Radical innovation through internal corporate venturing: Degussa's commercialization of nanomaterials

Abstract

Internal corporate venturing enables radical innovation within established firms in mature markets. Without effectively designed and managed internal corporate ventures, the organizational constraints of established firms will strongly favour incremental innovation over radical innovation. This paper investigates the evolution of a successful internal corporate venture within a large, incumbent chemical firm, now known as Evonik Degussa, to reveal the challenges, organizational design, and management strategies of their commercialization of radical nanomaterials technology. The commercialization of nanomaterials technology is of great interest to incumbent materials and chemical firms and to independent ventures, but the radical, generic, and capital intensive nature of nanomaterials technology requires organizational and managerial innovation. This case study demonstrates a model to enable growth through radical innovation in nanomaterials, while taking advantage of an incumbent firm's capabilities and complementary assets. Organizational strategies include incubation from a risk-adverse culture, relatively long timelines for evaluation, and a high-level steering committee. Managerial strategies focus on product development, risk reduction, and active risk management.

The emergence of the nanobiotechnology industry

“…1), with a total of 215 entries during that time period. The timing of these entries is consistent with the claim that new ventures are more likely than large, established firms to attempt to commercialize highly uncertain technologies 4,11,12 . In the emerging nanobiotechnology industry, approximately two-thirds of the firms with nanobiotechnology capabilities are very small as measured by annual revenues 4,13 .…”

“…Firms can increase their chances at benefiting from emerging industries such as nanobiotechnology by enhancing the exchange of ideas across technology fields and knowledge workers. Co-location of diverse groups, purposeful mixing of disparate expertise and insulation from an incremental innovation culture are recommended 8,11,21 . Hiring of scientists and engineers with an interdisciplinary education could also help bridge technology 'silos' 8,22 .…”

“…This highlights the tensions between existing capabilities and emerging capabilities within large, established organizations, such as the pressures suppressing radical innovation in the multinational chemicals corporation Degussa 11 . Therefore, despite first-mover advantages and superior resources of multinational corporations, it is the small, fledgling experiments, in the form of de novo firms tightly integrated to universities, which appear most likely to cross-pollinate concepts from different disciplines and commercialize the resulting nanobiotechnology inventions.…”

Why Are Bad Products So Hard to Kill?

“…If the manager is risk averse, it is more costly to motivate the managers to work on risky projects. Other researchers have studied how risk aversion affects the profitability of delegating project selection to managers (Lambert 1986;De Paola and Scoppa 2006;and Bester and Krähmer 2008), and whether managers are more likely to be innovative if firms adopt long-term incentives that reduce risk by smoothing outcomes over time (Im and Nakata 2008;and Maine 2008).…”

Realizing the Potential of Advance Material Innovations

“…Eager (1998), Clark (1997), Maine(2000) Established firms producing industrial materials Niosi and Bas (2001), Wield and Roy (1995), Hounshell & Smith (1988), Maine (2008), Early experiences of advanced materials ventures Niosi (1993), Hagedoorn & Schakenraad (1991), Maine & Ashby (2002) Advanced materials ventures Maine and Garnsey (2004), Maine and Garnsey (2006) Advanced materials ventures and spin-outs encounter many of the challenges faced-by other high-tech ventures, together with a number of distinct technical, management and market challenges common to other firms attempting to commercialize radical generic technologies. These include the need for process innovations, the challenges of diffusing a radical technology, their upstream position in value chain, multiple possible markets and the need for other complementary resources.…”