Innovations and Networks Combined

As the innovation research grows it gains more followers and credibility. More and more companies look to innovation to help them differentiate themselves from their competition (Read, 2000) shaping not just the structure of organisations but the overarching strategy adopted. This can have a profound effect on the shape of the market place (De Man and Duysters, 2005). This section applies the drive for innovation to the network concept previously discussed. Through discussion of both, the research question is identified.

Intra-Organisational Effects

Products increasingly consist of multiple and varied technologies and, as such, are intrinsically linked to the network of organisation that works beneath them.

‘Today innovation calls for the complex knowledge that only a broad network of specialists can offer.‘ (Quinn, 2000)

This view is reinforced by Roy et al. (2004) who states that ‘In a complex technological era, innovation generation is increasingly viewed as a multidisciplinary activity spanning a multiplicity of organizations, circumstances, and settings.’ On top of this, much technology has now become so complex that it is very rare that a single organisation will be able to master all of its areas (Quinn, 2000; Von Hippel, 1987; Hakannsson, 1987). The drive for innovation is creating profound change to the market. There are three main trends within innovation which support this statement:

Strategic Outsourcing – Companies are finding themselves in a position where in order to stay competitive they need to look externally for expertise. Actively choosing to outsource all but the non-core components of an organisation is a tactic discussed by Prahalad and Hamel (1990). They argue that if a part of the business: does not give specific access to a market, increase the perceived benefits to the customer or is easy to imitate then it should be packaged and outsourced . This issue directly applied to the field of innovation is discussed by Howells et al. (2008). They looked at the outsourcing of R&D capabilities. This trend was reinforced by the Industrial Research Institutes annual survey for 2009 which showed a marked increase in the companies intentions to outsource their R&D (Cosner 2009).
Buyer-Supplier Collaboration – Organisations are increasingly turning to suppliers for innovation.

‘Innovation comes from interactions within buyer-seller relations‘(Sivadas and Dwyer 2000).

A large body of research was established around this issue and towards the end of the 90’s academics were convinced that the buyer supplier relationship was the answer to all innovation problems (Dodgson 1993; Millson et al. 1996; Robertson and Gatignon 1998; Sivadas and Dwyer 2000). There were however a number of researchers who claimed that this was too simplistic (Corswant et al., 2002; Hoegl et al., 2005; Wagner and Hoegl, 2006). It was suggested that interaction alone was not the driver for success. The nature of the interaction and strength of the relationship that was formed was the important part of buyer-supplier collaboration (Eisenhardt and Tabrizi, 1995; Littler et al., 1993; Hartley et al. 1997).

Strategic Alliances – The final trend concentrates on the way in which companies are looking to ally themselves with their competitors. The increased risk involved in technical development has caused organisations to join together to minimise the impact of failure (Hitt et al., 1996). Research by De Man and Duysters (2005) looked into strategic alliances and its effects on innovation and showed a strong correlation between the two. As with buyer-supplier innovation, strategic alliances are never a guaranteed success. The key is the quality of the relationship (Roy et al. 2004). It is not enough to just simply exchange information. A relationship must be established, nurtured and maintained in order to see positive results (Primo and Amundson, 2001).

‘buyer-supplier collaboration (i.e., the quality of supplier involvement), as well as communication frequency and intensity, has significant relationships with the performance of interfirm product development projects.‘ (Hoegl et al., 2005)

All three innovation trends discussed act to increase the number of relationships any one organisation needs to consider. We can conclude that in order to effectively manage innovation we must become skilled at controlling the interactions between multiple actors. It can be argued that in order to manage innovation effectively we must appreciate that we are managing within a complex network. Network theory gives us a good understanding of the innovation landscape and a company that has the ability to influence its network can hope to achieve high levels of innovation. Innovation management is fundamentally connected to network management.