entrepreneurship through relationships – navigating from ... · entrepreneurship through...

Entrepreneurship throughrelationships – navigating fromcreativity to commercialisation

Sigvald J. Harryson

Lund University School of Economics and Management, Copenhagen Business School, Innovationand Organizational Economics, Kilevej 14A, DK-2000 Frederiksberg. [email protected]

This paper explores the role of relationships in the emergence of a network’s value creationstructure. The strategic navigation from creative exploration to global exploitation throughthe use of so-called transformation networks is particularly highlighted. The creativity phaserequires a creator with visionary leadership. The commercialisation phase, on the other hand,requires technology integration and global marketing excellence. Realising that this requiresmore than a bright inventor, the creator of Anoto brought in the right complementary assets atdistinct phases of the commercialisation process. Our case illustrates how integrator andmarketeer profiles were brought into a networked act of entrepreneurship for joint navigationacross an ocean of relationships that gave birth to a global standard for digital writing. Bycombining theories on open innovation and networking, a theoretical framework is developedto analyse the different nature of the networks (or the value creation structure) in whichcomplementary assets can be accessed, transferred and transformed into commercialisedinnovation. The analysis suggests that the value of complementary assets are embedded in andunlocked by three distinct types of networks: creativity networks, transformation networksand process networks. It also suggests that the ideal approach to accessing complementaryassets shifts over the research and development management process, and happens throughthese three different types and levels of networks, requiring fundamentally differentapproaches to leadership and relationship management. Current literature describes openand networked innovation as a continuous – not dynamic – process of exploration andexploitation without any distinction of how types and structures of networks evolve andinteract in the process.

1. Introduction

While the entrepreneur often is the driver ofcreativity and invention at the early or-ganic stages, (s)he may not always have theleadership capability most suited to moving intothe more rigid processes of exploitation andcommercialisation. (S)he may even be a barrierto outsourcing decisions, or networked solutions,that can be vital for moving from concept crea-tion to business implementation (Holt, 1992;Davidsson et al., 2001; Hill, 2001; Nilsson,

2003). As we gain deeper understanding of thedrivers of entrepreneurship, we see an opening ofinnovation processes that are getting increasinglynetworked. This evolution is partly captured bythe literature, in which the ‘ideal’ models of andprocesses for innovation have experienced a linearevolution from a traditional closed system to-wards more or less exclusively open and strategi-cally networked systems. It could be argued thatthe academic analysis of this evolution was in-itiated by Teece (1986) and his seminal articleaddressing how integration of specialised comple-

R&D Management 38, 3, 2008. r 2008 The Author. Journal compilation r 2008 Blackwell Publishing Ltd. 2008,2909600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

mentary assets could allow companies to betterprofit from innovation. His ideas inspired anumber of accounts dealing with the role ofexternal constituents in increasingly open innova-tion processes. This also triggered an evolution interms of terminology – reviewed chronologically:

! Open company development strategy (Ny-ström, 1990), and extended research and de-velopment (R&D) boundaries of the firm(Pisano, 1990, 1991);

! Openness to innovation (Salford, 1995;Baume et al., 1996; Berthon et al., 1999);

! Know-who based innovation (Harryson,1996, 1998, 2000; Lundvall, 1998; Hedberget al., 2000);

! Outsourced R&D (Howells, 1999; Oswald,2000), outsourced innovation (Quinn, 2000;Bean, 2001), innovation sourcing strategy(Linder et al., 2003);

! Innovation networks (Freeman, 1991; Sim-mie, 1997; Pittaway et al., 2004; Fowles andClark, 2005; Powell and Grondal, 2005; Perksand Jeffery, 2006);

! Networked innovation (Powell et al., 1996;Millar et al., 1997; Ahuja, 2000; Hellströmand Malmquist, 2000; Oswald, 2000; Tuomi,2002; Hardy and Lawrence, 2003; Radjou,2005; Salman and Saives, 2005; Swan andScarbrough, 2005);

! Open market approach to innovation (Rigbyand Zook, 2002; Wolpert, 2002);

! Open innovation through permeable organi-sational walls (Sawhney and Prandelli, 2000;Sawhney, 2001; Chesbrough, 2003a, b, 2004;Christensen et al., 2005; Kirschbaum, 2005;Chesbrough and Crowther, 2006; West andGallagher, 2006);

! Open source innovation (Lakhani and vonHippel, 2003; Feldman et al., 2004; Ulh!i,2004);

! Co-creation of innovation with customers(von Hippel, 1988; Dolan and Matthews,1993; Murphy and Kumar, 1997; Ulwick,2002; Brockhoff, 2003; Luthje and Herstatt,2004; Abraham, 2005).

Although all contributions relate to differentforms of networked innovation, no links aredrawn to network theories, or to how networkstructures evolve over time.

Nyström (1990) introduced the term opencompany development strategy to emphasisethat companies can achieve a greater innovativepotential by opening up to external collaborationand broadening their internal base of technolo-

gies, skills and competences. Pisano (1990, 1991)noted how established companies and newcomerscan co-exist in a sort of symbiotic supplier–buyerrelationship. This phenomenon is particularlyobvious when established firms realise a lack ofrelevant technological skills to compete withcertain new entrants, and take corrective actionby establishing collaborative links with otherexternal entrepreneurial firms to access their spe-cialised R&D assets. This strategy allows theincumbent to maintain an internal focus ondomains where it has developed a distinctivecompetence (e.g., commercialisation).

1.1. Outsourced R&D and innovation

Howells (1999) discusses how the concept ofContract Research & Technology (CRT) relatesto the increasing trend of outsourcing corporateR&D activities. He observes that companies arestill hesitant to outsource core technologies toexternal suppliers, but thinks that routine R&Dactivities will become increasingly outsourced toCRTs. Because Howells made this statement, thetrend towards open innovation has progressedwell beyond routine R&D activities.

According to Quinn (2000), the reason whymany companies are outsourcing innovation isthat it calls for such complex knowledge that onlya broad network of specialists can offer. Based onsimilar arguments, Bean (2001) holds that compa-nies increasingly need to consider outsourcing andcollaboration in increasingly open innovation.1

1.2. Some different understandings ofopenness to innovation

Salford (1995) describes openness to innovationas the willingness and preparedness of an organi-sation to accept a radical idea capable of trans-forming the company’s market stand, i.e., itsopenness and ability to change. He pays lessattention to whether the radical idea has anexternal origin or not. Baume et al. (1996) alsotalk about openness to innovation without speci-fically linking it to external networking. Instead,they hold that openness to innovation comes withmeasurability, as it describes the extent to which afirm embraces, accepts and measures innovation.They talk about the internal transparency and notthe external openness of the innovation process.Berthon et al. (1999) view openness mainly interms of opportunity recognition, or the ability tolink internal or external breakthrough ideas to a

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need in the marketplace (cf., O’Connor and Rice,2001). Rigby and Zook (2002, 82) introduced theconcept of open-market innovation as ‘an ap-proach that uses tools such as licensing, jointventures, and strategic alliances to bring thebenefits of free trade to the flow of new ideas’ –an early recognition of the new buzz-word.

1.3. Open innovation

Sawhney and Prandelli (2000, 25) seem to havebeen first in introducing and using the specificterms open and closed models for innovation withpermeable walls – and defining the ‘community ofcreation’ in-between the two models:

Community of creation is a permeable system,with ever-changing boundaries. It lies betweenthe closed hierarchal model of innovation andthe open market-based model. IntellectualProperty Rights are owned by the entire com-munity. The community is governed by acentral firm that acts as the sponsor and definesthe ground rules for participation.

Later on, Sawhney (2001, 102) introduced theidea that ‘rather than tear down organizationalwalls, you can make them permeable to informa-tion’. This is echoed by Wolpert (2002) whoargues that internally run initiatives must to agreater extent tap the potential of ideas, resourcesand capabilities of other companies, withoutlosing control over proprietary corporate secrets.One year later, Chesbrough (2003a, b, c, 2004)joins the open innovation debate with thearguments that traditional closed innovationmodels – characterised by vertical integrationwith internally controlled R&D labs developingtechnology in-house to be commercialised by theparent company – are based on the increasinglyfalse belief that successful innovation requirescontrol (cf., Allio, 2005). Chesbrough (2003a,36–37) defines the open innovation model as onein which ‘firms commercialize external (as well asinternal) ideas by deploying outside (as well as in-house) pathways to the market’. Kirschbaum(2005, 24) describes open innovation as ‘usingboth internal and external ideas at all stages ofnew business development’.

In short, the concept of open innovation im-plies that companies can attain competitive ad-vantage both by leveraging the inventions and theideas of other market players (that are relevant tothe core business) to commercial ends as well as

by licensing their own proprietary technologies(that otherwise would not have been exploited tothe same extent) to external partners, who havedifferent avenues of commercialisation.2

Another term related to open innovation isopen source innovation, which is based on thewillingness of users to openly reveal their pro-prietary information (Lakhani and von Hippel,2003). It implies that ‘the innovator has waivedrights to the critical knowledge component ofinnovation’ as this is increasingly made ‘generallyavailable to those who are interested’ (Ulh!i,2004, 1095), ‘for anyone to use, to correct anddevelop’ (Feldman et al., 2004, 5). This leads tothe formation of new innovation networks – asoutlined below.

1.4. Networked innovation and innovationnetworks

Freeman (1991, 510) made an early prediction that‘networking between autonomous firms will growstill more important and will become the normalway of conducting product and process develop-ment’. Powell et al. (1996) note how the locus ofinnovation has moved from inside the firms’boundaries to the networks of inter-organizationalrelationships. Millar et al. (1997, 399) propose thatinnovation resulting from a collaboration of acluster of firms requires a new framework forresearch. They refer to this kind of innovation astrans-organizational, or networked innovation,and define it as ‘bringing together knowledgefrom a range of disciplinary and geographicallydisparate sources’. Moreover, they suggest that thisnew kind of networked innovation depends on ‘themanagement of knowledge sharing, technologytransfer and learning’.

Simmie (1997), Powell and Grondal (2005) andHellström and Malmquist (2000, 181–182) discussthe importance of networked innovation and col-laboration between people with different knowl-edge and history in order to create new ideas:

The underpinning assumptions behind the ideaof Networked Innovation are that entrepre-neurial teams, which combine different person-alities, knowledges, skills and backgrounds,are more likely to accomplish an innovationthan a homogeneous team.

Ahuja (2000, 426) views networked innovation interms of ‘an interfirm collaborative linkage as avoluntary arrangement between independent or-

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ganizations to share resources’. Oswald (2000,341) holds that the main drivers of increasednetworking in innovation include shared risk,market access, complementary access and speedto market.

Perks and Jeffery (2006, 70) view networkedinnovation as ‘the shaping and management ofthe firm’s position in a network in order to accessand mobilise critical knowledge for innovationwhich resides within the network’. Their main-argument is that innovation is often driven bythose firms who configure the network.

Pittaway et al. (2004, 144) view innovationnetworks as a new market ecosystem in whichcompanies collaborate –‘combining the roles ofinventors, transformers, financiers and brokers tomatch collectively global demand for innovationwith worldwide supply’.

Fowles and Clark (2005, 46) view innovationnetworks in a broader sense – allowing companiesto ‘capture good ideas from anywhere in theworld’. They state that by involving partnersinto the R&D process companies can share boththe technological and commercial risk of innova-tion. However, they make no link to networktheory to explain the very different networkstructures that are used to support technologydevelopment (exploration) and technology com-mercialisation (exploitation).

Hardy and Lawrence (2003) argue that net-worked innovation occurs through relationshipsnegotiated in an ongoing communicative process,which is neither controlled by market nor byhierarchical mechanisms. We now know thatboth are required, but at different stages of theinnovation process. A more detailed and differ-entiated perspective of networked innovation isrequired.

Swan and Scarbrough (2005) highlight theimportance of strengths (shallow, deep) and scope(narrow, broad) of social ties within the overallinnovation network, but without neither distin-guishing when and why shallow versus deepstrength is required, nor when and why narrowversus broad social ties are useful to drive ex-ploration or exploitation in networked innova-tion.

Radjou (2005) claims that firms can revitalisetheir invention-to-innovation cycles by embracingthree principles that underlie networked innova-tion:

1. Engage customers as partners throughout theinvention-to-innovation cycle to harvest cus-tomer insights and thereby get the right in-

novations to the right customers at the righttime.

2. Source the best talent and ideas from any-where – reaching deep inside their organisationsand halfway across the planet; and leveragepartnerships to market disruptive innovationsanywhere rather than eschewing them.

3. Anticipate and respond proactively to ever-changing customer requirements and competi-tive threats by building flexibility into theinvention-to-innovation processes.

Indeed, an increasing number of authors havebrought the customer into the collaborative net-work as an integrated partner of the innovationprocess. Eric von Hippel (1988) pioneered thisthinking through his argument that market risksassociated with new, or enhanced, product, pro-cess or service development can be minimisedthrough specific customer category integrationin new product development. Companies canbenefit greatly from the insights of lead userswho differ from the ordinary users. Lead usersface new needs in the marketplace, which will beprevailing in months or years and can, therefore,benefit from an innovation to meet those needs.Von Hippel’s concept has been developed furtherby a number of authors who claim that directcustomer involvement in the innovation processenhances the company’s innovation capabilitiesand reduces the innovation-related market risk(Dolan and Matthews, 1993; Murphy and Ku-mar, 1997; Ulwick, 2002; Brockhoff, 2003; Luthjeand Herstatt, 2004).

In this context, Abraham (2005, 11) introducesthe term co-creation and holds that ‘the challengein strategic thinking is to find innovative ways ofco-creating value with customers, a technique forfinding unique competitive advantage’. Also inthis stream of literature no link is made tonetworking theory, or to the fact that lead usersare more useful in exploitation of innovation thanin its exploration. Another gap in this stream ofliterature is that it pays little attention to theimportance of relationships to support transfor-mation of knowledge into innovation and com-mercialisation. These dimensions seem to havebeen addressed in know-who based innovation –as outlined below.

1.5. How time-based competition sparkedknow-who based innovation

Time-based competition in innovation receivedparticular attention in Japan in the 1980s and the




early 1990s (Abegglen and Stalk, 1985; Stalk andHout, 1990; Harryson, 1997).

Reflections on the highly relationship-drivenapproach of Sony and other Japanese companiesled to conclusions like (Harryson, 1996, 37)‘ultimately, the knowledge-creating R&D processis no longer limited to individual know-how, butdraws instead on know-who – and unlimitedglobal sources of invention that continually nur-ture internal learning and improve R&D perfor-mance’. George Stalk (1998, xiii) endorsed theconcept through his argument that ‘moving fromknow-how to know-who is not just a powerfultool to increase innovation capacity, it is the sinequa non to manage the continuously increasingcomplexity of most industries’.

Whereas know-how is the ability to solveproblems efficiently based primarily on internallyaccumulated knowledge, experience and skills,know-who is the ability to acquire, transformand apply that know-how through personal re-lationships (Harryson, 1996, 1998). The ‘who’ inknow-who based companies knows who has theknow-how, has the active empathy to rapidlyestablish the trustful relationship required toacquire that know-how, and has the multiplecompetencies required to transform and apply itin a new context so that innovation can occur.Lundvall (1998, 417) confirms that know-who‘involves the social capability to cooperate andcommunicate with different kinds of people andexperts’. Hedberg et al. (2000) introduce thevalue-star as a complement to Porters’ valuechain and use the analogy of a know-who basedcompany acting as node in a network of know-how required to cerate new knowledge and cus-tomer value. Uzzi and Dunlap (2005, 60) stressthe importance of trust, diversity3 and brokerageto build know-who:

Research shows that if you create your net-works with trust, diversity and brokerage, youcan raise your level of information from whatyou know to who you know.

While we view the evolution of terminology andconcepts reviewed above as a useful introductionto sharpen the way we think about innovation, webelieve that the current thinking on the opening ofinnovation would benefit significantly from amore detailed and clearly positioned networkperspective. This is required to more meaningfullyanalyse different actors and their know-whobased relationships, as well as to understandhow the different types and structures of their

surrounding networks contribute, respectively, toexploration for creation, and transformation forcommercialisation of innovation.

Accordingly, a theoretical framework will beintroduced to help us better understand why andhow more relationship based approaches can beapplied to drive entrepreneurship from creativityto commercialisation.

2. Theoretical framework based onnetwork theory

A network approach is well suited to analyserelationships across different levels of innovationnetworks. A network is simultaneously open andclosed, indeterminate and rational, spontaneousand deliberate (Orton and Weick, 1990).

In accordance with Brass et al. (2004), we takea multilevel perspective to networks and distin-guish between three levels of networks: interper-sonal or social networks, interunit networks, andinterorganisational networks. These major typesof networks interact in the way that activities atone level result in consequences, which becomeantecedents for another level. For example, theformal organisation structure of an organisationcan be seen as a hierarchically determined net-work, which is seen as an antecedent for theinterpersonal network, because it determineshow individuals build networks among them-selves, inter alia constraining the formation ofinformal relationships. Similarly, the resultingstructure of the informal social network becomesan antecedent to the interunit network, because itinfluences the pattern of cross-unit connections.Social network relationships take place betweenindividuals and how they form networks influ-ences the formation of organisational networks.These network ties are therefore socially em-bedded. Actually, the main network theoriesconcern such social networks, e.g., ‘social ex-change theory’ (Blau, 1964), ‘weak/strong tiestheory’ (Granovetter, 1973) ‘social embeddednesstheory’ Granovetter (1985), ‘social capital theory’(Coleman, 1988) and parts of ‘structural holestheory’ (Burt, 1992). While Granovetter (1973,1985) primarily devotes attention to transactioncosts in the brokering of weak ties between distantothers, Burt (1992, 1993) also considers the in-formation benefits in terms of power and controloffered by structural holes. None of the authorsdeal explicitly with how brokering of ties and theclosing of structural holes can support organisa-tional ambidexterity to allow for combinations of,

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or transitions between, exploration and exploita-tion.

2.1. How different network structuressupport exploration versusexploitation of innovation

Exploration entails the quest for new knowledge,which can be combined in new constellations, tosubsequently develop new organisational capabil-ities and future innovation, whereas exploitationpertains to the efficient utilisation and develop-ment of the existing repository of corporateknowledge (March, 1991; Levinthal and March,1993; Murray, 2001; Harryson and Lorange,2005; Harryson et al., 2007). The ability to per-form both activities is referred to as organisa-tional ambidexterity (Tushman and O’Reilly,1997) – a seemingly useful ability to navigatefrom creativity to commercialisation of innova-tion. In this context, He and Wong (2004, 492)suggest that the interaction between explorativeand exploitative innovation is positively related tosales growth rate, but also conclude that ‘theorganizational tension inherent between explora-tion and exploitation may become unmanageablewhen both are pursued to extreme limits’.

Might it be possible to solve this tensionthrough new forms of networking between ex-ploration and exploitation? If so, what role dorelationships play in the emergence of a network’svalue creation structure?

There are essential questions that need answersfor a better understanding of the ideal conditionsfor creativity and commercialisation, and how tonavigate between the two through know-whobased entrepreneurship. In this context, a moredetailed and clearly positioned network perspec-tive is required to understand the impact of weakand strong ties in open and closed networks.

2.2. Weak and strong ties to supportcreativity and commercialisation

For Kao (1991, 25), who views creativity as aprocess generating new ideas and approaches, andinnovation as a process by which creativity isimplemented, entrepreneurship is a ‘human andorganizational process by which innovation takesplace’. Similarly, Schoonhoven and Romanelli(2002) view the entrepreneur as a networker,who brings creativity and innovation togetherfor comercialisation of the results. To improveour understanding of how to combine these

activities to secure commercialisation in an actof entrepreneurship, we first need to understandin which types of networks they thrive.4

Based on Granovetter (1973), Hansen (1999)uses a network study to explore how weak inter-unit ties help a new product development teamwith purposeful knowledge-sharing. His findingsare that while weak ties help the team find newknowledge located in other units, they are notuseful in supporting the actual transfer of com-plex knowledge. The more complex the knowl-edge, the stronger the ties required to support itstransfer. Research findings by Uzzi (1996), Row-ley et al. (2000) and Van Wijk et al. (2004)confirm that strong ties are positively related tofirm performance when the environment demandsa relatively high degree of exploitation and weakties are more beneficial for exploration purposesand to prevent the network’s insulation frommarket imperatives.5

Based on the arguments outlined above, itseems reasonable to assume that strong andweak ties are complementary from the perspectiveof time, and that the structure of an ideal networkshould maximise the yield per primary contact.We also learn that weak ties are likely to accel-erate development speed in early phases of ex-ploration when the required knowledge is notcomplex. Conversely, weak ties may slow downspeed in situations of high knowledge complexitywhere strong ties are required to support exploi-tation of innovation. Accordingly, it seems thatcommercialisation of radical innovation requiresmanagement of both weak and strong relation-ships for transfer and transformation of informa-tion into innovation across multiple types ofnetworks. Based on these arguments, a distinctioncan be made between three interrelated networktypes with different foci (Harryson, 2006):

1. Extracorporate creativity networks – typicallysmall, organically managed organisations withweak ties as primary sources of specialisedknowledge and technology focused on ex-ploration through loosely networked colla-boration;

2. Intracorporate process networks – typicallylarge, hierarchically managed organisationswith strong ties focused on exploitation ofinnovation through strong linkages betweenR&D and marketing & sales (M&S) for mar-ket alignment, and from R&D to design &manufacturing (D&M) for commercialisation;

3. Transformation networks focused on inter-linking the complementary creativity networks




and process networks. This is where and howcommercialisation of innovation seems to hap-pen – typically based on strong social relation-ships.

While Harryson’s (2005) model serves as astarting point of the theoretical framework, thereis still a strong need for further research tounderstand the role of transformation networksto analyse when and how which types of ties andrelationships contribute, respectively, to explora-tion and exploitation of innovation. Finally, itseems critical to better understand how explora-tion and exploitation depend on open versusclosed networks – as a critical contribution tothe wealth of literature on open and networkedinnovation. As highlighted in the introductoryreview, this literature seems to have missed theimportant connection to network theory and howdifferent structures and types of networks need tobe interlinked to secure both creation and com-mercialisation of innovation.

2.3. Open and closed networks

Along the connectivity dimension of the socialnetwork, a distinction is made between open andclosed social networks. Based on the idea thatorganisations are embedded in social ties (Gran-ovetter, 1985), the characteristics of these net-works are also assumed to be valid at theorganisational level of the network. In mostresearch on innovation networks, this similarityis taken for granted and is not discussed (e.g.,Gulati, 1999; Gulati and Gargulio, 1999; Ahuja,2000). The open network is mainly about resourceexchange of information, while the closed net-work focuses on social exchange, trust and sharednorms. An example of an open network is one inwhich firms have direct social contacts with alltheir partners, but these partners do not have anydirect contacts with each other. A high number ofsuch non-connected parties, or structural holes,means that the network consists of few redundantcontacts and is information rich, because peopleon either side of the hole have access to differentflows of information (Burt, 1992). Burt (1993)also argues that to enhance network efficiency anactor should focus on maintaining only primarycontacts and delegate the task of maintaining all(complementary) contacts to these primary con-tacts. The major selection criterion for suchpartners then concerns how many contacts theyhave – similar to the logic of scale free networks(Barabasi and Bonabeau, 2003). This implies that

the structure of an open network is suitable whengathering, processing and screening of informa-tion is the primary purpose as well as identifyinginformation sources. This resembles a creativitynetwork, which stresses the indirect linkage, hasmainly weak relationships and is loosely coupled.The opposite is the tightly coupled closed net-work, where all partners have direct and strongties with each other – much like the processnetwork in Figure 1. This network is centred onsocial capital, which is built through trust andshared norms and behaviour (Coleman, 1988).The contradiction between open and closed net-works is stressed by Ahuja (2000), who proposesthat the larger the number of structural holesspanned by a firm, the greater its innovationoutput. The contradiction between strong andweak ties is studied by Soda et al. (2004) regard-ing the organisation of project teams. They foundthat the best performing project teams are thosewith strong ties among the project members basedon past joint-experience, but with a multitude ofcurrent weak ties to complementary (non-redun-dant) resources. Similarly, Bakker et al. (2006)find that long-lived team membership (rather thantrust in itself) has a significant effect on thedensity of knowledge sharing relationships andthus the speed of knowledge transfer. The contra-dictions between networks for exploration versusexploitation are visualised in Figure 2.

Gemser et al. (1996) note that, for hi-tech firms,inter-firm ties seem to transform from quantity toquality in the transformation from exploration toexploitation. In particular, they observe howpharmaceutical firms established vertical linkageswith biotechnology firms to enhance innovative-ness, while a selection of computer firms reducedquantity and enhanced quality in their inter-firmlinkages to enhance the speed of commercialisa-tion.

For an organisation to perform creativity, in-novation and entrepreneurship, it seems clear thatnew combinations of these conflicting networkstructures are required, and the nature of thesecombinations will change over the innovation lifecycle. The main-contribution of this paper is todevelop a new relationship-based model for R&Dmanagement – illustrated through a detailed casestudy – to propose new ways to combine theseemingly conflicting network structures requiredfor exploration versus exploitation of innovation.This allows us to answer the research question:what role do relationships play in the emergenceof a network’s value creation structure? The casestudy will focus around the transition point from

Sigvald J. Harryson


the bottom left corner to the top right of Figure 3.While extant literature describes, respectively andin isolation, the bottom left and the top rightcorners of Figure 3, little or no literature seems toexamine the dynamic link between the two.

3. Methodology

The methodological strategy behind this researchis mainly abductive, being a mix of deduction andinduction (Alvesson and Sköldberg, 1994; Jans-son et al., 1995; Dubois and Gadde, 2002). Thepurpose is theoretical development with a finalstage of empirically illustrating a theoreticalmodel rather than theory generation based ongrounded theory approaches. The empirical sup-port of the theoretical framework was continu-ously assessed, or, inversely, a reality’s theoreticalsupport was investigated through the matching oftheories with realities. This process has started

from a more preliminary frame of reference, usingthe case-study approach (e.g., Yin, 1990; Mer-riam, 1998).

3.1. Using previous research to strengthenthe theoretical framework

The goal of this paper is to create a solid theore-tical framework, while at the same time strength-ening the practical validation of the research. Anabductive research process either has a deductiveor an inductive starting-point. The deductivelyangled processes are theory-driven, while induc-tive approaches are characterised by the contin-uous abstraction of empirical realities. Throughthe in-depth case study method a large extent ofinformation was collected from a limited numberof research units. The goal of our overall researchprogram is to gain a deeper understanding of‘how’ a selected few companies in Japan6 and

Large

Size of Unit /Organization

Small

Weak /Organic

Strength of Ties / Managerial Hierarchy

Strong / Mechanistic

Process Networks for Exploitation of Innovation

Strong Links Between R&Dand M&S

Strong Knowledge Transferbetween R&D and D&M

•

•

Transformation Networks interlinking Creativity-and Process Networks

CreativityNetworks

for Explorationof Invention

Figure 1. Cross-level networks for exploration and exploitation of innovation.

Weak Strength of Ties Strong

Closed

Type of Network

Open

Exploration

ConflictingNetwork

StructuresRequired for

Exploration vs.Exploitation

Exploitation

Figure 2. The conflicting network structures required for exploration and exploitation.




Europe7 – that can be seen as innovation leadersin their respective businesses – manage relation-ships across internal and external networks tosecure both exploration and exploitation of in-novation. The primary instruments in the datacollection have been semi-structured interviewswith audio recording and transcribing, includingseveral types of documentation. There has been acontinuous interchange between empirical dataand theory, as empirical findings initiated thesearch for further theories. Internal validity con-cern has been addressed through the use of multi-ple sources for the case studies in terms of numberof interviewees and their positions in the organi-sations. Complementary information has beengathered from corporate publications and fromother literature. By having key informants reviewthe case reports in several iterations, the issue ofconstruct validity and reliability have been ad-dressed as well.

The initial empirical research (from 1993 until2005) was mainly focused on large MNCs. Ac-cordingly, the creation and commercialisationprocesses did not take a born-global perspective,but focused on how process networks (in Figure 3)could identify, internalise and commercialise theresults of creativity networks. The theoreticalmodel derived from the large MNCs has somesimilarities with the model presented in this paper,but makes less use of network theory.

The Anoto case has been developed from 2004until submission of this paper – to pursue thequestion: what role do relationships play in theemergence of a network’s value creation structure?Both documentation and 22 interviews were usedto collect data for the Anoto case. The interviewscovered the founder, two (consecutive) CEOs, theCSO, CTO, the Director of Partner Relations and

of IP. In December 2007, two follow-up inter-views were made with the founder and the newCEO to update the case in terms of changes incommercialisation partnerships, financial perfor-mance and network structure position (in Figure 3).The last point was covered in response to relatedquestions by one of the anonymous reviewers. Theinformation obtained during the interviews wassummarised as soon as possible after each interviewand sent back for review. In addition, we organisedthree seminars at which we presented the empiricalresearch to the European benchmarking compa-nies, including Anoto, for a group-wide dialogueon best practices regarding relationship manage-ment in cross-level innovation. This has enabled usto get further detail in the feedback process tosecure internal validity. Because our full empiricalresearch is based on 10 different companies ofdifferent size and industry we believe that a goodbase for generalisation is offered for the theoreticalframework – within reasonable limits. This paperpresents the case that best illustrates this frame-work in terms of born global commercialisationthrough relationships – first with academic explora-tion partners and then with global exploitationpartners.

Based on detailed feedback from the Editorand two anonymous Reviewers, additional em-pirical research was conducted on two similarborn globals – ICEpower8 and Polar Rose9 –for comparison with Anoto and additional illus-tration of the theoretical model. The choice ofAnoto for this paper is based on its strong focuson relationships to combine creativity and com-mercialisation, coupled with unique access to thecompany, which has allowed for intimate obser-vations and in-depth interviews over more thanhalf of Anoto’s 9 years of life.

Large

Size of Unit/

Small

Weak /Organic

Strength of Ties / Managerial Hierarchy

Strong /Mechanistic

Anoto asCreativityNetworkdriving

Exploration of the AnotoTechnology

Having Strong Know-WhoLinks toNetworks ofPartners

Closed

Type of Network

Open

the Process Partner Process NetworksExploiting the Technology

Strong capabilities in productdevelopment and D&M

Strong brands, product mgmt.and wide customer reach

Global Marketing & Sales Networks

•

•

Global

Figure 3. The know-who and relationship based approach of Anoto – for exploration and exploitation of a new technology.

Sigvald J. Harryson


This is our first paper to take a full born globalperspective, while one complementary paperusing a similar theoretical framework, but witha pure MNC perspective using Volvo as a case,has been submitted and accepted (Harryson et al,2008).

The case will follow the logical flow and pro-gression of the theoretical framework and itsthree networks focused on, respectively, creation,transformation and commercialisation. Particularfocus will be devoted to how the network struc-tures and relationships evolve in the progressionfrom creation to commercialisation.

4. Case study – Anoto

4.1. Initial breakthrough idea by thecompany founder

Christer Fåhreaus was in his second year ofgraduate studies in mathematics and physicswhen he came up with the first breakthroughidea of Anoto. One late night, as he was goingthrough yet another book from an endless pile tomark and note down the most important insights,he thought: ‘there has to be a better way of doingthis’. His idea was as simple in its concept as itwas complex in its technology. He wanted tomake a digital pen that would read and storethe parts of the text that you mark from any kindof printed text, and then download these selectedparts on your computer.

He turned to the CTO of the Lund-basedcompany Ericsson Mobile and they jointly soldthe idea to the Board of Directors of EricssonMobile. However, while the BOD was convincedof the commercial viability of the idea, they didnot see a strong enough fit to develop this type oftechnology and product within Ericsson Mobile.Instead, Christer got financial support from Erics-son Mobile and the ‘founder’ of this business unitto start his own company to develop and com-mercialise the digital pen. Christer founded acompany called C-Technologies, which was thestarting-point of the Anoto Group.

4.2. Leveraging academic brainpower tocreate intellectual assets

C-Technologies managed to recruit a lot of highlyskilled engineers such as the aforementionedCTO, and the Chief Science Officer of EricssonMobile, as well as good student friends fromLund University and the Lund Institute of Tech-

nology and grew very rapidly into a companywith brainpower to go far beyond the initial ideaof the digital pen – called ‘C-Pen’.

Anoto accelerated the exploration of the inven-tion by absorbing skills from the strong universitybase of Lund in Sweden through 30 joint mastertheses and three fully integrated PhD thesis pro-jects over the first 3 years of operation. Thesuccess of the underlying research was stronglyrelated to highly skilled individuals who wererecruited based on personal contact networks.The original Anoto staff recruited people whoknew were to find other engineering stars basedon previous experiences, such as old co-workersand friends. Several of the engineers at Anotowon national Physic Contests and thereby provedtheir high skills in the area. A snowball-effectoccurred as these newly recruited engineers alsobrought along their personal contacts. This is howAnoto managed to achieve a rapid recruitmentpace while still getting very high quality brain-power.

Having coffee with some of his newly recruitedold friends, Christer gave birth to a new idea:‘Let’s make an optical mouse in the shape of a penfor better handling convenience’. In a 3-montheffort, Christer and his team came up with some-thing that went far beyond the original idea. Theymade a new type of digital pen – combined withdigital paper to be used the old fashioned way,while simultaneously being connected to the digi-tal world. This was made possible through aminiaturised camera that registers the movementof the pen across the digital paper and stores theinformation as series of map coordinates.Through this breakthrough, a clear visionemerged:

We see a world where people have access tointuitive tools for digital communication,based on the oldest and most used informationtechnology – paper and pen – and adaptedafter the natural human pattern of behaviour.(The Anoto vision from www.anotogroup.com, 06.05.04)

As the company matured, the overall vision wassubstantiated through three mission statements(www.anotogroup.com, 07.11.05):

1. To create a global de facto standard for digitalpen and paper. Anoto will accomplish this byuniting handwriting with everyday digitalcommunication between people and systems;




2. To enable innovative and leading edge pro-ducts based on imaging functionality. Anotowill accomplish this by delivering its corecompetence and technology to leading compa-nies and thereby enabling them to deliverworld-class products;

3. To build a world-class partner network. Anotowill develop and own a strong technologyplatform and commercialise it through partnercompanies in products, services and licenses.

4.3. Transforming intellectual assets intostart-up capital

The initial invention and the resulting academiccollaboration resulted in more than 40 patentapplications within the first year of the innovationcycle. This gave Anoto enough bargaining powerto attract significant capital both from companyinvestors and from venture capitalists. For exam-ple, Ericsson invested h16.6 mio for 17.9% of thecompany. Several other global companies andinvestment funds followed the example at similaror higher evaluations. Christer Fåhraeus, defendshis strategy:

When we had made the breakthrough, we firstdevoted six months to protect our initial dis-covery with 40 patent applications beforegoing live with a press-conference in Londontogether with partners like Ericsson, TimeManager and 3M . . . If you develop newtechnologies and products for a mass marketit is very important that you protect them withpatents. Once the market grows, the licensingrevenues will grow accordingly. (Interview,17.09.2005)

4.4. Building relationships to globalpartners for exploitation

After 18 months of intensive exploration withsome 300 patent applications as a result, Anotostarted to establish partnerships with large corpo-rates like Ericsson, Sony-Ericsson, Nokia, Hita-chi, HP and Logitech so as to secure commercialexploitation of the technology and promote it intoa global de-facto standard. A critical person indeveloping the new relationships to the combinedinvestors and technology commercialisation part-ners was Mr. Örjan Johansson. In 1996, longbefore the creation of Anoto, Örjan was con-

tacted by Nils Rydbeck at Ericsson (the ‘father’ ofthe Ericsson mobile phone, the former CTO ofEricsson and the person who later sponsored thecreation of Anoto) who wanted him to work witha new project called MC-Link. This was a newtechnology that Ericsson wanted to establish asnew world standard for short-distance-radio. Ör-jan’s mission was to build an organisation withthe purpose to define and globalise the standard.To succeed with this he realised that he neededhelp from other big companies in the relevantcustomer segments of mobile communication(Interview, 27.05.2004):

Our intention was to establish a global standardand thereby add value to the mobile phone, anddrive technology sales. To set a de-facto stan-dard is about finding the ‘big players’ within theareas and segments where the standard will beused; primarily in the industries of mobilephones and lap tops. It is far from trivial toget agreement on a standard among rivals.

Örjan Johansson established a special interestgroup (SIG) to set a global de-facto standardcalled Bluetooth. The background of the namerelates back to an important Scandinavian Viking– Harald Bluetooth – who became the symbol ofthis SIG. This was to highlight the importantViking-principle of never having a dinner-partywithout first settling any possible tensions amongthe Viking Kings in an atmosphere of openrelationships. Once all frictions had been elimi-nated, the party could start.

In a similar vein, Johansson would alwaysencourage all meeting-participants (the ‘Kings’of large rivalling companies) to first openly venti-late any possible divergence of opinion, or conflictof interest, and then move into an evening ofwining and dining for intensified relationship-building. According to Johansson (Interview,27.05.2004), ‘this was crucial in order to have aconstructive meeting the next morning with anopen atmosphere of fair compromise in the nameof collective progress’. To highlight the symbolicimportance of this Viking-principle, a bestseller10

about the history of Harald Bluetooth and otherVikings was distributed to all the members at anearly stage of the SIG, which chose to name thetechnology ‘Bluetooth’. After this work he be-came known as ‘Mr Bluetooth’. In year 2000, hehad finished this work and became Chairman ofthe board in Anoto. One and a half years later,Örjan and Christer changed chairs to better allowfor Örjan’s personal network and Bluetooth ex-

Sigvald J. Harryson


perience to help the company to establish a bettermarket reach through new commercialisationpartnerships and thereby enhance the return onthe breakthrough technology. Through his for-mer SIG Bluetooth relationships, Örjan enjoyedcontinued top-management access to the bigplayers – also in his new role within Anoto.Several of the partners, such as Hitachi andLogitech, also made significant investments bybuying Anoto stock, which gave Anoto a totalfunding of h200 million. This gave more resourcesfor further recruiting and patenting and, by theend of 2005, Anoto countedo300 employees, buthad more than 300 active and 60 additionalgranted patents in some 180 families. Already in2001, Anoto entered the top-10 list of Swedishcompanies with the highest total number ofpatents – together with companies more thanhundred times the size of Anoto like SKF, Erics-son and Volvo. Through his collaboration withLund University, Christer Fåhraeus found a wayto reduce the total patenting cost significantly:

When filing a patent in close cooperation withUniversities you can enjoy university status forthe patent filing and thereby reduce the totalcost to a fixed fee of 3.000 EUR for profes-sional help with claim construction and adescription. This is one of the reasons why itis particularly interesting to work with univer-sities in Sweden. (Interview, 17.09.04)

4.5. Re-focusing position the value chainposition

Today, the only parts of the value chain that Anotokeeps in-house are the IPRs of the core technologyand of the technologies that protect the core.Anoto’s goal is to have the responsibility of only50% of the value chain and hand over core partslike marketing, sales, distribution, product devel-opment and customer support to commercialisa-tion partners. From this point onwards, Anoto’sstrategy was not to make and sell pens. Instead, thestrategy was to sell technology licenses for the penand basic component required to develop systems.CEO Örjan Johansson holds that:

This strategy is about narrowing down ourposition in the value chain to reduce develop-ment costs and at the same time control thecore so that no one can threaten us. (Interview,07.04.2004)

This partnership strategy was a vital condition inorder to establish a global de-facto standard. Thepartners got a larger product responsibility whichreduced Anoto’s revenue per partner, but the valuealtogether increased when the partners’ volumesgrew because Anoto got licensing revenues fromevery unit sold and every pen used in a system. CEOÖrjan Johansson viewedAnoto’s partnering strategyas one based on critical mass and reward-sharing:

The idea with our extensive partner network isthat it is better to earn ten per cent of everythingthen hundred per cent of nothing. There wouldsimply be no market unless we had established ade facto standard by sharing our concept andlicensing our technology to the main-players inour industry. (Interview, 07.04.2004)

4.6. Collaboration in exploitation insteadof exploration

The strong technology portfolio gave Anoto theopportunity to find new avenues of exploitationfor their core technology. University collabora-tion for further exploration of the technology wasno longer necessary. Instead, Anoto opened upnew avenues of exploitation of the core technol-ogy. For example, Dai Nippon Printing (DNP)and Standard licensed the technology for printingapplications. DHL in Denmark, the Police inBelgium and a number of medical doctors inseveral hospitals began to act as lead-users ofthe Anoto pen. Also in 2004, Anoto signed anagreement with US-based LeapFrog (world-lead-ing developer of technology-based educationaltoys). Already at the beginning of 2005, LeapFrogintroduced an entirely new product category forchildren and young people based on the proprie-tary Anoto technology. A new device – a ‘PentopComputer’ called FLY – enables the child writingon paper to get feedback via speech and sound;provides aids in mathematical calculations; andhelps translate foreign languages. This allianceopens up new areas of application such as:education, training and games.

4.7. Leveraging trust to bring competitorsinto cooperation

In order to further grow the business, Anotoencouraged their partners to cooperate by creat-ing an arena for them to meet and establish directrelationships. They wanted them to communicate




and connect their networks to each other. FromAnoto’s side this required honest and open com-munication between themselves and the partners.Clearly, if Anoto said something to one companythey had to be consistent and tell all the othercompanies the same thing. At the same time theyneeded to develop trust and integrity in therelationships, because some of the partners werecompetitors and information they gave to Anotoshould not be spread further. The Director ofPartner Relations, Ebba Åshly Fåhraeus, said:

Trust-based integrity is key to our partneringprocess. The information that partners give usis always kept confidential because some of thepartners are competitors. We cannot supportthem if they do not share the information withus. Therefore, it is crucial to have mutual trust.(Interview, 06.05.04)

4.8. Continued focus on exploration, whilerelying on commercialisation partnersfor exploitation

In 2001 Fåhraeus received the Golden Mobile (TheOscar for the mobile telephony industry) and theGolden Mouse. He got the first award for Anoto asthe newcomer of the year and the second one forbeing the IT entrepreneur of the year. During 2002,he was identified by Time Magazine as one of the25 most successful entrepreneurs in Europe. Themotivation was that he had succeeded in creating aglobal de facto standard for paper-based digitalcommunications.

Also when taking recent developments intoaccount, Anoto clearly chose to remain in acreativity and transformation network position– reducing its number of employees to 100 – whileestablishing a significant number of additionalcommercialisation partnerships:

1. A h7 million partnership was established withDNP for the development of the next genera-tion pen in Japan (22.12.2005).

2. In 2006, the Italian Company GM Servizijoined as a partner of Anoto to add its manyyears of experience in the digital pen and papertechnology. Possibly as a consequence of thispartnership, Novartis Pharma Italy joinedAnoto’s partner network in 2007, and receiveda global IT award for its use of Anoto pens inpharmacy applications.

3. In 2006, Anoto also established a partnershipwith Unimicron Group in Taiwan to serve the

Taiwan market with Anoto products and solu-tions (31.03.2006).

4. Later in 2006, Anoto entered the US Militarysector, through a USD 3 million contractsigned by Anoto partner Natural InteractionSystems (NIS) with the US Defense AdvancedResearch Projects Agency. NIS conducts re-search, development, and integration of Anotodigital paper and pen technology into militarycommand and control systems. This allows forAnoto’s functionality to be tested in the harsh-est conditions, providing important feedbackfor further development (12.05.2006).

5. The year 2007 started with a partnership withBlackBerry to use the Anoto technology fordigital signature capability, and continuedwith the delivery of Anoto technology for ane-voting system for Hamburg elections,through close cooperation with the new part-ner Diagramm Halbach (07.03.2007).

6. The perhaps most important partnership in2007 was that with Livescribe (30-05-2007), anAmerican company launching a new paper-based mobile computing platform that incor-porates the use of Anoto’s digital pen andpaper technology. Christer Fåhraeus viewsthis partnership as particularly importantclaiming that ‘it will further spur the use ofAnoto technologies, which finally reach theconsumer market. This also has positive im-plications on our forms business whichdoubled during 2007’ (Interview, 14-12-2007).

As a result of the streamlined footprint andadditional commercialisation partnerships, An-oto recorded its first operating profit ever in2007, driven by a 27% increase in sales at sus-tained costs of operations. Without adding asingle employee, the number of active forms usersincreased by 104% from Q12006 to Q12007. Thenew CEO, Anders Norling, is equally positiveabout 2008 while recognising that ‘the challenge isto ensure that our ongoing sales are high enoughto maintain profitability without depending onindividual license orders’ (Interview, 14.12.07).Both Fåhraeus and Norling seem convinced thatthe expanded partnership base of Anoto willfurther expose the digital pen and paper technol-ogy to the consumer market and shorten salescycles for their profitable forms solutions.

Possibly inspired by another Lund-based com-pany called Tetra Pak, Anoto has turned globalsales of patent-protected paper into a highlyprofitable business.

Sigvald J. Harryson


5. Analysis and discussion

The use of network theory makes a more com-prehensive analysis and illustration possible ofhow open and closed networks jointly ‘work’together in and between the different stages ofthe innovation process.

The creativity network is mainly an open, diag-onal, loosely coupled network encompassing se-lected external scientists and experts. In thetheoretical model (Figure 3), the purpose of thecreativity network is to create new scientific knowl-edge that can be transformed into commercialisedinnovation by a transformation network. Anotoinitially span academic webs consisting mainly ofweak ties for further exploration of the emergingtechnology. For promising inventions and re-searchers, Anoto selectively transformed certainweak ties into stronger ones to individual, organi-sational and inter-organisational strategic partnerswho became deeply involved in the exploitation ofradical innovation. In this sense, the balancing actfrom exploration to exploitation can be seen as anact of transformation from weak to strong ties andfrom relatively open to more closed networksacross different levels. The founder, the CTO andthe Chief Science Officer initially maintained opensocial networks of mainly weak ties to the studentsat their home university. Strong social ties weredeveloped with those students who were selected todo their thesis in collaboration and co-locationwith Anoto so as to interlink their knowledge-creating activities with the process networkfor exploitation. Snowballing led to identificationand integration of further complementary brain-power. Compared with the open structure of thecreativity network in which Anoto was created, therelationship-based transformation network wasgradually closing towards academic partners witha strong focus on strengthening the ties to selectedprocess networks in terms of commercialisationpartners. The formation of this social networktriggered the creation of the inter-organisationaltransformation network, thereby being a precedentto it.

Much in line with Gulati et al. (2000) Anotocreated value through networks of low cost highcreativity master and PhD students. The diagonalsocial network was a precedent to the verticalinterorganisational network, because the socialcapital developed within the student–companynetwork was sometimes used to establish a moreformal collaboration with the student’s universityinstitute for joint patent applications to keeppatenting costs down.

The nature of innovation at the interpersonallevel is described by the social network, while itsnature at the work group and organisational andother inter-unit levels are described by the orga-nisational network. Christer Fåhraeus ap-proached his old friend, then CTO at EricssonMobile, who in turn joined Anoto, while mobilis-ing the financial support of an important EricssonBoard Member. Interaction in social networks ledto the inter-unit relationship between Ericssonand Anoto. Later on, the social network fromÖrjan Johansson’s Bluetooth experience sup-ported the relationship building between Anotoand the many new technology commercialisationpartners such as IBM, Hitachi, HP, Logitech,Nokia, Novartis Pharma, BlackBerry, US De-fence and Livescribe.

The founder and his social network were in-strumental for the development of the initialcreativity network, which resulted into severalvertical networks. In other terms, the social net-work of Christer resulted in the formation of acreativity network, which was an antecedent tothe development of the vertical network betweenAnoto and Ericsson. Our theoretical frameworkmakes it possible to distinguish between theore-tical constructs that are valid for only one of thelevels (e.g., for the inter-individual level expressedthrough the social network) and those that arevalid for all levels, such as the horizontal verticaland diagonal relationships. Anoto sometimes in-itiated diagonal relationships with universitiesand their students as a critical part of the crea-tivity network. The students were brought intothe organisation to connect with other persons orunits, forming a transformation network. Jointpatent applications promote knowledge absorp-tion at mainly the inter-unit level. The socialnetwork was the main vehicle of cross-level in-novation from exploration to exploitation, beingthe main antecedent of both the transformation,and process networks.

6. Applying different leadership styles,know-who and structures to optimiseboth network efficiency and networkeffectiveness

6.1. Using the theoretical model toanalyse Anoto’s navigation fromcreativity to commercialisation

Through its central position into the diagonalacademic networks for exploration, and vertical




partner networks for exploitation, Anoto seemsto have optimised network efficiency on bothends, while the commercialisation partners enjoyhigher network effectiveness by using Anoto asprimary contact for further exploration of thetechnology.

As suggested by our theoretical framework inFigure 1, moving from creative concept-creationto global business-implementation typically re-quires a more rigid and process-driven organisa-tion. As we have seen, Anoto’s commercialisationtransformation involved a change in leadership,while interlinking selected external process net-works to support global commercialisation of theAnoto technology.

Our framework suggests that creative inventionis more prone to happen in small, organic organi-sations, managed in absence of hierarchy or strongmanagerial control, which corresponds to the start-up phase of Anoto. The framework also suggeststhat commercialisation requires more structuredprocess networks in large and resourceful organisa-tions to secure production, M&S, logistics and aftersales service. Figure 3 outlines the two organisa-tional extremes as different types of networks:Creativity networks and process networks. In thiscontext, Anoto illustrated the use of know-whobased entrepreneurship and relationship buildingto span the organisational ambidexterity gap be-tween the polarised creativity networks and processnetworks (as suggested by Figure 2).

For Anoto, the whole initial knowledge (andcompany) creating phase seems to have beendriven by a few strong and many weak ties.Fåhraeus used his know-who of strong ties intoEricsson to acquire the required know-how – suchas the CSO and the CTO – to move from idea to asolid concept. The weak ties came into play wheneach newly recruited engineer, who gained thetrust of Fåhraeus through rapidly demonstratedexcellence, was asked to leverage his/her know-who to acquire further engineering excellencethrough a networked snowballing effect. In addi-tion, a large number of mainly weak ties intouniversity students led to 30 master – and threefull PhD thesis projects conducted with the start-up company. Anoto was particularly open toacademic collaboration in the early explorationphase, while reducing this kind of collaboration asthe company gradually closed its network struc-ture to focus more on exploitation through strongrelationships to commercialisation partners.

As the exploitation oriented commercialisationphase approached, the new CEO (Örjan Johans-son) leveraged his Bluetooth-based know-who to

establish very strong ties to a selected number ofglobally leading commercialisation partners –providing global sales and distribution channels,while acting as lead users in ways that helpedAnoto fine-tune applications of the technology.Accordingly, strong ties seem to have been criticalto drive the exploitation of innovation across theprocess networks. In this second phase, ÖrjanJohansson’s ‘Viking-approach’ to relationship-building and partner meeting management seemsto have played a critical role.

6.2. Linking the Anoto case to furtherempirical observations

Similarly to Christer Fåhreaus, the founder ofICEpower, Dr Karsten Nielsen, established apartnership with Bang & Olufsen and broughtin a CEO from B&O, which opened doors toquasi-captive business with B&O and, more im-portantly, led to a very strong commercialisationrelationship with Samsung to secure the use ofICEpower technology in more than 100 millionmobile phones and HiFi systems. Also very simi-larly to Anoto, ICEpower started by a PhDresearcher who leveraged a significant amountof fellow-PhD – and Master students to makehis technology and company grow to 50 people in5 years. In the first 3 years, ICEpower had aboutas many academic collaborators as internal em-ployees. Today, the company is more focused onstrong and exclusive commercialisation relation-ships with a selected few companies like Alpine,Audi, B&O, Samsung and Sanyo, while reducingthe number of open academic collaborators to15–20% of the number of internal employees.

A third born global in our research is PolarRose, which provides face recognition servicesthrough a browser plug-in – created by a PhDin computer electronics, Dr Jan Erik Solem. Alsoin this case, the founder made extensive use ofacademic collaborations during the company-creation phase (2004–2006) and then brought ina professional VP of Business Development, anda new CEO with strong relationship-buildingskills, Nikolaj Nyholm to formally replace DrSolem and jointly grow the company into a ‘ScaleFree Network’ (Barabasi and Bonabeau, 2003)able to reach and serve an unlimited number ofusers across the globe.

Through personal relationships, Nikolaj veryquickly managed to mobilise external fundingfrom Nordic Venture Partners amounting to 4million Euro dedicated to develop a solid business

Sigvald J. Harryson


model with expected initial revenue streams bythe end of 2008. In June 28th 2007, the first bversion was launched for 500 selected b users totest and give feedback on the face recognitionsoftware. Two months later, the number of busers had expanded to 2000 (still controlled byinvitations), which started to stretch the comput-ing power of Polar Rose. Nikolaj, who hadalready met Jeffery Bezos, the founder and CEOof Amazon, managed to establish an agreementwith Bezos to use Amazon’s computing network.Nikolaj (interview, 12.01.08) holds that ‘our part-nership with Amazon brings the required compu-tation and storage capacity to move from 2000test user to 1 million real users by the end of2008’.

In the context of the theoretical framework(Figure 3), the access to Amazon’s highly con-nected great bandwidth routers can be seen as acommercialisation relationship to a forceful pro-cess network.

Although all three companies are relying oncommercialisation partners for exploitation oftheir technologies, their transition from purecreativity networks to transformation networksstill seems to have triggered a significant closingof their academic networks. Moreover, they seemto develop a multitude (as opposed to only a few)of strong relationships to commercialisation part-ners. Hence, it seems that the transition fromexploration to transformation in no way impliesa reduction of the total number of relationships,but rather a gradual closing of the scientific net-work to allow for a progressive opening of thecommercial network.

Rather than moving from many weak to a fewstrong ties, the companies seem to experience atransition from a multitude of mainly weak and afew strong scientific ties to a numerically equallybig multitude of mainly strong ties to externalcommercialisation partners. This transition frommany weak to many strong ties intensifies theneed for time and calls for an enhanced focus onrelationship management – partly supported bythe power gained through structural holes (Burt,1992).

7. Conclusions and contributions to theory

An important gap in the literature on open andnetworked innovation has been identified andaddressed through the introduction of a frame-work based mainly on networking – and partly oninnovation theories to better understand the ideal

conditions of exploration and exploitation in thecontext of open innovation. The relationship-dimension of our theoretical framework suggeststhat a dominance of weak ties is required forexploration in creativity networks, and a domi-nance of strong ties is required for exploitation inprocess networks. In network terms, the processnetwork is therefore the opposite to the creativitynetwork, being closed, tightly coupled, and hier-archical. The transformation network is a mix ofboth these networks, being semi open or closed,neither loosely or tightly coupled, and bridgingthe two organisational networks. The creativitynetwork has a relatively open structure. It con-tains both individual and organisational levels. Asillustrated by the case, the creativity networks aremainly social networks, driven by personal rela-tionships. Selected individuals at the universitiesare more important than the universities them-selves. Accordingly, the social networks are dom-inating the organisational networks and actmainly as antecedents of organisational networks.

By only recruiting new researchers who enjoytrust by current employees, Anoto illustrates thesuggested model of Soda et al. (2004) in gettingproject teams with high past closure (strong tieswithin the team based on prior collaboration) andhigh current structural holes (weak ties to non-redundant resources at universities and othercompanies). Our case also illustrates that thisprinciple can be applied beyond the context ofproject teams – to the recruitment of a new CEOwith high past closure to targeted commercialisa-tion partners based on prior collaboration. As acomplement to Uzzi’s (1996) argument that afirm’s performance peaks when it is linked byembedded horizontal ties to an integrated net-work, the Anoto case illustrates diagonal cross-level phenomena in terms of how social ties at theindividual level of analysis interact with institu-tional and economic ties at the organisationallevel.

Finally, the concept of lead-user innovationdoes not seem to be particularly related to theearly open phases in which the case companiesnurture a multitude of weak ties. Rather, all threecase observations revealed that the use of lead-users (DHL and medical doctors in the case ofAnoto; Bang & Olufsen and Samsung in the caseof ICEpower, and a growing number of invita-tion-only b users in the case of Polar Rose) camein relatively late in the process from creation tocommercialisation. In this sense, it would seemthat lead users are more related to commercialisa-tion than to creation of innovation.




As suggested by the theoretical framework andillustrated by the Anoto case, a change in leader-ship can be useful to manage the navigation fromcreation to commercialisation of innovation. Thisallows for the conflicting, but complementarynetworks (open versus closed) and relationships(from numerous weak versus few strong to theopposite) to be built and leveraged at the appro-priate stages across the whole R&D managementprocess.

8. Managerial implications

The managerial implications of our study are thatmanagers of R&D and technology innovation canapply a new relationship-based approach – bothfor sourcing and internalisation of external aca-demic knowledge to accelerate exploration, andto develop commercialisation partnerships to ac-celerate exploitation. This approach – as illu-strated by Anoto, ICEpower and Polar Rose –makes it possible to balance exploration andexploitation for technology innovation. Theemerging theoretical framework illustrates theimportant individual relationship dimension oforganisational innovation and shows how thesocial networks of an agent can be integratedinto cross level innovation projects through themigration path from weak to strong ties as theinnovation process advances from exploration toexploitation. The implication is that the wide-spread dilemma of excessive ambidexterity (Heand Wong, 2004) can be tackled through cross-level micro-macro dimensions of relationshipmanagement, in which a start-up company canleverage transformation networks to mediatepartly academic exploration and fully industrialexploitation through managers with strong rela-tionship building skills and rich social ties (knowwho) into both domains.

A stronger focus on building and maintainingnew and existing relationships will drive entrepre-neurship across the full R&D management ofcreating, developing and commercialising innova-tion. However, to navigate all the way fromcreativity for exploration to commercialisationfor global exploitation of a technology will re-quire highly differentiated, yet strongly inte-grated, approaches to R&D and relationshipmanagement.

Exploration requires open R&D managementapproaches to bring in external creativity inrelatively organic forms, possibly based on snow-balling. Universities are often useful partners at

this stage, but it may be premature to bring inlead-users into the R&D management process.

Exploitation requires more closed and rigidapproaches to R&D management. Universitiesare seldom useful partners at this stage, butstrong relationships to a few well-selected lead-users can help define final applications andthereby speed up commercialisation.

The relationship building approach illustratedby Anoto can be applied by R&D managers tobuild new bridges across previously disconnecteddisciplines and areas of value creating activities todrive creativity, innovation and entrepreneurship.

9. Limitations and possible futureresearch directions

Although our theoretical framework draws onextensive theoretical research and empirical re-search from 10 companies, this paper presents thefull theoretical part, but only one in-depth case-study coupled with complementary observationsfrom two additional born global cases to enhancethe generalisability of the findings. Still, buildingthe creation of new knowledge on one in-depthcase and two additional brief case analyses isinsufficient. Accordingly an abductive researchmethod was applied to allow for continued de-duction from several relevant theory streams so asto enrich and refine the theoretical framework –while continuing the inductive testing of theframework against the three case observations.To further enhance generalisability of the theore-tical framework, a quantitative study could beconducted with a focus on measuring how thefollowing variables/factors change in the evolu-tion from creation to commercialisation of inno-vation:

! Number of external contributors to explora-tion/creation.

! Number of external partners supporting ex-ploitation/commercialization.

! Strength of ties to partners of explorationversus exploitation.

! Total number of external partners over num-ber of internal employees.

We believe this type of quantitative studywould add further relevant insight to the currentliterature on open and networked innovation.Further research will also be required to gain amore robust understanding of how learning bothfrom extracorporate networks like universities,and across internal networks like R&D, M&S

Sigvald J. Harryson


and D&M, can enhance flexibility and perfor-mance in R&D and innovation. In view of theevolution and dynamics of the knowledge trans-formation mechanism, further research would beneeded to examine the evolution of cross-levelnetworks from a longitudinal perspective. Finallyit would be worth further research to explore ifthe mechanisms described in our case are obser-vable also in more established companies andmature industries.

Acknowledgements

A previous version of this paper was presented atThe R&D Management Conference Taiwan – 8–11 November 2006, in Taipei and Hsinchu. Theauthor is grateful for constructive comments fromthe conference participants. I am also grateful tothe Editor and two anonymous Reviewers whoprovided very detailed feedback and constructivesuggestion that improved the quality, relevanceand robustness of this paper significantly.

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