Novel product innovation in project-based firms: explaining innovation where interdependent firms deliver complex system-level outcomes

Abstract

Project-based firms (PBFs) are an increasingly important firm type in today's projectdriven world. Over the next two decades, PBFs will transform nearly $60 trillion into complex product systems (CoPS) that comprise the communication, energy, and transportation infrastructure of our modern global economy. In the process, they will participate in a collective technological development process that is iterative, intensely interorganisational, and dominated by their participation in large industry projects. In this environment, PBFs will deliver components, subsystems, and CoPS, some being novel products that are new to the world. These are called CoPS-related novel products.However, the current understanding of how PBFs introduce CoPS-related novel products is lacking. In general, the existing innovation literature does not provide an adequate inter-organisational perspective, which is necessary to explain the development of new The CoPS innovation literature itself remains too focused on the role of large system integrators, and not on the broader network of firms that support innovation. This leaves unscrutinised rest of the 'project-based productive network' of firms delivering products (components, technologies, and subsystems) into the higher-level CoPS. Taken together, the current literature inadequately addresses many factors that are important to novel product innovation in PBFs. Therefore, the central research question this thesis aims to answer is: What factors facilitate PBFs' ability to introduce novel product innovations in environments where interdependent firms deliver complex system-level outcomes?Three specific challenges are imperative to understanding novel product introduction in PBFs. The first relates to the project-based nature of organising, which means that PBFs have contingent opportunities for novel product innovation, depending upon the circumstances of the projects they conduct. This is called the contingent opportunities problem. The second challenge is that PBFs have to ensure that their innovations are compatible with our technologies in their environment. This is called the technological interdependencies problem. The third challenge is that PBFs have enduring interorganisational commitments that extend across the projects they conduct. This is called the enduring relationships problem.ii Novel product innovation in project-based firms Three research studies were designed and conducted to address the three specific challenges. The research is based on survey data collected from PBFs in the Australian upstream oil and gas industry. Study 1 investigates capabilities that PBFs use to overcome the contingent opportunities problems. This study finds that firms use an adaptive problemsolving capability to recognise opportunities within projects, and are reliant on networking capabilities to bring about novel product innovations. Study 2 investigates how PBFs use both inbound and outbound non-pecuniary open innovation practices to resolve technological interdependencies. This stud...