 1988, p. 32). According to this view, strategic
networks are merely a superior method of managing the process necessary
for the generation and sale of a chosen set of products (like in Freiling
1998); this applies also to innovation and new product development (e.g.,
Deeds and Hill 1996). The participation of companies in these networks
depends on managing product and service development, both at the level
of the network and individual companies, and on managing operational
processes; the purpose of these networks is to gain competitive advantage
through access to resources and through the development of competitive
products and services.

These strategic networks are usually in the form of strategic alliances
and joint ventures. SMEs tend to work together in networks or virtual
networks. These forms of strategic networks will appear in the next sub-
sections, followed by how best to select a mechanism for collaboration.

5.1.1 STRaTegic allianceS

As one form of strategic networks, a strategic alliance is an agreement
between two or more parties to pursue a set of agreed-upon objectives
needed while remaining independent organizations. This form of coop-
eration can be positioned between mergers and acquisitions, and organic
growth of firms. Strategic alliances happen when two or more organiza-
tions join together to pursue mutual benefits. These benefits are found in
what the partners may provide to the strategic alliance, such as products
and services, distribution channels, manufacturing capability, project
funding, capital equipment, knowledge, expertise, or intellectual property.

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coLLAborAtion for innovAtion   •   149

Therefore, an alliance is a cooperation or collaboration that aims for a
synergy where each partner hopes that the benefits from the alliance will
be greater than those from individual efforts.

The alliance often involves technology transfer (access to knowl-
edge and expertise), economic specialization, shared expenses, and
shared risk. Alliances tend to maintain and improve competitive advan-
tage by making strategic decisions, which are primarily focused on the
development of new products, services, and processes. These decisions
are aimed at aligning the strengths of the alliance with its external pos-
sibilities. Entering these cooperative arrangements lowers the costs and
risks, as the costs and market risks for new product and service develop-
ment tend to be very high for an individual company. Bearing in mind
the increase in costs, risks, and needs for new technologies, the pre-
requisite for competitive success is cooperation in terms of innovative
activities, production, and distribution of new products. An innovation
strategy can introduce new perspectives for development of strategic
alliances aiming at specific market. Therefore, forming of strategic alli-
ances and formulating a related innovation strategy are key processes for
sustaining alliances.

By applying strategies of innovation, these strategic alliances offer
new products for customers and position themselves at (new) market
segments. Some innovation strategies for these alliances are platform
strategy, co-creation strategy, technology strategy, research strategy, part-
nership strategy, knowledge-based strategy, and risk mitigation strategy
(derived from Stefanović and Dukić 2011, pp. 61–2):

• The application of a platform strategy enables each firm in a stra-
tegic alliance to offer products for specific market segments, while
sharing a generic product or service architecture. For example,
Nokia and Siemens as partners created different phones, in terms of
external design, while their manufacturing technology was 80 per-
cent the same (Lord et al. 2005, p. 126). This practice has also been
used in the automotive industry among others (Meyer and Utterback
1993). For instance, Citroen, Fiat, Lancia, and Peugeot in the 1980s
developed a common platform for mini-vans (or multi-purpose
vehicles); this allowed the companies to share their development
costs while still retaining their own specific (external) design. Also,
this allows firms in this type of alliances to expand their business
globally, at the same time adapting their products to specific mar-
kets. This strategy demands strong visionary leadership, intensive
teamwork, which is focused on innovation and product develop-
ment. In case of implementation of this strategy, strategic alliances
come along with financial and technological risks (Bowonder et al.

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150   •   innovAtion MAnAgeMent And npd for engineers

2010, p. 21). Therefore, a new product is the same technologically
when an alliance focuses on a platform strategy, but differs in its
special characteristics depending on the target market.

• A co-creation strategy of a strategic alliance creates value by
involving customers in new product creation and development with
a goal to increase customer satisfaction. The needs and sugges-
tions of customers are captured and new products are developed
accordingly (Bowonder et al. 2010, p. 23). For example, Procter
& Gamble reached an agreement with the International Olympic
Comity and connected to mothers of six top Olympic athletes
worldwide. Within this arrangement, ideas were created for new
products development aimed at improving the life of athletes; 50
percent of these ideas emerged from the interviews with these
mothers (Lord et al. 2005, p. 130). Thus, the co-creation strategy
aims at reaching out to (potential) customers and eliciting ideas for
new products and services.

• A technology strategy for a strategic alliance aims at the use of
innovative technologies in order to achieve dominant competitive
positions. These technologies may have been generated internally
within the alliance or acquired externally. Strategic alliances could
also use technologies from more than one source and maintain their
leadership position in this manner (Bowonder et al. 2010, pp. 26–7).
For example, at the time Nokia entered a strategic alliance with
Microsoft with the purpose of expelling Android-based mobile
phones and Apple’s iPhone; it was going to exploit Microsoft’s
Windows Phone 7 platform, while its competitors used platforms
made by Google, and Apple had its own operating system. How-
ever, this had not only to be seen as a battle between Nokia on one
side and Google and Apple on the other, but also as a battle between
Microsoft and Google in the field of modern technologies (Lord et
al. 2005, p. 135). Thus, this type of strategy for strategic alliances
aims at creating partnerships for one of competing technologies in
order to strengthen the position of all partners in the alliance.

• A research strategy for strategic alliances implies that collabora-
tion is seen as beneficial based on monitoring technology trends
and as strengthening positions of individual firms for the future.
However, the future cannot be predicted easily, so firms and stra-
tegic alliances must have more than one option (see Dekkers
[2017, pp. 247–54] for multiple strategies and scenario planning).
A case in point is that Canon foresaw that LCD monitors would be
replaced with more technologically advanced solutions. However,
it was not able to develop advanced technology, so it entered the

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coLLAborAtion for innovAtion   •   151

partnership with Toshiba and began developing flat screens based
on surface-conduction electron-emitter technology as an alternative
strategy (Bowonder et al. 2010, p. 27).

• A partnership strategy for a strategic alliance is used to improve
the innovation process, to exploit complementary competencies of
each partner, and to share risk and resources. The objective of these
alliances is to beat the competition by innovating in partnership.
For example, Airbus forged an alliance with Aérospatiale, British
Aerospace, CASA, and Deutsche Aerospace AG to develop the
A380. The exchange of knowledge and resources between the five
partners helped Airbus in creating the biggest airliner in the world
(Bowonder et al. 2010, pp. 27–8). Thus, the aim of a strategic alli-
ance based on a partnership strategy is because the capacity and
capabilities of an individual firm are insufficient for the develop-
ment of a process, product, or service; this also means that risks are
being shared in such a strategic arrangement.

• Strategic alliances that use a knowledge-based strategy of innova-
tion are oriented toward development of new high-quality products
with high level of different types of knowledge built into them. The
application of this strategy aims at improving technology in order
to satisfy specific needs of certain customer segments. This hap-
pens specifically when technological and market uncertainties are
deemed high (Whitly 2000, p. 871). For instance, Daimler AG and
Renault-Nissan joined up so that they could develop technology for
small electrical cars. This cooperation entailed joined development
of small volume batteries and aggregates that are built into electric
cars. The main objective of the cooperation was the development
of small city car for the needs of Daimler. In return, Daimler helped
Nissan with developing technology of large volume aggregates and
hybrid technology (Lord et al. 2005, p. 140). This means that a
knowledge-based strategy can be asymmetrical with regard to the
knowledge of the partners and benefits of the partnership.

• A risk mitigation strategy of innovation in a strategic alliance aims
at the development of new, technologically superior, high-quality,
knowledge-based products, which perform in a broad range of dif-
ferent uses and enable the replacement of older products and ser-
vices. Strategic alliances aim to dominate markets with this strategy,
but they can also be exposed to high risks when introducing these
products and services in the market. In many cases, alliances are
focused on specific types of customers who were ignored by previ-
ous manufacturers. By developing cooperation with customers and
suppliers, diversification of risk is achieved and mutual interests

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152   •   innovAtion MAnAgeMent And npd for engineers

can be satisfied (Whitly 2000, pp. 872–3). The partnership between
Bayer CropScience and Food Chain was created with the idea in
mind that Bayer CropScience would give its clients expert advice
and technical support. Bayer CropScience supported breeders, pro-
cessors, and sellers in their efforts to offer high-quality product to
the end customer at acceptable price. Thus, Bayer CropScience
proactively initiated partnerships within the food supply chain.
Participation in Food Chain projects was focused on improving
reliability of customers, as well as the food industry regarding qual-
ity and food security (Lord et al. 2005, p. 145).

It could also be that partners in a strategic alliance seek a multiple of
these arrangements. Nevertheless, these different strategies for innova-
tion in strategic alliances demonstrate the variety of objectives, benefits,
and arrangements that motivate partners to collaborate for achieving
innovation.

However, it appears often that the factors power and trust domi-
nate the relationships in these types of strategic networks (Das and Teng
2001; Thorelli 1986, p. 38). This is caused by the fact that these strategic
alliances come about through strategic objectives of one or more of the
partners, which make it necessary to collaborate and which create ten-
sions in inter-organizational relationships (whether they are research- or
market-oriented [Hagedoorn and Schakenraad 1999, p. 307]). This means
that each partner aims to serve its self-interest, which does not necessar-
ily align with the espoused objectives of the strategic alliance. There are
plenty of examples of strategic alliances that have failed. A case in point
is the acquisition of a substantial stake in Japanese manufacturer Suzuki
Motor Corporation by German Volkswagen in late 2009. The deal saw VW
take 19.9 percent of Suzuki for 1.7 billion Euros and sign an agreement to
share technologies and global distribution networks. This would help both
firms break into each other’s markets, with VW dominant in Europe, but
struggling to enter Asian markets. Part of the arrangement saw VW allow
Suzuki to have use of much of its electric and hybrid vehicle technologies,
while the Japanese firm offered its German partner its own technologies,
as well as access to its lucrative hold of the Indian market. The partnership
quickly unraveled in a storm of disagreements. By October 2011, Suzuki
claimed VW had breached its contract, particularly in failing to handover
the hybrid technology. A month later, the two companies terminated their
agreement to work together, and Suzuki demanded VW return its near
20 percent stake: something the German firm refused to do. The dispute
eventually went to an international arbitration court. This example shows
expected benefits of all partners should be managed through the life cycle
of a strategic alliance to avoid failure.

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coLLAborAtion for innovAtion   •   153

5.1.2 JoinT venTuReS

Another form of collaboration for innovation is a joint venture. This is a
business agreement in which the parties agree to develop, for a finite time,
a new entity and new assets by contributing equity. Normally, they exercise
control over the newly founded enterprise, and consequently share rev-
enues, expenses, and assets. The objectives and related strategies can be
similar to those of strategic alliances (see Subsection 5.1.1). An example
of what is considered a successful joint venture is the one formed in 2006
by Siemens of Germany and Nokia of Finland, called Nokia Siemens Net-
works U.S. It was headquartered in Espoo, Finland. The formation of this
joint venture was prompted by the mergers in the industry, such as Alcatel
with Lucent. Its need also came about to counter the rise of low-cost Chi-
nese manufacturers, such as Huawei Technologies. The joint venture was
officially launched in 2007 and has continuously operated since then in 150
countries. In 2011, the company was rated by measure of revenues as the
fourth largest manufacturer of telecom equipment. In this respect, it was
next only to Ericsson, Huawei Technologies, and Alcatel Lucent. In 2013,
Nokia acquired 100 percent of Nokia Siemens Networks, buying all of Sie-
mens’ shares. The advantage of this arrangement is that the exposure to
risks is limited to the joint venture and the equity put into it by the partners.

These joint ventures that are successful normally develop into dif-
ferent forms, as already shown by the example of Nokia Siemens Net-
works in the previous paragraph. They become an independent firm,
what is sometimes called outsourcing, or they merge with one of the part-
ners or another firm; Figure 5.1 depicts this process for joint ventures.
For example, IBM decided to divest itself of its Rolm Communications
Division in 1989, rather than selling it outright; it spun it off into a 50–50
joint venture with Siemens, which then eventually bought the entire
division after assimilating Rolm into a new culture. This means that even
successful strategic collaborations are sometimes temporary and subject
to competitive market forces.

Figure 5.1. Schematic represen-
tation of joint ventures turning
into outsourcing and mergers.

Time

Joint Ventures

Outsourcing

Mergers

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154   •   innovAtion MAnAgeMent And npd for engineers

5.1.3 SelecTion of mechaniSmS foR
collaBoRaTion

Whether aiming for a temporary or long-term collaboration, the nature of
the strategic collaboration has to be selected. To this purpose, the classi-
fication of Roussel et al. (1991) can be used; see Subsection 3.3.1. Based
on its four categories, Omta (2004) presents a matrix for partner selection
and forms of collaboration; see Table 5.1. In this matrix, when there is an
emerging technology, which may have competitive impact in the future,
and if the firm’s technological capability is strong, optimizing the tech-
nological capability to reinforce the potential competitive advantage is
called for. If the internal technological capability is moderate or weak,
catching up may be necessary. However, uncertainty requires for scanning
the options for R&D, that is, many partners and flexible relationships,
preferably in strategic partnerships and alliances, or via contract research
organizations and sponsoring of knowledge institutions. In all cases, ade-
quate patent protection strategies need to be considered (see Chapter 7).
A pacing technology may have strong competitive impact on the short
or medium term. If a firm’s technological capability is relatively strong,
the bias should be toward doing the work in-house. Extra investments
may be required for research into the application of the technology in new
products and markets. If a firm’s technological capability is moderate,
sharing the risk by strategic alliances with partner firms makes the most
sense. If a firm’s technological capability is weak, acquiring of licenses or
joint development may be viable alternatives. Pacing technologies need
utmost management care, especially if the technology is maturing rapidly,
because these might become essential in the (near) future. It is, therefore,
necessary to scan research efforts by competitors and potential technol-
ogy sources intensively. Furthermore, the technologies in-house need to
be protected carefully. Generally speaking, the company should own key

Competitive impact
of technology

Internal technological capability
Weak Moderate Strong

Emerging Scan Scan/collaborate Collaborate
Pace Collaborate Share risks In-house
Key Optimize Optimize In-house
Base Outsource Outsource/

exchange
Sell/
exchange

Table 5.1. Matrix for partner selection and collaborative modes

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coLLAborAtion for innovAtion   •   155

technologies, as being critical to current competitiveness. If a firm’s tech-
nological capability is weak or moderate in the technology area at issue,
it should acquire extra technological capability for building in-house
R&D strength by acquisition or by introduction of a substitute technology.
For non-critical base technologies, outsourcing might be the appropriate
choice if a firm’s technological capability in the field is weak. If it is mod-
erate, it may serve as a means of exchange in a partnership. If it is strong,
it either may serve as a means of exchange or may be sold to focus the
internal technological capabilities on key technologies.

5.2  coLLAborAting With suppLiers

One of the external sources for innovation is collaboration with suppli-
ers (see Subsection 4.3.1); if managed successfully, collaborative sup-
plier innovation can contribute to new product and services via improved
differentiation, time-to-market, and lowered costs. According to Johnsen
(2010, p. 188), the interest in collaborating with suppliers is rooted in
how the Japanese automotive industry managed to shape this involve-
ment across all stages from new product development to manufacturing;
he notes that these practices have now become common ground in other
countries and other industries (ibid., p. 193). It requires companies to pay
attention to supplier selection, supplier involvement, and supplier devel-
opment, which are the topics of the next subsections.

5.2.1 SelecTing SuPPlieRS

For the collaboration with suppliers, the selection process is critical, and
for this reason, the assessment of the capabilities of suppliers (Hartley et
al. 1997, p. 67) should be incorporated in decision making. An example
is the method proposed by Handfield et al. (1999, p. 65); see Figure 5.2
for an adapted version of this model. In this approach, setting out of a
technology strategy forms the starting point of identifying potential sup-
pliers. Such a strategy can be based on strategic tools for innovation and
technology management (see Section 3.5). Further insight can be derived
from the matrix for partner selection and collaborative modes (Table 5.1).
The technology strategy intersects with the need for supplier selection in
specific projects for new product and service development. Particularly,
the selection of suppliers with so-called critical technologies is of inter-
est; according to the classification of Roussel et al. (1991), these are the
emerging and pacing technologies (see Subsection 5.1.3). The suppliers of

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156   •   innovAtion MAnAgeMent And npd for engineers

interest should be evaluated on whether they have the capability and capac-
ity to contribute with critical technology to new product development and
how such should be integrated in the development of new products and
services. In the case that suppliers have a critical technology but do not
have the capability, yet, supplier development should be considered (see
Subsection 5.2.3). Furthermore, the integration into new product and ser-
vice development depends on the whether the technology strategy of the
supplier is aligned with the firm, the degree of technological change, and
the expertise in product design and engineering. The lesser the alignment,
the less the supplier will be integrated into new product and service devel-
opment. Therefore, the capabilities of a supplier in terms of being able to
integrate a pacing or emerging technology into a new product or service
determines when and how it will be integrated in its actual development.

Figure 5.2. Supplier selection and involvement for new product and service
development.

Technology strategy, e.g.
• Portfolio analysis
• Technology roadmaps
• Collaboration matrix

New product development
• Customer requirements
• Technical specifications
• Internal capabilities
• Performance targets

Identification
potential suppliers

Risk assessment
(supplier integration)
• Technological capability
• Capacity
• Performance criteria

Pre-qualify

No
Evaluation
• Acceptable history
• Prior experience
• Industry reputation
• Pre-qualification

Develop supplierCritical technology? Technology roadmap
supplier aligned?

High degree of
technological change?

High degree of
supplier design expertise?

Integrate supplier in later
stages of NPD

Consider following options
• Collaborate for current NPD
• Improvement program
• Other long-term sources

Integrate supplier
when appropriate

Fully integrate supplier
early in NPD

R
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ie
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o
f s

up
pl

ie
r’

s
ca

pa
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ie

s

Yes

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YesNo

YesNo

YesNo

YesNo

Feedback to supplier

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coLLAborAtion for innovAtion   •   157

A related type of decision making is whether an activity should
be outsourced; this is particularly of interest for manufacturing. Such
decisions often have far-reaching consequences for manufacturing in
terms of performance criteria. However, these decisions are also subject
to progressive insight about the new product and service, and incomplete
and inaccurate information. To deal with these characteristics of deci-
sion making during new product development, Shishank and Dekkers
(2013, p. 325) have proposed an iterative method; see Figure 5.3. This
framework consists of four quadrants. The first quadrant A contains pro-
cesses for decision making on outsourcing related to the manufacturing
strategy of a firm. Similar to the framework for supplier selection in
the previous paragraph, pre-selection of suppliers takes place, and the
actual performance of existing suppliers is also evaluated. The manufac-
turing strategy and capabilities of suppliers determine mostly whether
a component or part should be produced in-house or outsourced. These
decisions are integrated in the processes for new product and service
development (Quadrant B). The actual decision-making processes and
methods should also be considered (Quadrant C), because they deter-
mine how these decisions are underpinned (see also Section 2.4).
Finally, the expected performance of the decision to produce in-house or
externally is evaluated in Quadrant D. This evaluation if not satisfactory
may lead to starting the cycle of decision making again. This framework
for outsourcing, as was also the case for supplier selection, depends on
evaluation and assessment to ensure that external capabilities match
with (future) expectations of performance by the supplier, and with the
technology and manufacturing strategies.

The decision to outsource can also be extend to R&D itself. Howells
et al. (2008) investigate outsourcing in the U.K. pharmaceutical indus-
try. They find that most companies, whether small or large, engage in
external sourcing of processes and activities. These activities range from
basic research to services, such as clinical trials. However, these exter-
nal activities need to be set off against internal capabilities. Grimpe and
Kaiser’s (2010, p. 1502) research demonstrates that joint R&D projects
with a variety of external partners can be used to complement R&D out-
sourcing in that diverse collaboration leads to a higher diversity of the
accessed knowledge resources. However, firms should be aware that R&D
outsourcing can become disadvantageous if firms rely heavily on external
knowledge; deterioration of integrative capabilities and high demands on
governance by management are the most notable of these disadvantages.
Thus, gains from R&D outsourcing need to be balanced against the pains
that stem from a dilution of firm-specific resources.

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158   •   innovAtion MAnAgeMent And npd for engineers

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coLLAborAtion for innovAtion   •   159

5.2.2 eaRly SuPPlieR involvemenT

So far, the methods and model have covered whether to engage with
suppliers during new product and service development; another matter
when such a decision is taken is how to involve a supplier. That supplier
involvement has a positive effect is indicated by Kanapathy et al. (2014,
p. 9) when they state that 28 percent of the variance in performance of new
product development is related to supplier involvement. For this involve-
ment, a matrix by Le Dain et al. (2010, p. 79) can serve as starting point;
see Figure 5.4. This supplier involvement matrix is based on distinctions
made by Clark and Fujimoto (1991), Bortolazzi et al. (1996, pp. 37–8),
and Handfield et al. (1999, p. 67) for design and engineering activities
by suppliers:

• In the case of white box design and engineering, there is no or only
a low level of involvement during product design and engineering.
The supplier will follow mostly the specifications set by the firm
(buyer); thus, the information exchange is limited to informal con-
sultation when appropriate. This approach is also called informal
supplier integration.

• When there is blackbox design and engineering, the design of the
component is led by the supplier according to the buyer’s perfor-
mance specifications. This is possible when the (internal) design
of the component or part is independent from the design of other
components and parts of the product; the product configuration (see
Subsection 1.1.2.2) should allow this to happen, meaning that this

Figure 5.4. Matrix for supplier involvement, incorporating white, gray,
and blackbox approaches.

Subcontracting
Co-ordinated
development

Devolved
design and engineering

Strategic
co-design

Critical co-design

Development risk

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160   •   innovAtion MAnAgeMent And npd for engineers

is typically associated with a modular structure for a product.
• In the case of gray box design and engineering, there is joint devel-

opment with formalized integration. Characteristic for this type of
supplier involvement is that the interaction between the suppliers
and buyers leads to the design of the component or part. This also
means that the supplier may become part of the project team for the
new product.

The choice how to involve a supplier also depends on the capabilities of
the supplier and the strategic alignment; see Figure 5.2. Le Dain et al.
(2010, p. 79) add that the risks associated with the development also play
a role; these risks may cover the degree of novelty, product configura-
tion, technological complexity of the component or part, contribution of
component or part to market differentiation of the product, position of
the component or part on the timeline of the project, and relative cost of
the component or part compared with the product. Using this elaborate
assessment of the development matrix, there are five modes for supplier
involvement during new product development:

• Subcontracting (white box). In this mode, the supplier follows the
specifications of the firm developing the product; this also means
that there is hardly any interaction with regard to specifications and
technology. However, it is still important to assess the capabilities
of the supplier to provide the component or part.

• Co-ordinated development (white box). This type of involvement
happens when the product design is carried out in-house and the
process design performed by a supplier. The aim of this coordina-
tion is to effectively integrate both activities (product design and
process design), while keeping the supplier informed of modifica-
tions related to the iterative nature of new product development.
The supplier may be consulted during the product design phase to
provide tacit knowledge about its manufacturing process.

• Devolved design and engineering (blackbox). In this case, the sup-
plier is fully responsible for the design and development of the
component or part. The buyer supplies functional specifications
and the interface with other components and parts in the product
configuration. This may involve also testing whether these func-
tional specifications have been met.

• Strategic partnership (blackbox). Also in this case, the supplier
takes on the responsibility for the design and engineering of
the component or part. Nevertheless, this type of collaboration
requires intense communication with the supplier in order to
clarify requirements and monitor changes occurring throughout
the project.

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coLLAborAtion for innovAtion   •   161

• Critical co-design (gray box). Neither the customer nor the
supplier possesses the knowledge or the ability to completely
execute the design of the component or part in-house. The higher
the development risk, the more the buyer will try to promote
and manage collaboration between its own project team and the
supplier’s team.

According to the level of supplier autonomy, a position in the supplier
involvement matrix can be associated with white box configurations that
will require a decision to perform the design in-house, whereas a position
associated with gray or black box configurations will require a decision to
buy the design.

5.2.3 SuPPlieR DeveloPmenT

Sometimes, the selection process of suppliers, see Figure 5.2, may lead
to considering supplier development. This means that the firm that is
collaborating with the supplier supports its development of (technologi-
cal) capabilities (Lawson et al. 2015, pp. 788–9). Supplier development
should lead to improvements in the total added value from the supplier in
question in terms of product or service offering, business processes and
performance, improvements in lead times, and so on. There are different
ways of doing this, but no universal approach. Joint value engineering
(see Subsection 2.3.2) is one possibility in supplier development projects.
Another approach to supplier development is reverse marketing; one
example of which is where a buying organization encourages a suppli-
er(s) to enter a new market. This might involve the supplier developing
its operation or introducing a new range of products. Another example of
supplier development is positioning an engineer at the supplier to provide
technical support and informal knowledge exchange. This means that the
supplier development aims at improving technological capabilities so that
(strategic) suppliers can be more effectively involved during new product
and service development.

5.3   LooseLy-connected innovAtion 
netWorKs

Another way of how companies can collaborate is in so-called innova-
tion networks; to this purpose, it is necessary first to look at what type of
networks can be distinguished. A typology is provided by Robertson and
Langlois (1995, p. 548); see Figure 5.5. The typology has two dimensions.

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162   •   innovAtion MAnAgeMent And npd for engineers

The first dimension is the one of coordination integration. This means to
what extent companies and other agencies, such as economic development
agencies, are working together and coordinating their individual actions.
The second dimension is that of ownership integration, which means that
one or more companies in these networks own shares of other companies
in the network. Based on these two dimensions, six types of networks can
be distinguished. The first type of network is that of so-called Marshallian
districts. This terminology refers to the Marshall aid that was provided by
the United States after the Second World War to nations and regions in
Europe to recover from the damage to industry. Even though regions and
nations were the target of this aid, the actual collaboration was accidental,
and also, the companies involved in these networks did not own shares
in each other’s companies (remember that Europe was poor at that point
in time). The second type of network is that of venture capital networks.
These networks are loosely connected and exist because of a financier or a
group of actors providing capital for development of companies. In return
for these investments, these venture capital funds share expertise across
their network. The third type of network is that of keiretsu networks, also
called kaisha networks and in South Korea, chaebol networks. As the name
implies, these are organized around a single firm, which is usually a large
assembler. The satellite firms supply intermediate inputs to the focal firm,
which effectively coordinates the network as a whole (for example, Toyota
as described in Dyer and Nobeoka [2000] and Rolls-Royce Areo Engines
in Prencipe [1997]). A fourth type is the regional network labeled Third
Italy by Biggiero (1999) and Robertson and Langlois (1995, p. 549). The

Figure 5.5. Archetypes of industrial networks
mapped on ownership and integration.
Source: Robertson and Langlois (1995, p. 548).

Degree of coordination integration

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district

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district

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coLLAborAtion for innovAtion   •   163

fifth and sixth types are forms of single firms looked at from a network
perspective. In the case of a holding company, sometimes also called a
conglomerate, the degree of common ownership is high, but the constitu-
ent companies hardly work together or share information. The Chandlerian
networks are generally large companies where they own companies or
divisions from the supply of materials to the distribution of products. Think
about some traditional companies such as in the automotive industry and
the electronics industry (for example, Siemens in the 1960s and 1970s). All
these networks have different characteristics, but generally, we do experi-
ence a move toward more loosely connected entities (Dekkers and Bennett
2010; Nobelius 2004), adding to the possible ways, industrial firms might
collaborate for innovation and new product and service development.

The repositioning toward loosely connected entities in networks
implies complex interaction as particularly found in the fifth-generation
(and sixth-generation) processes for innovation (see Section 3.4). The
shift toward more loosely connected entities collaborating for innova-
tion are now enabled by possibilities offered by information and com-
munication technology and the need to find novel solutions sources from
a wide variety of sources. These developments encourage companies to
concentrate on core competencies, even given the flaws and pitfalls of this
approach (for the latter see Barthélemy 2003). Consequently, companies
have transformed from centralized, vertically integrated, single-site facili-
ties to geographically dispersed networks of resources (Dekkers and Ben-
nett 2010, pp. 22–3). These simultaneous developments foster the specific
characteristics of (international) networks, which require adaptations by
companies to fit these characteristics. This also raises questions to what
extent these networks are orchestrated by a focal firm or hub, the thinking
of Dhanaraj and Parkhe (2006), or really consist of autonomous agents,
as Rycroft and Kash (2004) advocate. If these networks are orchestrated,
then there is at least some degree of coordination (see Figure 5.5) and
possibly some degree of ownership. These thoughts also lead to views
whether the emergence of these networks are a result of globalization,
which allows companies to source further afield, or interaction between
companies, in which serendipitously connections are formed (even though
these may be stimulated through networking events, etc.).

Examples of these loosely connected networks are Swiss Microtech
Enterprise Network and Virtuelle Fabrik. The collaborative enterprise
network Swiss MicroTech consists of small and medium-sized enter-
prises (Cheikhrouhou et al. 2012). Originally, it was founded as a group
of four enterprises belonging to the same professional association, as an
outcome of an applied research project aiming to define a strategic indus-
trial network. The network was founded in 2001; its aim was improving

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164   •   innovAtion MAnAgeMent And npd for engineers

the position of its members on the market and addressing weaknesses of
smaller firms with regard to commercial services for larger customers in
the automotive, electronics, and medical industries. In 2018, it consists
of eight members, which specialize in machining, thermal treatments,
metallic treatments, and quadratic parts. Together, they cannot only offer
services to other, mostly large companies, but they also create innovative
solutions. Innovation would have been more difficult, because none of the
members has on its own the resources to reach out to large customers and
create novel solutions. A similar example, but larger in its constituency, is
Virtuelle Fabrik (Katzy and Crowston 2008). It started as a virtual organi-
zation in 1996 of manufacturing companies with idle machine capacity;
akin Swiss Microtech Enterprise Network, it was part of a network devel-
opment project (a cooperation between the network members and univer-
sity researchers) in two adjacent regions of Lake Constance and the Swiss
Midlands. These networks are still operating as two separate ongoing
collaborative enterprises. Their members range from small and medium
enterprises to production divisions of large multinationals. Over the years,
Virtuelle Fabrik has cooperatively produced dozens of products, from
simple parts of a complex module for a letter-sorting machine to entire
products like the litter shark, a city dustbin for which the Swiss Midlands
network was awarded the prestigious Swiss innovation award Idea Swiss
in 2004 (ibid., p. 681). This shows that these collaborative networks can be
very successful in innovation, even if they started out as collaboration in
manufacturing networks with the purpose of using idle capacity.

5.4   Actors in processes of innovAtion 
netWorKs

Collaborative efforts are not only seen as an approach to decrease manu-
facturing cost; cooperation between networked companies is increasingly
seen as a means for lowering development costs, accelerating product
and process development, and maximizing commercialization opportu-
nities in innovation projects. The capability of building and maintaining
inter- organizational networks, such as joint ventures, license agreements,
co -development (between suppliers and customers), and strategic alliances,
has led to more product and process innovations (Ritter and Gemünden
2003). This also covers the extension of capabilities, with manufacturing
services as a newly emerging trend, and the capabilities embedded in man-
ufacturing services partly answering the demand for customization. These
collaborations can be modeled as displayed in Figure 5.6 (adapted from

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coLLAborAtion for innovAtion   •   165

Dekkers [2005, p. 330]); this carries some resemblance to the coupling
model in Figure 3.13. The figure shows that companies can collaborate
in two modes. The first mode for collaboration is based on complemen-
tary assets, which is commonly called vertical collaboration. This means
that each of the actors in the value chain possesses knowledge, skills, and
assets that are necessary to create a product (or service). It also implies
that each of these sets of knowledge, skills, and assets is necessary to
produce a product or service. Through vertical collaboration, companies
insure value innovation spanning the entire value chain and the inte-
gration of skills and knowledge for meeting performance requirements.
Vertical collaboration provides the chance for improving processes by
learning, if learning cycles are present. The second mode of collaboration
is called horizontal collaboration and is based on supplementary assets.
Because these supplementary assets have similar knowledge, skills, and
capabilities for the value chain, this means principally achieving econo-
mies of scale through collaboration. In terms of innovation, by horizontal
collaboration, firms will increase the chances of finding substitutes for
products or their components. Both vertical and horizontal collaboration
allow companies to deploy effective resources for innovation albeit with
different outcomes.

Both horizontal and vertical collaboration require managing the rela-
tionships between actors in the network. Burt (1992) and Uzzi (1997) have

Figure 5.6. Collaboration model for the value chain and innovation networks.

Materials

Products

Market

Resources

Skills, knowledge

Exchange
relationships

Su
pp

le
m

en
ta

ry
as

se
ts

Actors Actors Actors Actors

Actors

Skills, knowledge

Resources

Complementary assets

Ex
ch

an
ge

re
la

tio
ns

hi
ps

Actors

Skills, knowledge

DistributionProductionSupply

Innovation
and new

product dev.

Instructions

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166   •   innovAtion MAnAgeMent And npd for engineers

demonstrated the general mechanisms by which relationships between
firms in supply chains and networks can be explained. As starting point,
they use two different aspects of networks, namely, the positioning of
firms in the structure of the network and the nature of the mutual relation-
ships. Burt’s reasoning implies that the chance of achieving completely
radical innovations may decrease if companies establish strong mutual
contractual links, such as in supply chains. Links with other companies in
the supply chain might be so strong that they prevent a company from suc-
cessfully implementing an innovation, even if it is in a strategic position to
do so. Typically, a successful collaboration strategy consists of three basic
elements, that is, selection of a suitable partner, formulation of clear-cut
agreements (getting the project underway), and management of the ongo-
ing relationship. Carefully selecting future cooperation partners can pre-
vent many problems, and according to Hagedoorn (1990), the aim should
be similarity balanced by complementarity, with similarity referring to the
firm’s size, resources, and performance. However, of more importance are
the required complementarities offered by the cooperation partner, that
is, the combination of complementary activities, knowledge, and skills to
realize the desired synergy. The literature on strategic partnerships offers
many models to evaluate potential cooperation partners (e.g., Souder and
Nassar 1990). Based on a study of 70 U.K.-based firms in different indus-
try sectors, Bailey et al. (1996) even concluded that selecting partners
based on their track record in previous collaborations turns out to be a
poor basis for future collaboration. These signals indicate that how collab-
orations can be exploited effectively has not yet been settled.

5.5  Absorptive cApAcity

For how companies can benefit from collaboration for innovation, the
concept of absorptive capacity plays a key role according to academic
literature. By the originators of this concept, Cohen and Levinthal (1990,
p. 128), it has been defined as “a firm’s ability to recognize the value of new
information, assimilate it, and apply it to commercial ends”, with the focus
of their study being R&D investment. This process of assessing and inte-
gration new information can be used for new markets, new products, and
services at individual, group (or department), and firm levels. Antecedents
for absorptive capacity are prior-based knowledge (knowledge stocks and
knowledge flows in a firm) and communication, both internal and exter-
nal. Prior knowledge ranges from skills and knowledge at the individ-
ual level to scientific or technological developments in a domain. Cohen

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coLLAborAtion for innovAtion   •   167

and Levinthal (ibid., pp. 129–31) derive their thinking from psychology
and conceptualizations of learning. Particularly, this learning through the
assimilation takes place at individual and organizational level; the latter
as a result of how internal communication is structured. An example of
the opposite is General Motors in the 1960s, 1970s, and 1980s. Whereas
Toyota developed its production system into what later became to be
known as lean production (Womack et al. 1991), General Motors was
a bureaucratic and inward-looking organization, so much that it did not
advance its production system and fell back in competitiveness. Even
later, when it recognized that potential impact of lean production, it strug-
gled to adopt this concept and integrate it in its organization. This example
shows how important it is to identify and assimilate external knowledge in
order to be competitive; it has been said that, in order to be innovative, an
organization should develop its absorptive capacity.

The original study on absorptive capacity by Cohen and Levinthal
(1990) focused a lot on investments in R&D, but other investigations showed
that several other areas could be explored to develop a firm’s absorptive
capacity; this led to a review of the concept by Zahra and George (2002)
and Todovora and Durisin (2007) and a reformulation that further defined
it as being made of potential absorptive capacity and realized absorptive
capacity; potential absorptive capacity is a firm’s receptiveness to external
knowledge, and realized absorptive capacity reflects a firm’s capability to
leverage absorbed knowledge and transform it into innovation outcome.
This distinction is relevant because it delineates how firms interact with the
environment and how they communicate internally. Thus, the combination
of the external interaction and internal communication can only lead to new
or modified business models, new or modified products and services, and
new or modified processes. Then the external interaction, as part of potential
absorptive capacity, is knowledge acquisition that “refers to a firm’s capa-
bility to identify and acquire externally generated knowledge that is critical
to its operations” (Zahra and George 2002, p. 189); critical in this process
is understanding the value of this information (Todovora and Durisin
2007, p. 777). A second component of potential absorptive capacity is the
capability for assimilation that “refers to the firm’s routines and processes
that allow it to analyze, process, interpret and understand the information
obtained from external sources” (ibid. p. 189). In this perspective, poten-
tial absorptive capacity can also be viewed as sensing information from the
environment (see Dekkers [2017, p. 22] for the definition of environment in
systems theories). The concept of realized absorptive capacity constitutes
the capability “to develop and refine the routines that facilitate combining
existing knowledge and the newly acquired and assimilated knowledge”

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168   •   innovAtion MAnAgeMent And npd for engineers

(Zahra and George 2002, p. 190). In addition, the realized absorptive capac-
ity concerns the capability of a firm to apply the newly acquired knowledge
in product or services that it can get benefits from; this is called the exploita-
tion capability. These capabilities based on processes in a firm—sensing the
environment to acquire relevant information, assimilation of information to
contextualize information, transformation of information into concepts for
products and services, and exploitation of products and services—constitute
absorptive capacity of a firm.

However, it should be noted that absorptive capacity is an academic
term used mostly in innovation management. Omidvar (2013) recognizes
this and adds a practice-based perspective, which includes meaning, par-
ticipation, identity transformations, and agency. However, even with these
extensions, the concept of absorptive capacity is elusive for practice. For
example, Andersén (2012, p. 442) speaks about protective capacity as
being the “capacity to sustain, or to reduce the speed of depreciation of
knowledge-based resources by preventing knowledge from being iden-
tified, imitated or acquired by direct or indirect competitors.” This is
inversely related to absorptive capacity. The need for companies to pro-
tect themselves may outweigh to interact with the environment in an open
and transparent manner. This means that, in practice, companies limitedly
share information with others.

5.6  gLobAL reseArch netWorKs

The advent of collaboration has also led to the emergence of so-called
global research networks. These networks can be formed as part of a cor-
poration or based on partnerships between firms. Particularly for firms, the
conventional wisdom said that strategy formation and R&D had to be kept
in close geographical proximity (Kuemmerle 1997). Because strategic
decisions about new markets, products, and services were centralized and
made primarily at corporate headquarters, the thinking went, R&D facil-
ities should be closely located. A case in point was the renowned Philips
Natuurkundig Laboratorium that was located in Eindhoven and later in the
1960s in Waalre, a village next to Eindhoven; Philips’ headquarters were
located in Eindhoven until 2001 when they were moved to Amsterdam. At
the same time, the Philips Natuurkundig Laboratorium was transformed
into High Tech Campus Eindhoven, which is open to researchers from
many different companies. Philips Research, the remnant of the Philips
Natuurkundig Laboratorium, is still one of the largest campus tenants,
although not with anything like the number of people employed in its hey-
days. Nowadays, Philips Research has branches in China, Germany, India,

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coLLAborAtion for innovAtion   •   169

the United Kingdom, and the United States of America; the non-Dutch
parts of Philips Research account for about half the research work done
by Philips. There are two main reasons why companies have relocated and
expanded their research base across the globe (Howells 1990, pp. 496–7).
The first reason is that, as more and more sources of potentially relevant
knowledge emerge across the globe, companies must establish a presence
at an increasing number of locations to access new knowledge, to attract
talent, and to absorb outcomes of research by universities. Also, proxim-
ity to research and development by (foreign) competitors may instigate
such establishment of global research networks. The second reason is that
R&D is treated as a tool that firms use to defend and develop their market
presence across national boundaries. Particularly, multinationals seek to
extend their control of a market by foreign direct investment, and one
element in strategy is technology. Thus, to extend market presence and
control in new and existing foreign markets, multinationals set up research
laboratories to support product differentiation through product innovation
and development. Because of these reasons, large firms often have multi-
ple R&D locations across national boundaries, with some of these located
such so that access to markets is facilitated.

5.7  suppLy chAin MAnAgeMent

In terms of collaboration in networks, the integration of supply chain man-
agement into processes for innovation of processes, products, and services
is of paramount importance. Not getting it right may lead to substantial loss
of revenue, loss of reputation, and increased cost. This was demonstrated
during the 2000s when smartphones were introduced. All smartphone
makers, including Apple and Samsung, experienced considerable troubles
when their products were more popular than expected, and consequently,
the supply of components and materials lagged behind; this was a serious
concern, because for some components and parts, such as micro-proces-
sors and displays, considerable investments are required coming along
with relatively long lead-times to build facilities for production. This
example of smartphones shows that having a supply chain that can ade-
quately respond to increases in demand (or lesser demand) than expected
is crucial to successful introduction of new products and services.

Particularly, the design of supply chain should be characterized by
responsiveness. In this respect, the model for the supply chain strategy by
Fisher (1997) is often referred to; see Figure 5.7. In this model, a distinc-
tion is made between efficient supply chains and responsive supply chains.
Efficient supply chains are suitable for functional products, such as basic

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170   •   innovAtion MAnAgeMent And npd for engineers

foods and cleaning agents, for which demand is predictable. These sup-
ply chains should offer lowest costs and a high rate of turnover to lower
costs associated with inventory. Also, the design of products should aim
at maximizing performance and minimizing cost, akin value engineering
(Subsection 2.3.2). For innovative products, responsive supply chains are
required because demand can be volatile and unpredictable. Decisions in
these supply chains are not aiming at minimizing cost, but at utilizing
production capacity for availability of products and positioning products
in the right places for maximizing sales to hedge against unpredictable
demand. Also, the design of innovative products could facilitate if they are
based on modular designs; see Subsection 2.6.3. In this strategy, for the
supply chain speed of delivery and flexibility dominate, with cost playing
a lesser role. Therefore, the approach to the supply chain strategy is very
different for innovative products and functional products.

5.8  Key points

• Not only for being a source of innovation (see Chapter 4), but also
for providing knowledge during new product and service devel-
opment collaboration with strategic partners is seen as key to an
effective innovation strategy. This type of collaborations can take
the form of strategic alliances and joint ventures. A strategic alli-
ance for innovation is when partners cooperate to combine their
knowledge, skills, and technologies in order to jointly come to
new ideas and plans that can be converted into a good or service;
these alliances are most based on complementary assets, skills, and
knowledge. A joint venture includes the forming of a new entity for
expansion, development of new products and services, or moving
into new markets, particularly overseas.

Figure 5.7. Fisher’s matrix for design of supply chain.

Innovative productsFunctional products

Ef
fic

ie
nt

su
pp

ly
c

ha
in

s
R

es
po

ns
iv

e
su

pp
ly

c
ha

in
s

Mismatch

Mismatch

• Predictable demand
• At lowest cost
• High rate of
inventory turnover
• Product design:
maximize performance
and minimize cost

• Unpredictable demand
• Respond swiftly to
minimize stockouts,
forced markdowns
and obsolete inventory
• Excess buffer capacity
• Use modular design

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coLLAborAtion for innovAtion   •   171

• Collaboration with suppliers is seen as beneficial to innovation. It
requires companies to pay attention to supplier selection, (early)
supplier involvement, and design of supply chains:
 One dominant aspect is that the selection of suppliers should be

based on their technological capabilities. Sometimes, supplier
development to enhance their technological capabilities may
be worthwhile, especially when there is strategic alignment
between the buying firm and a supplier.

 Furthermore, early supplier involvement is a form of vertical col-
laboration between supply chain partners, in which a firm involves
suppliers at an early stage of the product development process.
For this involvement, a distinction is made between white box (the
supplier will follow mostly the specifications set by the buying
firm), gray box (joint development with formalized integration in
NPD), and blackbox (led by the supplier according to the buying
firm’s performance specifications) design and engineering.

 For innovative products, the design of supply chains should be
responsive. Typically, this means that not cost considerations
do prevail, but the availability of products in new or emerging
markets determines the position and the level of inventory. In
addition, if possible, short lead-times should be achieved.

• Collaboration does not only extend to companies working together
in supply chains or for access to market, but also happens in loose-
ly-connected networks; two notable forms are:
 Regional networks. In regional networks, firms participate

and complement each other’s capabilities with the aim to offer
products and services that otherwise could not be achieved by
the individual entities and to utilize resources better.

 Venture capital networks. Firms in venture capital networks
are able to make use each other’s capabilities and knowledge.
This also depends on how a venture capital fund has built its
portfolio.

• Global research networks can be established as part of a corpora-
tion or based on partnerships between firms. They consist of R&D
centers at multiple locations. The decision for locations is informed
by access to expertise, talent, and proximity to markets.

• The innovative capabilities of a firm are determined by its capability
to recognize the value of new, external information (for example,
about technologies), assimilate it, and apply it to commercial ends;
this is called absorptive capacity.

• Trust and power are important factors in maintaining relationships
for collaborations. These issues emerge in strategic networks and

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172   •   innovAtion MAnAgeMent And npd for engineers

collaborative networks, particularly when one actor tries to take
advantage of another without reciprocation.

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