An exploratory qualitative research on open innovation ...

Master Thesis

An exploratory qualitative research on open innovation adoption of SMEs:

A resource-based perspective

Submitted by

Neha Kumari

B70280703/ S3600149

[email protected]

[email protected]

MSc Advanced International Business Management

Supervisors:

Newcastle University Business School – Dr. Karen Elliott

University of Groningen – Dr. R.W. De Vries

August 16th 2019

Word Count – 14,842

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Abstract

The key objective of this research is to explore the phenomenon of open innovation. The

popularity of open innovation research is growing and the environmental forces and

management practices that supports the process of open innovation has not been discussed

much. As such this research aims to discuss the implications of strategy and the determinants

of open innovation in the Dutch SME sector. The research conducted 6 in-depth interviews

with senior employees working in the consulting, services and the manufacturing industry in

the three cities – Groningen, Zwolle and Amsterdam. Later a model has been created that

explains the adoption of OI principles and the determinants. The findings suggest that open

innovation is the future of SME sector but the demands of the present time is a more flexible

and positive attitude towards OI from the management side. Based on the findings and

discussion the key propositions are presented that provides a ground for future empirical

research.

Keywords: SMEs, Open innovation strategy, knowledge exploration (inbound open

innovation), knowledge exploitation (outbound open innovation), resource-based view, open

business model

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Acknowledgements

First, I would like to thank my supervisors, Dr. Rudi de Vries and Dr. Karen Elliott for their

constructive feedback, support, and guidance during the process of this research. I must

acknowledge that they were truly honest with the feedback and patient enough to give a

thorough review for my work from the starting. Second, I would like to thank my family for

always believing in me and giving me the opportunity to pursue my dream of doing a Master’s

course at the University of Newcastle and University of Groningen. Further, I am thankful for

all the great people I met during my Master’s course. Lastly, I would like to thank all the

inspiring employees who participated in this study.

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Table of Contents

Abstract……………………………………………………………………...…………….….1

Acknowledgement………………………………………………………………..……….… 2

List of Figures……………………………………………………………………...…………4

List of tables……………………………………………………………………….….……...4

List of Abbreviations………………………………………………………………..………..4

1. Introduction……………………………………………………………………….…….…5

2. Literature Review…………………………………………………….………….…….…..8

2.1 A review of open innovation…………………... …………………....…………8

2.2 Challenges towards open innovation……………………....……………….….15

2.3 Summary of the literature review and research Gap……………………….…20

3. Research Methodology………………...………………………………..…..……….…23

4. Findings………………………………………………..................................................40

5. Discussion and the grounded theory model……………………………....………........56

6. Conclusion………………………………………………………….……………..…...62

6.1 Managerial Implications…………………………………….…..………..........63

6.2 Limitations and Future Research…………………..……………….…………...64

References…………………………………………………………………….……..…..…..66

Appendix………………………………………………………………………...……..……74

Appendix 1: Coding Scheme……………………………………..……..….….........74

Appendix 2: Interview Guide……………………………………….…...….….........82

Appendix 3: Consent Form…………………………....….………………...….…....84

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List of Figures

Figure 1: The Data Structure…………………….……………………………….…………35

Figure 2: The grounded theory model……………………….……………….……….…….61

List of Tables

Table 1: Demographic details of individual participants…………..…………….…………28

Table 2: Ethical Issues…………………………………………..….………....……….…….31

List of Abbreviations

SMEs Small and Medium Enterprises

R&D Research and Development

IP Intellectual Property

HR Human Resources

HRM Human Resource Management

OI Open Innovation

OECD Organisation for Economic Cooperation and Development

RBV Resource based view

NSH Not sold here

NIH Not invented here

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1. Introduction

Ever since it was first introduced by Chesbrough (2003), open innovation has been a topic of

great interest. The most popular and widely used definition of open innovation states that:

‘Open innovation is the use of purposeful inflows and outflows of knowledge to accelerate

internal innovation and expand the markets for external use of innovation’ (Chesbrough,

Vanhaverbeke and West, 2006, p. 1). It is believed that open innovation practices enable firms

to combine external and internal ideas, knowledge and technology and thus provide greater

opportunities to technological collaboration (Lichtenthaler, 2011) and, hence, enhance their

innovation capability and international competitiveness.

But, open innovation is easier said than done. The attitude of firms regarding this knowledge

exchange is mostly negative (Lichtenthaler et al, 2010) that makes it hard to be realized. And

in the majority of cases they still prefer in-house innovation than OI. Moreover, research so far

is mostly limited to large firms with contradictory results and assumptions that may not be

realized in every business environment – particularly the small and medium enterprises (Van

de Vrande and Brunswicker, 2014; Van de Vrande et al., 2009; Lee et al, 2010).

SMEs, often characterised as firms with fewer than 250 employees and an annual turnover of

less than 50 million euro (Kierzenkowski and Kastaneer, 2014) are considered as the backbone

of an economy. They have specific characteristics that distinguish them from large

corporations. They are generally independent, multi-tasking, cash-limited, based on personal

relations and informality, highly personalized and local in their area (Perrini, Russo and

Tencati, 2007). It is believed that they are one of the key actors in open innovation, but their

context remains largely unexplored (Lee et al, 2010). Some studies show that SMEs are

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performing better (van der Meer, 2007) while other reports show that SMEs are less open than

large multinationals (Van de Vrande and Brunswicker, 2014; Van de Vrande et al., 2009) and

are often sceptical about the financial gains of implementing open innovation. Although

research has confirmed that SMEs are also adopting OI principles, a lot still needs to be

explored because they have a specific nature and the existing findings on open innovation in

large firms cannot be applied to them (Van de Vrande and Brunswicker, 2014; Van de Vrande

et al., 2009). This highlights for an emphasis into SMEs in open innovation research.

Relevance to Dutch SMEs

In particular, the economic relevance of SMEs can be seen in the European nations. In the

Netherlands alone, they represent over 99.7% of all enterprises close to the figure of 99.8% for

the European Union (Kierzenkowski and Kastaneer, 2014). As such EU policymakers give

huge importance to boosting their networks. The 2011 review of small business act (SBA),

aimed at supporting European SMEs for open innovation and internationalisation, lead to great

announcements for promoting new forms of collaboration between companies of the same or

different regions (OECD et al, 2012). As such it can be said that these initiatives have been

primarily focussed at strengthening the business networks of SMEs to encourage growth and

open innovation.

However, meeting these flagship targets does not seem to be easy. Research shows that only a

fraction of the total population of European SMEs including Netherlands are contributing to

open innovation. Particularly, the context of the Netherlands calls for an attention. The

macroeconomic situation of the country has been difficult in recent years. After the 2009 crisis

Netherlands witnessed uncertainties in the macroeconomic environment (OECD, 2014). The

worst consequences were for SMEs and the effects of the crisis are evident even now. Financial

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restrictions and competences issues are still prevalent in the economy and in spite of being a

highly developed knowledge-based economy Netherlands is struggling with the challenge of

creating value from the knowledge. Moreover, the Netherlands ranks lower in international

collaboration activities, with just 22% of the innovative Dutch firms collaborating with

international partners (OECD, 2014) while the figures are 31% for France and 38% for

Belgium. This presents an opportunity for researchers to examine the factors that influence this

technological cooperation between SMEs and the external market in the Netherlands.

Therefore, this master’s thesis aims to explore the phenomenon of OI in the Dutch SMEs sector.

The purpose of the research is to explore the environmental factors prevalent in the Dutch SME

market and the way they enable or hurt open innovation. The rest of the research is organised

as follows - The next section provides a literature review on open innovation and its critics.

Based on it the research gap and the research questions are formulated. Next, the research

methodology is discussed wherein, the research philosophy, research approach and the research

method are stated. Later, based on the data analysis the findings are discussed. And the last

sections give a brief about the limitations and perspective for future research and managerial

implications.

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2. Literature Review

Researchers should always begin their studies with prior guidance provided by some sort of

orienting theoretical perspective (Locke, 2005). It is necessary to first discover relevant

concepts for the purpose of theory building that can guide the creation and validation of

constructs for theory generation (Gioia et al, 2012). Open innovation has a vast theoretical

background and so it is first necessary to narrow down the concepts without reviewing the

literature exhaustively. Not narrowing the concepts as a starting point of the research could be

confusing and exhaustive for researchers and may lead to research failure. This research aims

to explore the role of intermediaries for the successful implementation of open innovation in

the Dutch SME sector. And the literature review is organised as follows: The first chapter

describes the general overview of open innovation research. It describes the two dimensions of

open innovation and its strategic implications. The second chapter discusses the criticizations

of open innovation literature. Finally, drawing on the limitations and contradictions on the

existing research the research gap would be developed.

2.1 A review of open innovation

Innovation is defined as the introduction of new and improved processes and products into the

economy, subsequently a change in production resulting from a new or improved product,

process, technique, or method (Johnston, 1966). Prior to the concept of industrialization and

the need for knowledge sharing with the global market, industrial firms developed new

technologies for their own products internally (Ahlstrom, 2010). Accordingly, most companies

pursued relatively ‘closed’ innovation strategies with limiting interactions with the outside

world. It is believed that successful innovation requires control and companies used to generate

their own ideas, develop them, build them, market them and service them on their own

(Vanhaverbeke and Chesbrough, 2014, p.56).

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However, in recent decades the term ‘closed innovation’ is viewed as losing impact and a new

terminology ‘open innovation’ (OI) is gaining popularity in the management and strategy

literature (Chesbrough, 2003). Open innovation is embedded in the notion that the sources of

knowledge for innovation are widely distributed in the economy (Chesbrough and Bogers,

2014) and that firms are increasing the acquisition and search for external technologies and

knowledge through cross-border transactions. The rise in global competition, reduction in the

life cycle of the product and the rising cost of research and development (R&D) are some

factors that led to the evolution of the concept (Crema et al, 2014). The basic idea behind OI is

that firms should look and operate beyond their boundaries and perform knowledge exploration

and exploitation both inside and outside throughout the innovation process (Lichtenthaler,

2011). Particularly, the 21st century is more dynamic because of the rising globalisation and

international technological collaboration, and the need for knowledge flows has been found

surging more than ever. Thus, based on the assumption that valuable knowledge is widely

distributed across the globe Chesbrough (2011) proposed two core types of OI namely, inbound

and outbound.

Inbound open innovation or knowledge exploration refers to sourcing or acquiring knowledge

or technology from outside the organisation instead of producing it on its own. It is an outside-

in process where firms are more open for knowledge exploration (Lichtenthaler, 2011). On the

contrary, outbound open innovation refers to the inside-out process where firms open up the

innovation process to external knowledge exploitation. It is the less commonly recognized

aspect where under-utilized ideas and technologies in the firm are allowed to go outside to be

incorporated into others’ innovation processes. Lichtenthaler (2011) calls this as

commercialization of technological knowledge. This dimension of open innovation aims at

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earning profits by bringing ideas to market, selling intellectual property (IP), and multiplying

technology by transferring ideas to the outside environment (Enkel et al, 2009).

It is to be noted that there has always been some sort of confusion with the two terms – closed

and open innovation. In a review Trott and Hartmann (2009) argue that there has always been

some sort of openness in the innovation and that Chesbrough has just restructured the concepts

into a new dimension. Nevertheless, the degree of openness has surely surged in the present

times with a change in the strategy of firms to innovate, a shift from in-house innovation to OI

(Chesbrough, Vanhaverbeke and West, 2014). However, it is argued that research into this

direction is still in its infant stages (Van de Vrande et al, 2009). For instance, the strategic

implications of OI remains largely unexplored and mostly they have been studied for large

firms (Crema et al, 2014). Therefore, the underlying study extends the OI literature by

integrating it with the strategy literature.

2.1.1 Strategic implications of OI

For decades, literature on strategic management has generated theories that are popular among

firms even today. Grant (1991, p.1) defines strategy as ‘the match an organisation makes

between its internal resources and skills and the opportunities and risks created by its external

environment’. Thus, highlighting the concept – resource-based view (RBV). The evolution of

the RBV (Grant, 1991; Barney, 1991) is one of the great contributions in the strategic

management literature. Whatever strategy a firm uses, it depends on its resource portfolio,

strengths and weaknesses, as such the RBV approach can be considered as the backbone of

strategy. Therefore, this research highlights the fundamentals of RBV before digging into the

strategic choices of firms to implement OI.

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Resource-based view

The RBV states that a firm’s internal resources and capabilities, that are rare and non-imitable,

are the foundation of a long-term strategy for a competitive advantage (Grant, 1991). It

underlines four basic assumptions as per the VRIO framework – value, rareness, imitability

and organisation (Terziovski, 2010). Value refers to whether the resource provides a

competitive advantage, rareness refers to whether competitors possess it, imitability refers to

whether or not it is costly to imitate by competitors and organisation refers to whether the firm

is organised to exploit the resources.

Resources here are inputs into the production process (Grant, 1991) such as the brands, tacit

knowledge and competence of employees (Sveiby, 2001). Knowledge for instance is the

personal skills of individuals in the economy that are valuable and difficult to be codified or

imitated. Competence is broadly described as the ability to create value from the knowledge

externally and internally (Sveiby, 2001). It is the mix of human knowledge, skills and aptitudes

serving the enterprises productive purposes. However, whether a firm is able to exploit its

resources and competencies depends on its capability to deliver added value at marketplace

(Grant, 1991) – thus introducing the term organisational capability.

Capabilities are the organisation’s ability to use its resources to deliver added value in the

marketplace, an organisations collective physical facilities and expertise of employees (Grant,

1991). It emphasizes how efficient the organisation is in deploying the tacit knowledge of its

employees and at times in renewing and recreating its capabilities to meet the needs of changing

environments. However, with changes in the global business environment and

internationalisation, firms are now compelled to adapt and integrate with the external market.

This also requires their resources and capabilities to be adapting and evolving. It is this change

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and adaptation that makes the resource-based view more dynamic – hence the term dynamic

capabilities (Teece et al., 1997). Teece et al, (1997) describes dynamic capabilities as the firm's

ability to integrate, build and reconfigure internal and external competencies to address rapidly

changing environments. Thus, dynamic capabilities require interorganizational collaboration

and co-creation to deliver added-value at marketplace and it provides an explanation of

competitive heterogeneity between firms in the market. Overall, the resource-based view

provides a robust approach to guide firms to formulate their strategy. Based on this the research

presents an overview of the strategic choices that an SME can use to adopt OI principles.

Strategic choices for open innovation

Based on the above assumption’s literature has found two widely used strategic choices of

firms - inside-out and outside-in.

Inside-out strategy (knowledge exploitation or outbound OI)

An example of a small firm that used the inside-out strategy is Shana Corp – a private Canadian

software company (Miller et al, 2002). Over years Shana Corp developed its internal

capabilities with the use of its vibrant innovation culture of product development and soon

enough it started to share its growing knowledge with the clients who needed its abilities for

their own innovations (ibid.). The managers identified what their firm was good at, developed

it and later pursued those clients that would benefit from Shana’s growing capabilities (ibid.).

This way Shana Corp developed its dynamic capabilities. Thus, it can be concluded that an

inside-out strategy is one that relies upon an internal orientation – inner strengths, resources

and capabilities of the organisation. Firms with such a strategy try to build a vibrant innovation

culture using their internal valuable resources and they also allow some of the ideas and

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technologies to be used by other firms in their innovation processes (Chesbrough, 2011, p. 83-

84).

Similarly, firms may use the inside-out strategy to implement outbound OI. It can be

implemented through three practices (Van de Vrande et al, 2009). The first is venturing.

Venturing refers to starting of new organisations drawing on internal knowledge and getting

supported by the parent organisation in terms of finance, human capital, legal advice etc. Start-

ups has gained huge popularity to describe young ventures. “A start-up is a company working

to solve a problem where the solution is not obvious and success is not guaranteed” – Neil

Blumenthal, cofounder and co-CEO of Warby Parker (Forbes, 2019). The second is outward

licencing of intellectual property (IP). IP are the results of innovations that plays a crucial role

in knowledge exploitation and firms out-license their IP to get more value of it (Gassmann,

2006). The third practice is to involve the non-R&D workers in the innovation process. While

R&D has a long tradition of being involved in the in-house innovation, recent developments

have witnessed the active integration of the non-R&D workers in the innovation process. The

strategy of involving non-R&D employees basically entails leveraging the knowledge and

initiatives of employees who are not involved in R&D, for example, by taking up suggestions,

exempting them to implement ideas, or creating autonomous teams to realize innovations (Van

de Vrande et al., 2009). This could be achieved by taking advantage of the knowledge gained

by current employees on their job or possibly through their informal relationships with

employees of other firms in the industry which is referred to as weak ties (De Vries, 1977).

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Outside in strategy (knowledge exploration or inbound OI)

Conversely, the firms that rely on the outside-in strategy start with an external market

orientation and study customer trends in order to design their strategy – that can be acquisitions

or building relationships with key partners and customers (Gianiodis et al., 2014). And, they

make great use of external ideas and technologies in their own businesses (Chesbrough, 2011,

p.83-84) It highlights the strategic importance of customers, suppliers and other stakeholders

to improve the organisation’s dynamic capabilities and co-create value with external partners,

thus emphasizing on external knowledge exploration.

There are different ways firms may use the outside-in strategy in the context of inbound open

innovation or knowledge exploration. The first is through customer involvement (Van de

Vrande et al., 2009). Users are not just passive adopters of innovations but they may rather

develop their own innovations which producers can imitate (Von Hippel, 2005). Firms may

benefit from their ideas and so they should provide tools for their proper integration. The

second dimension is external networking. It involves both formal collaborative and informal

networking activities. Networks allows firms to fill the knowledge gaps without spending

enormous amounts of time and money to develop that knowledge internally. External

participation is another important dimension to recover the innovations that were initially

abandoned. As an example, enterprises may invest in start-ups to keep an eye on opportunities

(Chesbrough, 2006).

Thus, overall the above two dimensions of open innovation seem to be proliferate and

organisations are aware that they cannot manage all the competencies they require in-house

(Gassmann, 2006). But research shows that OI is not easy to be managed and firms are often

critical about the outcomes of open innovation (Van de Vrande et al., 2009). And, it still

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remains unclear how SMEs manage their OI strategies. Therefore, the next chapter describes

the critics towards OI adoption.

2.2 Challenges towards Open innovation

The previous chapter discussed the general review of open innovation and its strategic

implications. But it gives a much wider generalisation about the concept. This part goes one

step further by focussing on the challenges of OI and narrowing down the literature for SMEs

in the Netherlands.

Employee Syndromes

Even though the two dimensions of open innovation discussed above look promising they are

not easy to be managed and the reason is the attitude of employees. According to social

psychology attitudes are a major factor in human interaction and decision making and they

guide an individual’s thinking and information processing, thus their behaviour (Antons et al.,

2017). However, studies suggest two of the most jeopardising individual-level attitudes of

employees that hampers external knowledge transfer – “not-invented-here” (NIH) attitude and

“not-sold-here” (NSH) attitude. Lichtenthaler (2011) calls this as employee syndromes.

Employee syndrome is a term often viewed as a disease that describes the detrimental

consequences of an overemphasis on internal knowledge (Katz and Allen, 1982; Lichtenthaler

and Ernst, 2006). As reviewed by Lichtenthaler and Ernst (2006, p.369) the term ‘syndrome’

implies that the actions that are taken because of this disease is rather systematic and occurs

frequently. Thus, the NIH and NSH are the major hampering factors for OI adoption.

The NIH syndrome (Katz and Allen, 1982) describes a negative attitude towards external

knowledge exploration (inbound OI). This shows a decision-making bias that occurs during the

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evaluation of knowledge from external organisational boundaries (Antons and Piller, 2015).

This attitude stems primarily from the tendency of employees to retain the monopoly of

knowledge in their field (Katz and Allen, 1982). It also results from poor experience with

knowledge transfer and poor incentive systems. And, it may cause severe harm to the

organisation if the external knowledge is valuable in comparison to the internal solutions

(Antons et al., 2017). Moreover, cultural differences are very common with external

knowledge exploration (Dahlander and Gann, 2010).

Conversely, the NSH syndrome describes a negative attitude for external knowledge

exploitation or outbound OI (Lichtenthaler et al., 2010). This attitude derives from the

limitations and the fear of strengthening competitors, unsatisfactory incentive systems, limited

experiences with external knowledge exploitation, inefficient market and poor competitive

activity (ibid.). External knowledge exploitation always comes with the risks of revealing

important information and ideas that are sensitive to a firm as such it may lead to market failures

because inventors are reluctant to reveal their developments (Dahlander and Gann, 2010).

When an inventor is keen to license its information to a potential licensee, it is necessary to

reveal some information to the potential customer. This ‘disclosure paradox’ implies that the

potential licensee receives the information without paying for it and could act opportunistically

and steal the idea (ibid.). Because of this opportunistic attitude companies start to refrain from

external knowledge exploitation. Thus, not-sold-here tendencies also derive from risk-averse

nature of employees. These attitudes result in the difficulties of firms to successfully manage

the processes. Moreover, even if a firm sets up a particular management mechanism like a ‘new

hiring policy’ (Lichtenthaler, 2011, p. 84) or new incentive systems, the results are not shown

automatically.

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These limitations and the attitudes of employees show why some firms still prefer in-house

innovation over open innovation. And because of these attitudes the actual results of innovation

are minimized. Even from a capability-based perspective the decision to transfer knowledge is

a strategic choice as discussed in chapter 2.1, but the implementation is again affected by these

attitudes (Lichtenthaler et al., 2010). A majority of the sample of firms studied so far have been

reported to have faced these attitudes (ibid). Therefore, it is evident that external exploration

and exploitation practices are both subjected to cultural and management challenges. In order

to build a good relationship with customers, firms need to explore and import knowledge and

also exploit knowledge that has already been accumulated (March, 1991), thus the trade-off

between exploration and exploitation is crucial for innovation (Lichtenthaler, 2011). But so far

research has not been able to clarify how the balance between exploration and exploitation can

be achieved (He and Wong, 2004) and the type of management practices that firms should use

to better adopt OI principles (Lichtenthaler, 2011). Therefore, the research presents the

management challenges related to the OI principles.

Managerial Challenges

The second critics applies to the managerial challenges or the paradox of openness (Larsen and

Salter, 2014). As stated by the authors this paradox evolves because ‘the creation of innovations

often requires openness, but the commercialization of innovations requires protection’

(Laursen & Salter, 2014, p.867). Accordingly, opening up and capturing value from this

approach is challenging and requires a considerable managerial attention. It is this paradox

which explains why firms prefer exploration over exploitation. Because the latter entails more

risks and uncertainties. This paradox can also be seen from the OI practices of Dutch SMEs.

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Van de Vrande et al., (2009) organised a study on Dutch SMEs and found that they are

increasingly getting involved in both – technology exploration and exploitation, although,

exploitation activities are pursued by less than 30% of their sample, whereas exploration ones

are adopted by more than 90%. Among the barriers recognised from the sample are – resources,

time, marketing, culture and administrative. But research needs to highlight how these barriers

can be overcome. Moreover, the article could not specify how large and small firms interact

for open innovation (Van de Vrande et al., 2009, p.436). Although large firms and small firms

manage open innovation differently, there are occasions where they share a common platform

as partners. As such it is important to focus on the management implications of these practices

(ibid).

van der Meer (2007) as well-found significant differences in open innovation practices of firms.

He organised a survey on open innovation strategy in Dutch companies and found that the

collaboration between innovative larger companies is different from the collaboration between

SMEs (p.200). He describes Dutch firms as reluctant to take part in the exploitation activities

with only 54% highly innovative companies using them vs. 74% adopting exploration

practices. This shows that the Dutch market is more inbound (exploration-intensive) than

outbound (exploitation-intensive). Overall these findings suggest that Dutch SMEs are more

naturally suited to engage in open innovation than larger companies, but it needs to be studied

how the transaction can be facilitated. Thus, the managerial challenges still remain intact.

Another challenge for managers is the applicability of RBV. Applying the RBV approach for

OI strategies in SMEs is critical. RBV itself is prone to critics that calls for further clarifications

of the theory (Kraaijenbrink et al., 2010). For instance, Connor (2002) argues that the RBV

applies only to large firms with significant market powers and the smaller firms fall beyond the

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bounds of RBV. As such RBV may not be applicable under unpredictable environments, in

which new technologies emerge and the value of resources change drastically. This may be

problematic for SMEs. It has been long argued that SMEs need to improve their organisational

capabilities and organisational structure to become more efficient (Bessant and Tidd, 2007).

And that they don’t have the leverage of these resources and capabilities that large firms can

easily manage. According to Nooteboom (1994) a major problem within SMEs is that their

characteristics - small scale, lack of functional expertise and limitations in investment capital

and resources often hamper the identification and leverage of resources needed to yield new

opportunities. Thus, it still remains unclear how SMEs manage their resources and open

innovation strategy. Therefore, this research aims to discuss the management practices that can

overcome these challenges.

Challenge of business model

The last critic is related to the challenge of a business model. Vanhaverbeke and Chesbrough

(2014) addressed the role of business models in the context of OI. ‘A business model is a

framework to link ideas and technologies to valuable economic outcomes’ (Vanhaverbeke and

Chesbrough, 2014, p.52). In their review they describe two extremes of business models – open

business model and closed business model. The traditional stand-alone business models have

the idea of closed innovation where most of the innovation is carried out in-house like internal

R&D. But, with rising competition and mobility, firms are seen using a more open business

models that are more networked and create value by leveraging external ideas into the process

(Vanhaverbeke and Chesbrough, 2014). Open business model not only reduces the cost of

innovation by the division of labour but also generates extra revenues through spin-off

activities (ibid.). Especially, for the SMEs the adoption of OI is inextricably linked with the

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open business model of the firm and the efficiency with which they build networks with

external partners (Chesbrough, Vanhaverbeke and West, 2014).

However, research shows that there is a significant positive correlation between company size

and network cooperation intensity (Carlsson et al, 2011). Moreover, the cultural, cognitive,

organisational and institutional differences between collaboration partners have been

recognised as the main barriers to the successful adoption of open innovation practices in SMEs

(Van de Vrande et al., 2009). As such it is believed that SMEs do not enjoy the benefits of

networking that large firms generally do. Particularly, for the Dutch economy, an increasing

number of self-employed and part-time workers on temporary contracts (OECD, 2014; OECD,

2018; Baker and Gielens, 2018) raises the question of whether SMEs enjoy a robust long-term

business network. Thus, the business model of SMEs is often challenging because of their weak

networks and poor resource portfolio. This highlights for an emphasis into the business model

of SMEs. The importance of different kinds of network and the internal dimensions of

managing open innovation in the SME needs to be explored (Chesbrough, Vanhaverbeke and

West, 2014). Therefore, getting an idea about the networks and the institutional supports

(government and universities) is another motive of this research.

2.3 Summary of the literature review and research gap

Overall, the central premise of the literature review and the critics is that open innovation in

SMEs is subjected to critical acclaim and broad claims that still needs to be validated. The

strategy-open innovation construct for SMEs needs to be explored (Van de Vrande et al., 2009;

Crema et al., 2014) and the management processes and attitudes of employees that influence

the collaboration between partners also needs to be discussed (Lichtenthaler et al, 2010).

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Although the two syndromes discussed above are considered as bottlenecks in the context of

OI, there are ways to legitimize and facilitate the internal adoption of OI principles. For

instance, in a review Burcharth et al., (2014) demonstrated that training and competence

building programs for employees can reduce the negative effects of the employee syndromes

for OI. And this can be achieved through better management practices. Yet, research on

employee syndromes have been mostly superficial and lacks substantial managerial

implications (Antons et al, 2017; Lichtenthaler, 2011). Therefore, the research aims to explore

the management practices and other determinants that eases the knowledge flows for open

innovation in the Dutch SMEs.

The research considers the gap in two areas – strategic implications of open innovation in the

Dutch SMEs sector and the environmental factors (barriers and enablers) that influences open

innovation principles. Hence, acknowledging the work and suggestions of scholars

(Lichtenthaler et al, 2010; Chesbrough, Vanhaverbeke and West, 2014; Antons et al., 2017) for

further research on open innovation literature this research aims to answer the following main

questions:

Q1: What are the determinants (enablers and barriers) of open innovation in the Dutch SMEs?

Q1a: What are the effects of management tools on the adoption of OI principles?

Q2: Who are the intermediaries of the open business model of the Dutch SMEs?

The research contributes to the exploratory SME literature by exploring the determinants of

open innovation strategy in SMEs. First, the study aims to explore whether the Dutch small

and medium enterprises follow inside-out or outside in strategy for open innovation, thereby

linking the open innovation literature to strategy. Second, the research aims to link open

22

innovation literature to business model research. The research explores the components and the

management culture of the business models that facilitates open innovation. The intermediaries

involved in the open innovation process and the business model would give a good review of

the inter-organisational networks that facilitates or hinders open innovation in the SME market.

23

3. Research Methodology

This section represents the methodology or the blueprint that governs this research and the

underlying assumptions. The motive of this section to describe the setting in which the research

is conducted and the methods used to do the study. The chapters below are organised as follows

– first the research underlying assumptions are explained followed by the research approach.

Next, the research method is described and data collection and sample profile are explained.

Later the data analysis and the research quality are described.

Research Philosophy

The three philosophical perspectives that a researcher can follow are: positivist, interpretive

and critical perspectives (D.lapan et.al, 2011, p.6-8). Positivist philosophy is most suited when

the study involves testing of one or more hypotheses while, interpretivist philosophy is most

suited when the researcher wants to explore a topic in general rather than testing or validating

an existing model. The critical perspective is relatively new and not much in practice. This

research does not intend to test or confirm any existing model but to explore an emerging

phenomenon. Therefore, the study uses the interpretivist philosophy and the axiology paradigm

as a way of thinking.

Axiology is the branch of philosophy that explores the nature of ethics (D.Lapan et al., 2011,

p.22). The assumptions underlying this paradigm is that reality is socially constructed and can

be best achieved through social constructions such as language, consciousness, shared

meanings and instruments. It assumes that people are the ‘knowledgeable agents’ in

organisations who know what they are trying to do and who can explain their thoughts and

actions (Gioia et al., 2012). Netherlands is a culturally diverse nation with numerous

24

international students and expats studying and working. And in my view, a good sample for

the study has to be culturally diverse to understand the social and ethical perspective. Therefore,

the research aims to explore the subjective views of the employees of the small and medium

firms who work in a culturally diverse innovative business environment and to understand

every minute details about them including their culture, expertise and management skills. The

research ensured to explore the attitudes of the employees towards external cooperation. In

doing so it was possible to understand the realities of the business world of SMEs and how they

interpret the process of open innovation.

Research Approach

Unlike the classical deductive approach in which a phenomenon is narrowed down to a specific

set of hypotheses that are then tested by collecting empirical data (Adams et al, 2014), this

study followed an inductive approach in which the researcher begins by collecting data and

comes to a generalisation about it. Inductive reasoning is more open-ended and exploratory

where the main purpose is theory building whereas deductive reasoning is narrower where the

purpose is to test or confirm the hypotheses (ibid.). Hence, the focus was not on the cause-

effect link like in deductive research or on finding the best or more likely explanations like in

an abductive approach (Saunders et al., 2012). But to explore the reality of the small and

medium enterprises including the attitudes of their employees and their subjective views about

open innovation. Thus, to better understand the nature of the problem and leave room for

alternative explanations of what is going on. To sum up, this research uses the interpretivist

philosophy and inductive approach. The paragraphs below would address the methodological

choices and the data collection and sample profile.

25

Research Strategy

In order to understand employees subjective views and experiences with the process of open

innovation, this study uses exploratory qualitative research (D.Lapan et.al, 2011; Adams et al.,

2014). Qualitative research refers to research that produces descriptive data, people’s own

written or spoken words and observable behaviour. It is best suited for a research that explores

a wider open-ended question, ‘who’ ‘what’ and ‘why’, rather than exploring or testing

numerical data through complex scientific methods (D. Lapan et al., 2011, p.6). Especially the

question word “what” underlines the qualitative aim of developing an initial understanding of

subject instead of quantifying data and seeking generalizable results (D.Lapan et al., 2011, p.6).

The reason for choosing an exploratory qualitative research is to examine a complex

phenomenon using naturally occurring data (Silverman, 2014) and to overcome the limits of

borrowed theories and quantitative empiricism. Also, because the research subject has so far

only been approached by few scholars, who explicitly call for more work on the subject matter

(Lichtenthaler, 2011; Crema et al, 2014). Thus, the study aims to focus on a limited sample

which could then be analysed with grounded theory approach proposed as described in the later

section. Moreover, the study employs a combination of primary and secondary data sources to

explore the phenomenon of OI.

Data Collection

Primary data

Saunders et al., (2012) suggest a minimum sample size of 5-25 participants for interviews.

Hence, the research conducted 6 in-depth semi-structured interviews each lasting for 30 to 60

minutes. The interviews were audio recorded and transcribed. Non-probability sampling was

used for the data collection. In non-probability sampling the probability of selecting population

26

elements is unknown and is best suited for time and cost benefits (Adams et.al, 2014). A

combination of convenience sampling and snowball sampling was used for exploratory

research because of the time constraints. Convenience sampling is a type of non-probability

sampling where members of the target population that meet certain criteria like easy

accessibility, geographical proximity, availability at a given time, or the willingness to

participate are included to participate in a study. And snowball sampling is a simple way in

which participants are best located through referral networks (ibid.).

The participants had to have an experience working for an SME at least once in their career.

The research ensured that the size of the firm fits in the category of a SME considering the

following restrictions - Firm size: small firms (n < 50 employees), medium-sized firms (51 <

n < 250 employees) (Ranga et al, 2008). This was the first condition to be met for shortlisting.

Second, the participants had to have experience in either of the following sectors: Consulting

and HR, Services and Manufacturing. The reason being that most of the earlier research has

focused on one industry like manufacturing (Carree and Thurik, 1998). Therefore, having a

diverse setting would allow for more robust inferences.

An interview guide with eleven, mostly open-ended and non-directive questions were used that

helped the interviewer to express his/her thoughts freely and to maintain consistency across

interviews, while leaving space for follow-up questions (see appendix 2). This data collection

method allows the conversation to follow the interviewees’ individual responses and provides

the opportunity for identifying new perspectives of the topic. The respondents’ freedom to

express their feelings and beliefs in their own words can generate a greater depth of insight,

such as the discovery of new themes. This represents a valuable aspect of qualitative research.

Individual interviews

27

I used my LinkedIn network to identify the participants and I tried to contact them by posting

a message on their mailbox describing the purpose of study. However, it was difficult to

identify who were willing to participate. Particularly, most of the female employees who were

contacted did not respond. I personally visited Zwolle and Amsterdam to conduct two

interviews, but it was difficult to find the remaining participants. At last, after contacting over

18 employees through LinkedIn, phone calls and emails 6 employees were selected for the

individual interviews. The table below gives their demographic details. For P1, P2 and P5 the

interviews were face-to-face. And for the remaining participants telephonic interviews were

conducted.

Participa

nt- ID

Role Gende

r

Industry Size of the

firm

Age Years of

experienc

e

Nationality

P1 Consultant M Human

Resources

and

Consultancy

< 250 31 4 Dutch

P2 Consultant M Services < 250 27 3-4 Indian

P3 Consultant M Services < 250 25 3-4 Indian

28

P4 Interim

Manager,

Organisatio

n Advisor,

Entrepreneu

r

M Food, Pump,

Machine

building,

Manufacturin

g

< 250 65 40+ Dutch

P5 IT head,

Entrepreneu

r

M Services,

Digital

entrepreneur

<50 Exact

age

not

know

n

18+ Dutch

P6 Service

Manager

M Services <50 Exact

age

not

know

n

9+ Dutch

Table 1: Demographic details of individual participants

29

Secondary data

One of the limitations about the primary source in this research is a small sample size. To

compensate for this limitation and to draw better comparisons and validations, the research also

used secondary data. Secondary data is often used to validate and compare the primary data

(Adams et al., 2014) and to draw important themes that would not have been otherwise found.

Therefore, the research used academic literature and the latest OECD reports related to SMEs

in the Netherlands, between years 2010-2019. The academic literature and the OECD reports

are available at the online library of the University of Groningen and referenced later. The E-

journals and SmartCat search engines available at the university library provided a scope for

sufficient literature review needed for the study. Moreover, the Google search engine was also

used to find relevant published articles on open innovation. The next chapter will describe the

sample profile and the way the interviews were organised.

Sample profile

Prior to beginning the data collection, it was important to identify if the participants worked

for SMEs at least once in their working career. It is noteworthy that some of the participants

selected had experience with both multinationals and small firms but the research ensured to

clarify whether they worked for SMEs before. This was robust for the research because they

could draw on key differences between multinationals and small and medium enterprises. To

ensure credibility and more robust participation, I treated them as knowledgeable experts and

ensured that there were some follow up questions from their side.

All the 6 participants (see table 1 for demographic details) were employees in the Netherlands

and all the interviews took place in the three cities – Groningen, Zwolle and Amsterdam. All

30

the participants confirmed to have worked in a small to medium firm (< 250 employees). In

addition, 4 participants also confirmed to have owned a small business.

Maintaining gender balance was not possible in this research as all the female employees who

were contacted were short of time and could not commit. Therefore, the interviews were

conducted with male employees. To ensure variations in experiences, I tried to have a good

mix of young and experienced professionals.

The first interview took place at Zwolle with the consultant at a HR and consultancy firm.

Furthermore, three individual participants from Amsterdam had some relevant experience in

the services industry. Another interview took place with the head of the Dutch Business

Partners and he was the most informative even though he had more experience with closed

innovation. He was informative about the critical issues or barriers with open innovation.

The last interview took place in Groningen. This participant worked in a small agency having

less than 10 employees and he also worked for multinationals. This participant has over 18+

years of total experience in which working with SMEs is the major expertise as described by

him. Therefore, I focused only on the details specific to the small and medium firms. Prior to

inviting them for the face-to-face or telephonic interviews I ensured that the ethical

considerations are not undermined in this research.

Ethical Considerations

In order to avoid any ethical issues, the conduct of research was guided by the six key principles

of the ESRC Framework for Research Ethics (Economic and Social Research Council, 2015).

Table 2 shows the six principles and what was followed throughout the research to mitigate the

key ethical issues.

31

ESRC Principle Measures for an ethical research conduct

Maximize benefit for individuals and society

and minimize risk and harm

To minimize the risk and harm the interview

data and quotes were used in a way that could

not reveal the identity of the interviewees.

By analysing the data, the research tried to

find out the importance of channels and

intermediaries for idea generation,

knowledge exploration, retention and

exploitation

Right and Dignity of individuals should be

respected

To ensure that the participants are not

offended, direct personal questions were

avoided, like about the family members.

Participation was properly informed All the participants were informed that they

need to sign a consent form prior to the

interview and that the interview would be

recorded. It was up to them if they wanted to

withdraw. Hopefully, they all signed the

consent forms before the interview.

Research should be conducted with integrity

and transparency

To maintain the integrity, all participants

were asked if they wanted to have a copy of

the transcripts or the recording. But, no one

actually wanted it as the consent form was

sufficient.

Lines of responsibility and accountability

should be clearly defined

The information sheet handed out contained

specific details on how the data will be used

and about the responsibility of the researcher

Independence of research should be

maintained

The research was an independent project

without any influence from third parties.

Table 2: Ethical issues

Data analysis

Data analysis of interviews

In line with the study’s interpretivist philosophy and exploratory nature, this study adopted the

Gioia approach of grounded theory (Gioia et al., 2012, p.20) to analyse the interview

transcripts. This method was chosen because it offers a more systematic theory-building

32

approach and is designed to bring qualitative rigor to inductive theorizing and developing new

concepts.

According to this approach “qualitative rigor” is enhanced by organising the qualitative data

into the 1st- and 2nd- order categories. In the 1st order analysis there is little attempt to distil

categories that may later emerge from the data (ibid.). Rather it lists all the categories that can

be possible from the interview. The 2nd order analysis is the phase that seeks for a pattern in

the initial codes and in which the researcher considers himself/herself as “knowledgeable

agent” (ibid.). Eventually the categories are reduced to a more manageable number. Finally, it

is investigated if the 2nd order themes can be distilled further into “aggregate dimensions”

(ibid.). This is transformed into the data structure that finally leads to the grounded theory

model after reviewing and comparing it with relevant literature to recognise possible emerging

themes and structures. Thus, keeping track of this approach the qualitative data was analysed

in three stages also guided by the principle of thematic analysis to identify themes or pattern in

the data (Braun and Clarke, 2006) that can address the research questions.

As a very first step, existing literature was reviewed making notes of the themes that emerged

out of it. The focus was to summarize what was already known. This served as an initial

framework for the analysis. The first stage was for generating the initial codes (1st order

categories). After each interview transcription initial codes were generated and it was ensured

that the initial codes are relevant to the research questions. Examples of initial codes are –

“whereas smaller companies…you are much more agile…flexible and you can just quickly

move”. Thus, this initial code is relevant to the research question in two ways. First, it explicitly

relates to SMEs and second, it relates to the type of management in SMEs. Both the concepts

are relevant to the research questions. Next, guided by the principle of thematic analysis, these

33

initial codes were compared and analysed to generate semantic and latent themes. Semantic

theme carries the explicit or surface meanings of the data whereas a latent theme looks for the

underlying meaning or conceptualization of the semantic content of the data (Braun and Clarke,

2006). These themes were then grouped into relevant 2nd order themes to answer the research

questions. During this process it was important to pay special attention to emerging new

concepts from the participants. It was ensured that the 2nd order themes are properly defined

using phrases to give meaning to them.

For example, the initial code “whereas smaller companies…you are much more agile…flexible

and you can just quickly move” was coded as “Agile management culture” (see Figure 1,

Appendix 1). Next, I tried to compare the initial codes to find if there are any repetitions or

pattern. For example, the quote “Countries in Europe start with a Dutch start-up or buy a

Dutch start-up because it is flexible, it is quick” matched with the initial coding “Agile

Management Culture”. Hence, “Agile Management Culture” is the 2nd order theme coded as

per the repetition in the responses. Finally using this strategy 8 more theory and researcher

centric 2nd order themes were generated. These themes were then used to construct the

grounded theory model as presented in the discussion section later.

In the third stage of analysis, the 8 major themes were assembled into 3 aggregate dimensions,

which captured the overarching concepts relevant to the open innovation strategy of SMEs

(Figure 1). Next, to make the analysis stronger and more trustworthy it was supplemented and

compared with secondary data.

Data analysis of secondary reports

34

The secondary reports were analysed to gather more information about Dutch SMEs innovative

performance and the key barriers they face. As stated earlier, these reports are used as a

supplement to strengthen the analysis of the primary data and make better comparisons. As a

first step of the analysis, the 2nd order themes from the primary data analysis were used to find

supporting or contradictory points in the secondary reports. For example, the 2nd order theme

“Duality of labour force” was found as “This divide (or duality) should be reduced” (OECD,

2014). Thus, using the secondary and primary data a better picture could be drawn. However,

one extra 2nd order theme “Gender Inequality” was found from the OECD statistics (Baker

and Gielens, 2018; OECD, 2018). It was on the basis of my own observation and subjective

view and also because it was closely associated to the research questions. Finally, after the data

analysis (Primary and secondary) the below data structure with 9 relevant 2nd order themes

were finalised.

35

1.Barriers[..]Time, cost and resources

2.the time and the effort that we put in

is also less because we need money

3. No budget resources

4. limited role of venture capital in

risk financing

1.More part-time women workers

2. less expertise and knowledge than

men

(Baker and Gielens, 2018)

This divide (or duality) should be

reduced” (OECD, 2014)

1.not enough background

2.less experience you have less

knowledge

Duality of labour

force

Lack of resources

Gender inequality

Less Experience

Barriers of OI

1st Order Categories 2nd Order Themes Aggregate Dimensions

Figure 1: The Data Structure

36

1.smaller companies…you are much

more agile

2. frequent meetings

3. Dutch start-up are is flexible

4.project deadlines

1. IT platform that was built

together with all these companies

2. Software response tool to do

everything

3.we have something called the

Hackathon

1.we recruited a lot a people in

Newcastle

2. HR is also involved I believe

3. The screening people…they are

more empowering and

enabling…and actually doing the

innovation themselves

Agile

management

culture

IT

management

Human

resources

management

Managerial

solutions of OI

1st order categories. 2nd order themes Aggregate dimensions

Figure 1: The Data Structure (Continued)

37

1. research institutes...published in papers

and stuff

2. universities supporting open projects

3. Maastricht University ...emphasis is on

learning and collaboration

4.SME+innovation fund

5. the government is very flexible

6. so this is the governmental thing to

stimulate innovation

1. professional services. Actually, a

liaising component…to tell the R&D teams

…ok…this is what the customer wants

2. professional services…the guys who are

talking to the customers

Role of

institutions

Role of employees and

customers

Business model

1st Order Categories 2nd order themes Aggregate Dimensions

Figure 1: The Data Structure (Continued)

38

Research Quality and limitations

The quality of the research was enhanced by ensuring validity and reliability. Validity refers to

the accuracy of findings whereas reliability refers to the consistency and replicability of

findings for other researchers (LeCompte and Goetz, 1982). To ensure the reliability of the

research design, I tried to show the process of generating the themes from the data corpus. This

way different researchers can track the process of how I started with coding that ultimately lead

to the grounded theory model. I also kept a record of the research process by including the

criteria of participants notes, interview transcripts and the recordings. The questionnaire also

aimed to contribute to the quality of the research by capturing the different viewpoints of the

employees which in turn could enhance their understanding about the advantages of open

innovation. To increase transparency of the research design, interview transcripts and

recordings are available on request, and questionnaire, consent form for participants, coding

scheme can be found in the appendices. But, this research cannot guarantee complete

replicability in different settings because I was interpreting the situation from my subjective

view. Yet, in my view the findings may be partially replicable for SMEs in other European

nations because of the similar institutional setting.

Internal validity refers to the extent to which observations are authentic representations of some

reality (LeCompte and Goetz, 1982). So, to enhance the internal validity and make the findings

more trustworthy and authentic, literature and secondary reports were used to make better

comparisons and inferences. But establishing external validity or complete generalizability was

troublesome because of the subjective nature of the study. This research accounted for a small

group of employees in the Netherlands. But the subjective views of a different group may be

39

different. Therefore, the findings may not be completely transferable to a different group. The

research methodology has other limitations as well.

The quality of the research would have been enhanced by the use of computer-aided software

for the analysis of the raw data. Also, the quality of this study would have been improved if

more than a single researcher was involved in the coding process to compare and assess the

coding scheme. Another limitation of the research is the sampling methods. A major criticism

of convenience sampling is that the sample might tend to be non-representative and biased

(Mackey and Gass, 2015). Thus, the research has limitations because of a single-researcher

bias. Nevertheless, internal reliability and validity has been accounted for in this research.

Next, the key findings from the data analysis is being described.

40

4. Findings

The objective of this section is to describe the findings of the research using the primary and

secondary sources. The data analysis leads to 9 themes divided into three sections. The first

two sections describe the barriers and enablers of open innovation. The last section describes

the role of networks for open innovation. Relevant literature - academic and secondary reports

have been used as a supplement to compare and validate the findings.

Barriers of open innovation

A. Duality of the labour market

Recent times have seen a surge in the number of knowledge migrants and temporary contract

workers in Holland (OECD, 2018). But the attitudes of the native workforce towards their

inclusion in the economy seems to be sceptical. A much experienced and elderly P4 suggest

that collaborating with third countries like India has a lot of trust issues and is not economically

protected.

“In the past there were almost no people from China and India they came to Europe so

it was much easier to protect your knowledge, for example…you are in the

university…its open this or that…it makes the companies much more difficult to protect

their knowledge and find the right people where they do trust and cooperate

with[..]people are not loyal, you invest in people but then at the end they are not

there…we have a lot of job centres that’s not stable enough and mostly innovation takes

some time and it has a long horizon. This loyalty is very important…and this is not

there” (P4)

P5 comments in a similar way giving more importance to security:

41

“from my perspective the openness is obviously good to have a shared community but

also as a company needs to bring in money to pay these people who contribute[..]that’s

why I am saying there has to be balance” (P5)

While a much younger native appraises the talent of ‘knowledge migrants’ but admits that there

are some firms who refrain from OI principles.

“I talked to a number of people from India, from South Africa, from Brazil, what the

common ground is that they are all brilliant people…it's just hard to find a match. If

you don’t speak Dutch[..]Can't comprehend why some companies still have everything

in Dutch. It’s not open innovation[..]If all companies at least have a two-way street like

you have an English and a Dutch manual for instance that would be a logical start. In

the North there are a lot of companies who do this I think we are missing out” (P1)

On the other hand, P2 and P3 who are knowledge migrants in Holland describe their

experiences:

“In the internship I faced a lot of difficulties…like you will hardly get any interview

calls. I applied to many places. But unfortunately, I was not accepted…that was the

frustration here…because there are very limited English-speaking jobs” (P3)

“it is a very open-hierarchy structure over here…everyone is considered equal[..] that

is the cultural difference between India and Holland and also, you get to choose what

you would like to work, not like someone coming up to you and asking you to work on

this but they will ask you your opinion” (P2)

42

This suggests that the inclusion of knowledge migrant in the economy is difficult and often

they struggle. While some immigrants are welcomed in the economy, others face a lot of

barriers. This dual perspective was also noted in a recent OECD report on Netherlands. As

cited in the OECD report:

“The labour market is characterised by a small flexible segment (often younger workers

on temporary contracts or self-employed) and a large, more rigid segment (often older

and better skilled workers with strong social protection. [..]This divide (or duality)

should be reduced” (OECD, 2014, p. 67).

Thus, from the data it is evident that the participants were divided in their perspective about

open innovation. While some participants focussed more on trust and security in business,

others were much more agile and positive about technological collaboration for innovation and

openness. This shows a sense of duality in the attitude of the workforce. Although this attitude

is similar to the employee syndromes (see Chapter 2.2), these evidences add another construct

in this determinant and that is ‘age’. From the interviews and the OECD report it appears that

highly skilled and older workforce is more protective than the younger segment and is less

likely to adopt OI principles. Self-employed workers and knowledge migrants can be a

facilitator of open innovation because of their flexibility and they can also collaborate with

different customers and contribute in knowledge exchange. However, the attitude of the native

workforce in Holland is divided towards their inclusion. This duality in a way hampers OI

because flexibility of the labour market is necessary for innovation (OECD, 2014). Next,

resources and financing remain an impediment for open innovation.

43

B. lack of resources

Similar to the earlier observations (Van de Vrande et al., 2009; van der Meer, 2007) evidence

from the interviews and secondary data suggest that SMEs have a lack of resource portfolio

and financings that hampers open innovation. P1 describes the issue as below:

“Barriers[..]Time, cost and resources[..]because innovation is usually a repetitive

process that actually takes a lot of time” (P1)

P4 describes that a poor resource base is the main handicap with SMEs.

“What's stopping is simple…they have no money and not enough background so that

they can set up this business on a proper way” (P4)

P5 describes the vulnerability of his business as below:

“in my case we are into open-source development into software and applications but

the time and the effort that we put in is also less because we need money[..]I had a

small company with 5 people - 5 developer and 2 designers and the contribution is by

default lower…because we need to make sure that everybody can be paid the price”

(P5)

P6 as well supports the above observation:

“innovation is probably harder…because there is no budget or resources” (P6)

Moreover, the effects of the financial crisis seem to be haunting the SMEs even now. The Dutch

SMEs face increased scarcity of bank lending since the financial crisis, combined with the

limited role of venture capital in risk financing (OECD, 2014). Thus, resources and financing

still remain one of the main obstacles for OI management in SMEs.

44

C. Lack of Experience

Another problem with OI adoption seems to be lack of experience, as evidenced from the

interviews. The effect of the founding-team experience on the survival of SMEs have been

widely studied but have given mixed results. Theory suggests that experience can have a

decreasing or increasing returns (Delmar and Shane, 2006) depending on the nature of start-up

or whether the prior experience was successful or unsuccessful. As such the open innovation

strategy can also be influenced by experience.

From the interviews it was evidenced that experience is one of the main barriers of open

innovation in the Dutch SME market. Most of the start-up ventures and small enterprises are

started by young people who have little to no experience of the business models that would

give them success. And they are too young and enthusiastic to calculate the risks involved in

the business models they follow.

P4 describes that a proper mix of young entrepreneurs and experienced entrepreneurs would

promise a successful business model for open innovation:

“it’s very difficult for start-ups to come to a business model where they can earn

money…90% or more will not survive after one or two years[..]they have no money and

not enough background[..]For the SMEs it is not much experienced people who are

coming in the circle”

However, P6 adds that entrepreneurs who have a lot of experience might have reached the

saturation point where they can't think of any new ideas because they have already tried

everything before and as such it may have a negative impact on open innovation.

45

“Because if you have less experience you have less knowledge, when you have less

knowledge you are probably easier thinking about certain things…and when you have

easier thinking about certain things you see solutions…while somebody who has all the

knowledge, he is not able to think easy anymore. It’s like this person already knows

everything. He knows all kinds of barriers. while when you have less experience. You

are more likely to just go for it and see where you end than thinking about all these

barriers that someone who has a lot of experience with that”

Even, from the OECD report (Baker and Gielens, 2018) it is evident that some sections of the

workforce like the females in Holland have less exposure to the market and they are seen

working for less hours than men. It can be inferred that this leads to less experience and they

do not gain the sufficient knowledge and expertise than their male counterparts for OI. It

appears that experience plays a vital role in open innovation. Rather than a linear curve the

relationship appears to be an inverted U curve where the returns of implementing open

innovation at first may increase with experience but after the saturation point is reached it may

start to decrease. To sum up these barriers are seen as the major bottlenecks in the OI processes.

The next section discusses the factors that facilitates the OI processes.

D. Gender inequality

The last hampering factor from the data analysis is gender inequality. Statistics suggest that

women account for a large majority of part-time workers in the Netherlands as compared to

men (Baker and Gielens, 2018). The age-old tradition of considering women to be the primary

caregivers and men to be the primary income earners seems to be intact even in the 21st century.

And this is reflected by the fact that women in Holland work for less hours and have less

46

financial security than men. This gender inequality in working time also implies that women

are likely to attain less expertise and knowledge through on-the-job learning than men (ibid.).

Furthermore, the target to improve the representation of women in senior roles have shown

little progress (OECD, 2018, p. 36). In a knowledge-based economy like the Netherlands this

inequality seems to be creating a void between the workforce. This can be detrimental for open

innovation principles as such this knowledge gap between men and women needs to be

minimized.

Enablers of open innovation

The above section described the barriers. This section presents the managerial solutions of OI

based on the analysis.

E. Human Resource Management

Human Resource is the main department responsible to deploy and develop resources for

growth (Eisenhardt and Martin, 2000) and their contribution to the creation of competitive

advantage cannot be denied. In a review on OI adoption, Burcharth et al, (2014) highlights the

importance of the operational human resource management capabilities in the areas of

performance management, training and development programs, and special talent programs

like job rotations, compensation and rewards. Their importance has found support even within

the dynamic capability perspective of a firm (Teece et al, 1997). However, their role in the

adoption of open innovation principles still remains confusing and contextual. This was even

evidenced from interviews. All except two (P3 and P4) agreed that the Human Resources (HR)

and consultancy are the important intermediary for knowledge flows, matchmaking and

training in the process of open innovation. P1 describes his firm as internationally minded:

47

“So yes, we are into innovation internationally[..]we even went to Newcastle with my

colleagues to Eindhoven and they recruited a lot a people in Newcastle …so yeah…we

are an internationally minded company……We are actually not an innovative

company…but we are the middlemen who recruit …it's not like we use technology a

lot…we use LinkedIn. But we are definitely not only focused on the Dutch market” (P1)

P1 also describes the role of Human Resources (HR) for knowledge exploration as:

“HR is also involved I believe…If HR is only hiring the Dutch people, then R&D

manager can jump high or low but it’s not going to work out for them…so no…I believe

it’s a common goal…it's not a goal in itself…but it’s a thing to reach the goal…and I

believe international people can definitely help…Currently there is so much demand

that I believe you can’t do it only with Dutch people”(P1)

P5 supports the contribution of HR for open innovation and also suggest that there can be

innovation in every department including HR.

“The screening people…they are more empowering and enabling…and actually doing

the innovation themselves …like innovation in HR itself. processes…the more efficient

ways to communicate…or to attract more people or screen people” (P5)

But, P4 was doubtful about the role of HR in the process of open innovation:

48

“They are only looking to the profile but they don’t understand what is behind the

profile…these people who doing the selection…they never bring the right

people…that’s my experience[..]they simply not have the knowledge not experienced

enough to feel or smell what is needed” (P4)

Burcharth et al, (2014) did find that training (on-the-job learning) and development programs

organised by the human resource management enhances the dynamic capabilities of the firm

and also reduces the negative effect of employee syndromes. They also found that older firms

lack the flexibility needed to adopt openness. But surprisingly from the findings so far, it

appears that the human resource management may themselves be divided in this perspective,

if the duality of workforce is considered, as will be discussed in detail in the discussion section.

But, so far from the data and literature it can be interpreted that Human resource management

(HRM) have a key role to play in knowledge flows across organisational boundaries. And,

while the HRM facilitates the training and development programs for OI, agile management

facilitates the collaboration and interaction between the partners, as discussed next.

F. Agile management culture

Agile management refers to a kind of management that requires frequent, weekly coordination

between teams and a continuous customer and employee feedback to ensure the successful

implementation of the processes under strict timelines (Galpin, 2018). This kind of a culture

provides an integrated and actionable approach and a strong decision-making process to ensure

an efficient coordination between partners (ibid.). However, so far, the effectiveness of an

agile culture has not been studied in the context of open innovation in SMEs. Although prior

studies (Van de Vrande et al., 2009; van der Meer, 2007) emphasize the importance of

49

management practices for open innovation, they do not explicitly describe what kind of

management practice is needed for open innovation. The evidence from the interviews partially

filled this gap by describing the importance of agile management culture for open innovation

in SMEs.

P2 describes the role of agile culture as below:

``We have various project deadlines. And based on these project deadlines we need to

actually complete stuff so if you are working in a team of an innovative product depends

upon all the team members to actually put in their ideas and put in their hours and

time…into the innovation[…]customers come up with these kind of idea of how we can

predict the lead time or how we can focus the lead time”(P2)

P4 describes the importance of an agile and flexible culture for start-ups and small businesses:

“Countries in Europe start with a Dutch start-up or buy a Dutch start-up because it is

flexible, it is quick...” (P4)

P5 highlights the importance of an agile culture as below:

“whereas smaller companies…you are much more agile…flexible and you can just

quickly move.” (P5)

P6 describes the importance of frequent meetings and commitment between companies for OI:

“You need to be together in order to align on certain topics…so what was supportive

is that we frequently met with the complete group of people in order to make sure that

the right things were done” (P6)

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These evidences show that an agile management culture facilitates the adoption of OI and helps

to keep track of the developments and collaborations. This also suggest that this flexibility and

frequent coordination enhances their competencies and open innovation strategy.

G. Information Technology management

The other determinant as evidenced from the interviews was ‘IT management’. Research on

the use of ICT tools and employee participation have not been explored much and represents

an even more interesting research avenue (El-Ella et al., 2013; Nambisan et al., 2017). ICT

tools play an important role to facilitate this collaboration at a low transaction cost. The

significance of digital management and ICT tools for the process of open innovation was

evidenced from the interviews.

One such tool introduced by P2 was “Hackathon”. He describes the ways of capturing ideas

as:

“The other innovation ideas…yeah…we have something called the

Hackathon…so…we have a yearly Hackathon…where people actually come

together…ask all the employees to come up with ideas to improve the products” (P2)

P3 gives some ideas about the ICT tools that are used to integrate customers into the open

innovation process.

“Software response tool to do everything…it’s like you have to send messages, email

and anything…you can do that within that software itself…so it’s like within software

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they collaborate with everyone…… ZIRA…or such…salesforce is there…SAP

conquer” (P3)

Also, there has not been much research on the recruitment strategies for external participants

(West and Pillar, 2014, p.48). P1 describes the use of LinkedIn to search for new participants

or for idea contests.

“So yes, we are into innovation internationally [..] it's not like we use technology a

lot…we use LinkedIn. But we are definitely not focused on only the Dutch market” (P1)

P6 describes the use of IT platforms for collaboration between networking partners as below:

“I worked for them they were together with 8 other companies they were innovating on

a system […] the innovation was that these companies started working together on a

platform and…IT platform that was built together with all these companies[..]and then

they would. Share ideas about it that how they could better share their information on

that platform” (P6)

From these quotes it can be inferred that ICTs introduce new competencies and organisational

requirements in the SMEs that creates better learning opportunities for the employees and thus

helps them collaborate and compete with other firms of greater competencies. Thus, these

competencies help in their open innovation strategy.

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Intermediaries of business model

Thus, the above themes described the barriers and enablers of open innovation. This section

aims to describe the intermediaries of the business network of SMEs.

H. Role of institutions

Evidence from the interviews emphasize the importance of universities for open innovation.

P2 describes the role of research institutes in promoting open innovation as below:

“The other innovation ideas...three ways…one via customer needs…second is through

…Hackathon…third is through the research institutes...published in papers and stuff”

(P2)

P4 describes the role of universities in promoting start-ups as below:

“He has to find a network of partners[..]. people whom you can talk to about his ideas

and real people who can spare with him as his partners. I see it in some universities

they have a team of old guys mixed people…and they help students so that he can test

his ideas” (P4)

P5 comments that universities and large firms together are supporting small enterprises in their

open innovation strategies by supporting them with networking and resources.

“There are universities also…supporting and also open projects where SMEs look for

companies like IBM to help out…initiatives…to share knowledge with brilliant people

coming from the universities” (P5)

53

After the universities, the importance of government was also evidenced from the interviews

and secondary sources. As noted in the survey (Kierzenkowski and Kastaneer, 2014) the

SME+innovation fund, launched in January 2012 is aimed to support SMEs with finance.

“The first pillar comprises direct "Innovation Credits" to support research and

development projects of enterprises, which are converted into subsidies in the case of

failure of the project[..]The second pillar includes the existing "SEED Capital", which

is a co-investment scheme for early stage capital. Private equity funds that invest in

risky technological start-ups can apply for a loan through the SEED capital[..]The

third pillar includes a new Dutch Venture Initiative (DVI) which is a "fund of funds"

facility, i.e. it holds a portfolio of other investment funds” (Kierzenkowski and

Kastaneer, 2014, p.13)

Coming to the interviews, three out of 6 participants agreed that government is supporting

technological collaboration between firms for innovation. As noted by P3:

“Comparatively they are more supportive…more open to innovation. If you have an

idea and you want to do a start-up it’s very easy here [..] the government is very flexible

with it” (P3)

P4 describes the government support in Holland for start-up ventures as:

“The government is supportive. If you want to do a start-up it takes hardly a day here

to start it comparatively to other countries…for example in India the process is so

complex” (P4)

And, P5 supports the role of government in enabling open innovation:

54

``. if you can create technology or create jobs and learning for people and you have a

good plan for business, a broader plan for the execution then you can request a

subsidy[..] so this is the governmental thing to stimulate innovation” (P5)

This comes as a surprise to earlier research. Ranga et al., (2008) in their research found that the

SMEs in North Holland have specific knowledge needs that remains largely unknown to the

academic institutions and government agencies in spite of the various ongoing small-firm

oriented initiatives. There demands are either not met or are not tailored properly with the

initiatives. The reason for this discrepancy is – poor communication between parties,

insufficient awareness of government agencies, high bureaucracy, cultural differences and

language (Ranga et al, 2008). However, evidence suggests that things might be changing now.

I. The role of employees and customers

This brings the reader to the last theme from the data analysis. There are several research

contributions pointing to the employees and customers as crucial sources of innovation

(Chesbrough and Brunswicker, 2014; Backstrom and Bengtsson, 2019). But these research

contributions include the surveys of innovation sources in large firms (Backstrom and

Bengtsson, 2019) ignoring the small and medium enterprises. However, customers are now

putting their trust even in SMEs as evidenced from the interviews. P2 describes the role of

customers and non-R&D teams in ideas inflows and implementation as below:

“We are actually in the professional services so we actually implement the

product…The R&D is actually developing the product…and innovates on the product

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itself…so yes…a combined effort...From the fields product implementation field …you

get a lot of data about what the customers is lagging behind…all these kinds of inputs

is actually needed by the R&D teams…“...so we become actually a liaising

component…to tell the R&D teams …ok…this is what the customer wants[..] those kind

of innovation comes from the field and so the project implementation team and the R&D

team has a close collaboration as well for the innovation to happen” (P2)

Also, P3 describes the combined role of customers, services and R&D in the process as below:

“We are the professional services…the guys who are talking to the customers…we

know what are their expectations. So, from customers’ expectations you have to

innovate your product… we have to get input from the customer …we give R&D the

feedback of what are the scope of innovation” (P3)

Thus, it highlights the relative importance of customer-market orientation for open innovation

strategy – a case of outside-in strategy. At the same time, it also emphasizes the importance of

skills and capabilities of the employees in interacting with the customers that shows an element

of inside-out strategy. It can also be inferred that innovation originates from both customers

and employees of the SMEs. The needs and the regular feedback of the customers is the starting

point for open innovation. But the know-how and internal competencies of the employees are

equally important to target the right customers. To conclude, the 9 themes discussed so far

describes the factors influencing open innovation in the Netherlands. Drawing on these analysis

and findings the research presents the discussion and key propositions that ultimately leads to

the grounded theory model that can provide grounds for future research.

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5. Discussion and the grounded theory model

The aim of this chapter is to answer the 2 questions described in the research gap (see Chapter

2.3). Relevant literature is used to evaluate whether new concepts have been discovered and to

contextualize the findings. Finally, a conceptual model is presented.

The first question ‘What are the determinants of open innovation and what are the effects of

management tools on the adoption of OI principles’ can be discussed with reference to the first

two sections of findings.

This question has two frames – barriers and managerial solutions. The first frame discusses the

barriers of open innovation. Findings suggest that duality of the labour market is one of the

main bottlenecks for open innovation (OECD, 2014). From the attitudes of the participants it

appeared that the knowledge migrants in Netherlands are willing to contribute and share their

competencies but the native employees are not always supportive about their inclusion in the

economy. There attitudes are similar to the employee syndromes discussed in the literature

review (chap 2.2). This in a way hampers knowledge exchange. It was also evidenced that the

older workforce segment is more protective than the younger counterpart as they have more

social protection and trust issues (OECD, 2014). Moreover, financial restrictions and gender

inequality also seems to be undermining OI principles (Baker and Gielens, 2018). This is

surprising because it is believed that the 21st century saw new possibilities of networking and

expansion through partnerships and the impediments to openness like protectionism and trade

barriers started to come down (Mathews and Zander, 2007). But it is evident that these

impediments are still seen in the Dutch labour market. The findings also suggest that experience

has an inverted U relationship with open innovation success.

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The second frame discusses the enablers of open innovation. The first management tool is the

human resources themselves. From the interviews and literature (Burcharth et al, 2014) it was

evidenced that the HRM are equally important for facilitating open innovation and

collaboration, although the labour market may have a dual attitude towards being open (OECD,

2014). Evidence support the earlier findings that the HRM can be the key facilitator of OI and

can help significantly to reduce the employee syndromes (Burcharth et al., 2014). Surprisingly,

it is evident that not all the segment of HRM may be supportive that adds another construct –

‘average age of HRM team’. The older rigid segment of highly skilled HR department may not

be too receptive about OI themselves as compared to the younger segment. For instance, the

older segment may not be willing to provide training and development programs for knowledge

migrants, who come for a temporary period. Earlier it was found that older firms lack flexibility

to adopt OI (Burcharth et al, 2014). But this research interprets that even older firms can be

flexible and positive towards OI principles if the HRM in that ‘old’ firm is flexible and younger.

And even for young firms, if the management team is older and socially protective and rigid

then that may have negative consequences for OI principles. This leads to the following

propositions.

Proposition 1 (P1): An older, less flexible and more rigid segment of highly skilled human

resource management increases the negative effect of NIH syndrome, leading to a lower

adoption rate of inbound open innovation.

Proposition 1a (P1a): An older, less flexible and more rigid segment of highly skilled human

resource management increases the negative effect of NSH syndrome, leading to a lower

adoption rate of outbound open innovation.

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Proposition 2 (P2): A more flexible and less rigid younger segment of human resource

management reduces the negative effect of NIH syndrome, leading to a better adoption rate of

inbound open innovation.

Proposition 2a (P2a): A more flexible and less rigid younger segment of human resource

management reduces the negative effect of NSH syndrome, leading to a better adoption rate of

outbound open innovation.

Next, from the findings it appears that an agile management and an IT management culture

facilitates the process of open innovation in SMEs. Prior studies have highlighted the strategic

importance of agile management at the organisation level (Galpin, 2018) but their significance

in the context of open innovation in SMEs remains largely unknown. And, it is still not clear

how SMEs interact with networks and partners of larger size (Van de Vrande et al., 2009). But

the findings from the interviews suggest that the agile and IT management culture gives a better

management procedure and communication ability between networks and enhances their

synergies.

The answer to the second question ‘What is the intermediaries of the open business model of

SMEs’ depends on all the themes found in this research. From the findings it seems that

business networks of Dutch SMEs are comprised of – government, universities, and industry.

Findings also suggest that SMEs benefit from a combination of inside-out and outside-in

strategy for open innovation. The active integration of customers and suppliers in the process

shows the external market orientation - outside-in element (Gianiodis et al., 2014) and the

competencies of the SME employees themselves shows the inside-out element of strategy.

59

Their internal competencies and knowhow are crucial for determining what the firm is good at

(Miller et al, 2002) and their market-orientation is important to target the right customers and

communicating with them (Gianiodis et al., 2014). External networks – universities, other

firms, clients, suppliers and recruitment agencies are the sources for external competencies of

SMEs. It can be said that these competencies are also the building blocks for open innovation

strategy. This also highlights the triple helix network in SMEs that considers the government,

industry and universities to be the three pillars of economic growth and innovation (Ivanova

and Leydesdorff, 2016).

However, creating synergies and long-term commitments between partners for knowledge

exchange in the Netherlands seems to be challenging due to recent developments like Brexit.

Surveys (OECD, 2018; Kierzenkowski and Kastaneer, 2014; Baker and Gielens, 2018)

highlights the rising number of knowledge migrants, self-employed and temporary contract

workers who face strict labour regulations that stops them from long-term commitments.

Moreover, gender inequality seems to be problematic. These workers and knowledge migrants

can be one of the key players in open innovation but their inclusion in the economy is still on

a low scale because of the attitude of the native workforce. Without trust and favourable

attitudes the benefits of an open business model are hard to be realized because the partners

may refrain from collaborating. In a review Chesbrough and Vanhaverbeke (2014) describe the

importance of open business model for adoption of OI principles. This research interprets that

an open business model may also help to reduce employee syndromes and enhance mutual trust

between collaborating firms. This leads to the last two propositions of this master’s thesis.

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Proposition 3 (P3): An open business model of the SME helps in reducing the NIH syndrome

of employees and facilitates the adoption of inbound OI principles.

Proposition 3a (P3a): An open business model of the SME helps in reducing the NSH syndrome

of employees and facilitates the adoption of outbound OI principles

Finally, it can be concluded that a more balanced approach to inside-out and outside-in strategy

for open innovation is practical for firms. Based on the discussion and the propositions below

grounded theory model can be realised.

61

OI adoption

Open business model

(P2a)

Other Determinants IT management (+)

Agile Management (+)

Lack of resources (-)

Gender inequality (-)

Low experience (-)

Duality of workforce (-)

Employee Syndromes

Younger HRM

segment

Older HRM

segment

(P1)

(P3) (P3a)

(P1a)

(P2)

_

_

Figure 2: The grounded theory model

Inbound OI

NSH

NIH

Outbound OI

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6. Conclusion

To sum up, this master’s thesis focussed on exploring the present Dutch SME market in terms

of openness from the perspective of the employees and recent survey reports. It became evident

that the workforce is divided in their principles and that was also reflected from the reports.

While the younger segment seems to be more likely to adopt OI principles, the older segment

is still sceptical. To sum up the research contributes to the literature on open innovation in four

different ways.

First, the study adds to the literature of open innovation by linking it to the HR management

literature for SMEs - by exploring the management practices of SMEs to adopt OI principles.

Evidence suggests that human resource management has a key role to play in OI practices and

they do so by either reducing or enhancing the employee syndromes. And it depends on the

context of the human resource management and their overall ideology. However, it is inferred

that a younger management team is more likely to adopt OI principles.

Next, the research linked the OI literature to the strategy literature based on RBV. It appears

that the strategic choices to implement OI practices are again influenced by the employee

syndromes and how well the management want to collaborate. Evidence also suggest that

SMEs engage in both outside-in and inside-out strategy.

Third, the research adds to the literature of open innovation by linking it to the business model

research. Supported by the earlier work (Ranga et al, 2008) the research explores the role of

industry, customers, government and the universities in facilitating open innovation in the

Dutch SMEs. The findings suggest that the long-term collaboration between partners enhances

the competencies of the firm. However, this research also adds the context of employee

63

syndromes to the business model research by proposing that an open business model and long-

term commitment between partners reduces the detrimental effects of the employee syndromes.

Fourth, the research contributes to the literature on open innovation by exploring the other

determinants that affects the adoption rate of OI. The research supports the literature

(Chesbrough Vanhaverbeke and West, 2014) that highlights the importance of IT management

and ICT tools for OI adoption. And additionally, finds that an agile management culture also

enhances the collaboration. In contrast to earlier studies that shows the benefits of

internationalisation in terms of shared knowledge and technology, this research shows that

economies are more protective about their knowledge in the present time because of

immigration from other countries and that attitude is reflected from their nationalist behaviour

and language barriers. It is also evident that experience and open innovation shows a somewhat

inverted U relationship. The outcome at first increases with experience but after reaching the

saturation point it may eventually start to decrease. It is also seen that organizational flexibility

and competition plays an important role in open innovation although SMEs do not have the

luxury of money and resources. This compels them to be more open in their innovations.

Finally, based on the discussion and conclusions, the research draws important managerial

implications for policymakers.

6.1 Managerial implications

This master's thesis has important implications for policymakers. First, the findings suggest

that policymakers should encourage long-term collaboration between network partners and

take possible steps to encourage gender equality. Thus, emphasising on the importance of the

long-term formal agreement between the intermediaries. This has a long-term benefit for open

64

innovation because it encourages long-term collaboration between SMEs, large firms and

universities. This may help to create a vibrant open innovation culture in the economy.

Second, the findings suggest that policymakers who want to foster open innovation should

consider reducing protectionism and language barriers so that the cross-border knowledge

transactions can be easier.

Finally, the research suggests that open innovation is the future of economic growth especially

in the SME sector and that it is the time that policymakers should review their policies that

allows SMEs to follow a more open business model. As a first step the policymakers should

encourage an agile management culture in SMEs.

6.2 Limitations and further research

This research has its own limitations which calls for future research. First, the study did not

include female participants. This had the disadvantage that the participants were not much

informative about the gender related issues that might affect open innovation. For instance, it

would be interesting to explore women entrepreneurs’ experiences in collaborating with male

entrepreneurs for networking and knowledge exchange for innovation. This can link open

innovation literature to Hofstede's cultural dimension.

Second, the study only involved one researcher which could lead to a single-researcher bias.

Because of limited time available, convenience sampling and snowball sampling was used

which also suggests that some participants were similar in their experiences and knowledge.

Convenience sampling is considered as the least reliable design but because they are the

cheapest and easiest techniques they are often used as sampling methods (Adams et al., 2014).

65

Future research should involve multiple researchers and a diverse sample for data collection

and data analysis.

Third, although the findings suggest that SMEs would benefit from a combination of inside-

out and outside-in strategy, the research could not explicitly clarify the extent to which it holds

true. The reason is the small sample size. The evidence of just ‘six’ interviews is not sufficient

for robust inferences. Future research should focus on specific nature of each dimension to

justify if the propositions can be applied to each – inbound and outbound. This indeed requires

a larger sample size.

Last, the research does not include one sector that can be a good example for open innovation

practices - Healthcare. Studying the health sector would lead to better analysis of both - inbound

open innovation and outbound open innovation because of the immense research and

development work done by them. The healthcare sector is widely known for its immense

inhouse R&D developments. But whether it successfully manages outward technology transfer

is an area of future research.

66

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Appendix

Appendix 1: Coding Scheme

Representative supporting data (1st order data) for each 2nd order theme

2nd Order Themes 1st order data

A.

Duality of the labour market

“In the past there were almost no people from

China and India they came to Europe so it

was much easier to protect your knowledge,

for example…you are in the university…its

open this or that…it makes the companies

much more difficult to protect their

knowledge and find the right people where

they do trust and cooperate with[..]people are

not loyal, you invest in people but then at the

end they are not there…we have a lot of job

centres that’s not stable enough and mostly

innovation takes some time and it has a long

horizon..this loyalty is very important…and

this is not there”(P4)

“I talked to a number of people from India,

from South Africa, from Brazil, what the

common ground is that they are all brilliant

people…it's just hard to find a match..if you

don’t speak dutch[..]Can't comprehend why

some companies still have everything in

Dutch. Its not open innovation[..]If all

companies have at least a two way street like

you have an english and a dutch manual for

instance that would be a logical start. In the

North there are a lot of companies who do

this I think we are missing out”(P1)

“From my perspective the openness is

obviously good to have a shared community

but also as a company needs to bring in

money to pay these people who contribute

rgt?.. in my opinion, you need to have a

healthy balance because one hand you want

to find a company that supports people to do

proper research and most of the time they get

this money by selling their

innovations…”(P5)

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“it is a very open-hierarchy structure over

here…everyone is considered equal[..] that is

the cultural difference between India and

Holland and also, you get to choose what you

would like to work, not like someone coming

up to you and asking you to work on this but

they will ask you your opinion”(P2)

like..every client here…everyone here..

specific to Dutch market…they just want the

software everything within their

language…the instruction language..is also

in Dutch…so I guess communication is one

of the key barriers over here…if you are not

from holland (P3)

“In the internship I faced a lot of

difficulties…like you will hardly get any

interview calls..I applied to many places..but

unfortunately I was not accepted…that was

the frustration here…because there are very

limited english speaking jobs” (P3)

“The labour market is characterised by a

small flexible segment (often younger

workers on temporary contracts or self-

employed) and a large, more rigid segment

(often older and better skilled workers with

strong social protection.[..]This divide (or

duality) should be reduced” (OECD, 2014, p.

67).

B.

Lack of resources

“Barriers[..]Time, cost and

resources[..]because innovation is usually a

repetitive process that actually takes a lot of

time”(P1)

“in my case we are into open-source

development into softwares and applications

but the time and the effort that we put in is

also less because we need money[..]I had a

small company with 5 people - 5 developer

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and 2 designers and the contribution is by

default lower…because we need to make

sure that everybody can be paid the

price”(P5)

“What's stopping is simple…they have no

money and not enough background so that

they can set up this business on a proper

way”(P4)

“Since 2004, income from foreign firms has

increased steadily while income from Dutch

firms fell with the onset of the 2008 financial

crisis and has yet to return to pre-crisis levels

“(OECD, 2014, p.164)

C.

Experience

“all these young people should use much

more experienced people..old boys like

myself so that they would not make the old

mistakes …startups…all young people..all

have no experience..that’s good for creativity

..they can easily think outside the box…but

they can’t make a business model..so that

they can be successful..no mix with

experienced people…so that is at least as an

old guy what I think” (P4)

“Because if you have less experience you

have less knowledge, when you have less

knowledge you are probably easier thinking

about certain things…and when you have

easier thinking about certain things you see

solutions…while somebody who has all the

knowledge .he is not able to think easy

anymore..it's like this person already knows

everything..he knows all kinds of barriers..

while when you have less experience..you

are more likely to just go for it and see where

you end than thinking about all these barriers

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that someone who has a lot of experience

with that”(P6)

D.

Gender Inequality

‘Gender inequality is important, reflecting

insufficient participation of men in

household work and a persistent gender

wage gap. The gender bias in part-time work

can in part explain this, given that the

Netherlands has one of the highest wage gaps

in terms of annual labour income in the

OECD, while the gap of full-time employee

earnings is below the OECD average

Furthermore, ambitious targets to improve

the representation of women in senior roles

have shown little progress. The target of

achieving 30% female representation on the

boards of large companies by 2016 was

missed, and the Netherlands has recently

ranked 25th

out of the 28 EU countries in this

area’ (OECD, 2018)

“Workers in the Netherlands have a stronger

preference for working shorter hours than

their OECD counterparts. As a result, the

Netherlands has the highest incidence of

part-time work in the OECD. Workers who

work part-time tend to enjoy high levels of

job satisfaction, when compared to full time

workers, and the share of individuals who are

‘involuntarily’ employed part-time is very

small relative to total part-time employment.

A further indication of the preference to

work part-time is that the Netherlands is the

highest ranking country in the work-life

balance measure of the OECD’s better life

index[..]However, women account for a

large majority of part-time workers This high

share can be partly attributed to cultural

aspects of the family, where women are

considered to be the primary caregivers and

men the primary income earners (Baker and

Gielens, 2018, p. 18).

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E.

Human resource Management

“HR is also involved I believe…If HR is

only hiring the Dutch people, then R&D

manager can jump high or low but its not

going to work out for them…so no…I

believe it’s a common goal…it's not a goal

in itself…but it’s a thing to reach the

goal…and I believe international people can

definitely help…Currently there is so much

demand that I believe you can’t do it only

with Dutch people”(P1)

“The screening people…they are more

empowering and enabling…and actually

doing the innovation themselves …like

innovation in HR itself.. processes…the

more efficient ways to communicate…or to

attract more people or screen people”(P5)

“Human resources comes down to hiring

…when you have the virtual teams managing

the resources allocating different resources

to different projects [..] I don’t think they lie

anywhere in the innovation”(P3)

“They are only looking to the profile but they

don’t understand what is behind the

profile…these people who doing the

selection…they never bring the right

people…that’s my experience[..]they simply

not have the knowledge not experienced

enough to feel or smell what is needed”(P4)

F.

Agile Management

``We have various project deadlines..and

based on these project deadlines we need to

actually complete stuff so if you are working

in a team of an innovative product depends

upon all the team members to actually put in

their ideas and put in their hours and

time…into the innovation[…]customers

come up with these kind of idea of how we

can predict the lead time or how we can focus

the lead time”(P2)

“Countries in Europe start with a Dutch

start-up or buy a Dutch start-up because it is

flexible, it is quick...”(P4)

78

“whereas smaller companies…you are

much more agile…flexible and you can just

quickly move..”(P5)

“You need to be together in order to align on

certain topics…so what was supportive is

that we frequently met with the complete

group of people in order to make sure that the

right things were done”(P6)

G.

IT management

“the other innovation ideas..…yeah…we

have something called the

Hackathon…so…we have a yearly

Hackathon…where people actually come

together…ask all the employees to come up

with ideas to improve the products…what

innovation you can bring up to the product

…they give us one week or two weeks to

actually develop it…and..then they look at

the panel…the number of ideas…and they

try to incorporate the idea… Three

ways…one via customer needs…second is

through …Hackathon…third is through the

research institutes...published in papers and

stuff’ (P2)

“software response tool to do

everything…its like you have to send

messages, email and anything…you can do

that within that software itself…so its like

within software they collaborate with

everyone…… ZIRA…or such…salesforce

is there…SAP conquer” (P3)

“Mostly I have been dealing with closed

innovation..so just innovating within our

company…within our own processes [..]but

there is one particular example…during the

time I was working for (company X) .. when

I worked for them they were together with 8

other companies they were innovating on a

system […] the innovation was that these

companies started working together on a

platform and…IT platform that was build

together with all these companies…all these

companies would like add suggestions and

functions and requirements and that they

would like to see in their application…and

79

then they would..share ideas about it that

how they could better share their information

on that platform”(P6)

H.

Role of institutions

“comparatively they are more

supportive…more open to innovation..if you

have an idea and you want to do a start-up its

very easy here…just takes 20 minutes to start

it…the government is very flexible with it”

(P3)

“the government is supportive..if you want to

do a start-up it takes hardly a day here to start

it comparatively to other countries…for

example in India the process is so complex”

(P4)

“the other innovation ideas...three

ways…one via customer needs…second is

through …Hackathon…third is through the

research institutes...published in papers and

stuff” (P2)

“He has to find a network of

partners[..].people whom you can talk to

about his ideas and real people who can spare

with him as his partners..I see it in some

universities they have a team of old guys

mixed people…and they help students so

that he can test his ideas”(P4)

“There are universities also…supporting

and also open projects where they look for

companies like IBM to help

out…initiatives…to share knowledge with

brilliant people coming from the

universities…also..if you can create

technology or create jobs and learning for

people and you have a good plan for

business, a broader plan for the execution

then you can request a subsidy and then you

get money, so this is the governmental thing

to stimulate innovation”(P5)

80

I.

Role of customers and employees

P2: we are actually in the professional

services so we actually implement the

product…The R&D is actually developing

the product…and innovates on the product

itself…so yes…a combined effort...From the

fields product implementation field …you

get a lot of data about what the customers is

lagging behind…all these kinds of inputs is

actually needed by the R&D teams…“….so

we become actually a liaising

component…to tell the R&D teams

…ok…this is what the customer wants…in

pharmaceuticals… those kind of innovation

come from the field and so the project

implementation team and the R&D team has

a close collaboration as well for the

innovation to happen...also, after they

develop the product..they test it and that is

also through the professional services...who

does the project implementation

P3: we are the professional services…the

guys who are talking to the customers…we

know what are their expectations..so from

customers expectations you have to innovate

your product… we have to get input from the

customer …we give R&D the feedback of

what are the scope of innovation

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Appendix 2: Interview Guide

Interview with employees in the Dutch SME sector

Q1: Could you tell me something about yourself and your interests?

Q1a : How old are you and what is your cultural background?

Q1b: How would you describe your cultural background?

Q2: What is your total industrial experience in terms of years and in which fields you

specialize?

Q3a: What is your current position and for how long?

Q3b: Also, do you have any international experience?

Q3c: How would you define your firm in size?

Moving to the main questions

Q3 : In your career, did you come across ‘open innovation’? technology exchange for

innovation!

Q3a: Could you throw some light on what are your views about open innovation in general?

Q3b: What are the factors you find supportive for open innovation?

Q3c: What are the barriers?

Q3d: does size matter for innovation?

Q4 : Do you think policies and work rules are supportive towards open innovation?

Q5: Do you think there can be ethical issues?

Q6: Have you ever managed or worked with the R&D teams?

Q6a: Do you feel they are important for innovation in general and why?

Q6b: What factors are supportive in managing the R&D teams?

Q6c: What factors acts like a barrier?

Q7: Do you believe innovation is the sole responsibility of the R&D department or the

whole organisation? What is the role of HR for instance?

Q8: are you involved in technology outsourcing?

Q9: Have you managed cross-cultural teams and do you think they are important for

innovation?

Q9a: What are the advantages and disadvantages of such teams?

Q9b: what are the supporting factors to successfully manage them?

Q9c: What types of barriers you faced while managing cross-cultural teams?

82

Q10: Also how many female managers have you worked with and how was the experience

working with them?

Q10a: How would you describe their importance for better overall performance?

Q10b: Do they have innovative mindset, ideas or do they differ from the male counterpart in

terms of their beliefs, etc?

Q11: Finally do you want to add something about innovation and management, if we

missed something?

83

Appendix 3: The consent form

Open Innovation in Dutch SMEs : An exploratory Qualitative analysis

Information and Consent Form

Neha Kumari (B70280703) from Newcastle University has been asked to conduct research for

her master’s thesis as part of the program ‘Msc Advanced International Business Management’.

Neha will explore the implementation of open innovation that can clarify the relative

importance of external knowledge and technology for innovation. In the era of

internationalization, firms are actively looking beyond their boundaries to look for external

knowledge and technology. The research aims to explore the external forces (cultural diversity,

gender diversity, laws and regulation, ethics, etc) that influences the process of open innovation

under different institutional environments. The research aims to explore the subjective views

of managers and working professionals on this topic. It is an inductive qualitative research

based on the assumption that the reality of the innovative business environment can be better

interpreted by social interactions rather than numerical data. Following the development of a

theory of change for the project, an evaluation plan will be devised that will utilise multiple

methods in order to collect data to evidence the theory

You are being asked to consent to take part in one or more interviews in order to give your

views. With your permission, these interviews will be audio recorded in order to aid data

analysis. The data from interviews will remain anonymous and you will not be identified. Any

direct quotes that may be used in a report or other writing will not be attributed or traceable to

any named individual. The audio recordings are stored as digital files on a secure server which

is password protected. You have the right to withdraw your consent at any time during the

study by contacting any member of the research team and your data will be destroyed.

The researchers are bound by the GDPR 2018 legislation this includes provisions that:-

(a) My personal information will not be used for any purpose except the purpose that I

have been told about and that I have agreed to.

(b) My personal information will be protected from disclosure to anyone except the

researchers and my legal adviser.

If you wish to change your mind and withdraw your permission for the data you supplied to be

used for the purposes of the research, please contact the researcher for the project:

Neha Kumari, University of Newcastle, Newcastle upon Tyne NE1 4SE, +31683202270,

Email: [email protected]

Supervisors:

Karen Elliott, University of Newcastle, Newcastle upon Tyne NE1 4SE, +44 (0) 191 2081719,

84

Email: [email protected]

Rudi de Vries, University of Groningen, University of Groningen, Nijenborgh 9, 9747 AG

Groningen, Netherlands, +31 503633843

Email: [email protected]

Open Innovation : An exploratory qualitative analysis

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