The Paradox of Openness and Value Protection Strategies: Effect of Extramural R&D on Innovative Performance

Abstract

This paper is dedicated to the memory of MB Sarkar, who passed away in June 2016, during the third round of revisions to the paper. We would like to thank the Senior Editor, Rajshree Agarwal, and two anonymous reviewers for their thoughtful and developmental feedback. This paper also benefited from the comments and suggestions of Alfonso Gambardella, Harry Bowen, attendees at the SMS 2010, AoM 2011, and the Dime 2011 conferences, as well as seminar participants at Universidad Carlos III (2010) and Politecnico di Milano (2011). The authors have contributed equally to this article. ! 2 ! The paradox of openness and value protection strategies: Effect of extramural R&D on innovative performance ABSTRACT: The emphasis in firms on extramural research and development (R&D), involving increased engagement with external entities in the conduct of research, can also result in knowledge leakage. Knowledge leaks can undermine firm competitiveness and to prevent this, firms deploy various isolating mechanisms to protect their knowledge. Integrating insights from the resource based view and evolutionary theory, we hypothesize an inverted curvilinear relationship between extramural R&D and innovation, and explain why the value protection strategies employed by firms change the relationship at various degrees of external knowledge sourcing. We test our hypotheses on a sample of 506 French manufacturing firms using data from three surveys conducted in the period 1998 to 2006. We find an inverted-U shaped relationship between extramural R&D and innovation performance. This relationship is moderated by employee retention and secrecy such that the benefits of extramural R&D are weakened at lower degrees of extramural R&D while its downsides are mitigated at higher degrees of extramural R&D. Our work thus suggests boundary conditions to the paradox of openness.

Embracing the Paradox of Interorganizational Value Co‐creation–Value Capture: A Literature Review towards Paradox Resolution

“…The findings by Wadhwa et al . () on extramural R&D (i.e. investments in acquiring knowledge of a partner) and employee retention strategies are in line with the above studies.…”

“…A focal partner who focuses too much on value capture or protection against misappropriation misses out on the chance to create value (Madhok and Tallman ; Wadhwa et al . ). As pointed out in the introduction of this study, the value co‐creation–capture tensions are nuanced and may take many different shapes.…”

“…It can also include the misappropriation of the focal organization's resources by a partner in the IOR (Wadhwa et al . ). In the marketing literature, this has been described as value co‐destruction (Plé ), and in particular co‐destruction through the intentional misuse of resources, whereby one actor seeks to increase its own well‐being to the detriment of the other's well‐being (Plé and Chumpitaz Cáceres ).…”

Role of HRM in Talent Retention With Evidence

“…Wadhwa, Freitas, and Sarkar, (2017) in their study on Research and Development (R&D) emphasised on knowledge leakage as a factor that firms should consider to avoid employee turnover given their business competitors. Having a quality workforce means that operations can run as planned and this improves productivity.…”

“…So, talent retention programs can act as cushions against loss of organisational knowledge which is an essential tool for driving growth and sustainability as emphasised by Wadhwa, Bodas Freitas, and Sarkar, (2017). As a process, talent retention requires the identification, implementation, and evaluation of the effectiveness of different strategies aimed at fostering employee loyalty to their employing organisations and the human resource managers are often given the lead role in doing these tasks (Taylor, 2002, p. 229).…”