Opening the Black Box of “Not-Invented-Here”

1. Opening the Black Box of “Not-Invented-Here” Attitudes, Decision Biases, and Behavioral Consequences David Antons | Frank T. Piller| OUI Conference | 28 July 2014 School of Business and Economics TIME Research Area | Innovation, Strategy and Organisation Group (ISO)

2. Not-Invented-Here A typical challenge to lead-user inventors • Bette Claire Nesmith Graham • Born in 1924 in Dallas • Chief executive secretary for W.W. Overton,Chairman of the Board of the Texas Bank and Trust • Inventor of Mistake Out • Correction fluid calling it “Mistake Out” • Mixing tempera paint with her kitchen blender • IBM refused to buy the invention • Founder of the Liquid Paper Corporation • Founded in 1956, profitable in 1968 • Sold to Gillette Corporation for $47.5 million in 1979 Source: http://www.women-inventors.com/Bette-Nesmith-Graham.asp

3. Not-Invented-Here A typical challenge to lead-user inventors • Bette Claire Nesmith Graham • Born in 1924 in Dallas • Chief executive secretary for W.W. Overton,Chairman of the Board of the Texas Bank and Trust • Inventor of Mistake Out • Correction fluid calling it “Mistake Out” • Mixing tempera paint with her kitchen blender • IBM refused to buy the invention • Founder of the Liquid Paper Corporation • Founded in 1956, profitable in 1968 • Sold to Gillette Corporation for $47.5 million in 1979 A typical case of “not invented here” (NIH): Why do focal firms reject promising solutions provided openly by the periphery in general and users in particular? Source: http://www.women-inventors.com/Bette-Nesmith-Graham.asp

4. Not Researched Yet? Not-Invented-Here in the literature „Anecdotalevidencesuggeststhatthisphenomenoninduces R&D workerstodiscountorignoresourcesofknowledgeexternaltotheirteamororganization...“ (Agrawal et al., 2010)

5. Towards a framework of Not-Invented-Here The decision setting Decision setting: different sources of knowledge externalities Let‘sbuild a model of NIH

6. Not-Invented-Here and external knowledge When is knowledge perceived as external? • Externality with regard to… • the (disciplinary) context of the knowledge itself • the source from which the knowledge originates • Organizational boundaries: intra- and inter-functional (Bstieler & Hemmert 2010; Song & Swink 2009), as well as inter-organizational transfer (Cassiman & Veugelers 2006; Laursen & Salter 2006) • Spatial distance (Allen 1977; Salomo et al. 2010; Song et al . 2011)

7. Towards a framework of Not-Invented-Here The inner structure of Not-Invented-Here Decision setting: different sources of knowledge externalities • contextual (disciplinary) externality • organizational externality • spatial externality Inner structure of Not-Invented-Here Let‘sbuild a model of NIH

8. Not-Invented-Here Defining and explaining the bias We define NIH as a bias triggered by the negatively-shaped attitudeof an individual towards knowledge that has to cross a contextual (disciplinary), spatial or organizational (functional) boundary, resulting in either its sub-optimal utilization or its rejection as behavioral consequences of this attitude bias. • Five functions of an attitude (Ajzen 2001; Eagly & Chaiken 1993) • Ego-defensive function: maintaining self-worth and self-concept • Value-expressive function: expressing and affirming central values • Social-adjustive function: fostering social identity • Knowledge function: organizing and structuring ambiguous environments • Utilitarian function: supporting approach or avoidance decisions

9. Not-Invented-Here Behavioral trajectories of attitudinal functions

10. Towards a framework of Not-Invented-Here The inner structure of Not-Invented-Here Decision setting: different sources of knowledge externalities • contextual (disciplinary) externality • organizational externality • spatial externality Inner structure of Not-Invented-Here Possibly triggered heuristics, e.g. • psychological ownership • selective information processing • confirmation bias Not-Invented-Here Bias • underestimation of utility • overestimation of costs Attitude towards external knowledge • ego-defensive function • value-expressive function • social-adjustive function • knowledge function • utilitarian function Let‘sbuild a model of NIH

11. Towards a framework of Not-Invented-Here Behavioral trajectories of attitudinal functions Decision setting: different sources of knowledge externalities • contextual (disciplinary) externality • organizational externality • spatial externality Behavioral responses and outcomes Inner structure of Not-Invented-Here Behavioral responses regarding external knowledge • underutilization • rejection Possibly triggered heuristics, e.g. • psychological ownership • selective information processing • confirmation bias Performance impact • knowledge exchange • innovation project • firm performance Not-Invented-Here Bias • underestimation of utility • overestimation of costs Attitude towards external knowledge • ego-defensive function • value-expressive function • social-adjustive function • knowledge function • utilitarian function Contextual factors, e.g. • organizational culture • incentives • Industry • Strategic orientation • innovation process • absorptive capacity

12. Avenues for future research Applying the NIH framework in different contexts • Measurement of Not-Invented-Here • Direct vs. indirect attitude measures • Consequences of Not-Invented-Here • Testing causal claims • Solving the empirical puzzle of complementarity (Dahlander & Gann 2010; Grimpe & Kaiser 2010) or substitution (Laursen & Salter 2006) of internal and external R&D • Contexts of Not-Invented-Here • Prior research focused on organizational and spatial boundaries neglecting the content • Countermeasures for Not-Invented-Here • De-biasing decision-making vs. inducing compliant behavior through incentives • Levels of analysis • Bottom-up or top-down evolution of Not-Invented-Here?

13. QUESTIONS AND DISCUSSION Thank you for your attention David Antons| antons@time.rwth-aachen.de