Interorganizational collaboration and firm innovativeness: Unpacking the role of the organizational environment

Abstract

In firm decisions to engage in interorganizational collaboration in the context of innovation, conceptions of the organizational environment play an essential role. In this paper, we develop a multidimensional model of how managers use interorganizational collaboration as an organizational response to particular environmental conditions and an important instrument to boost firm innovativeness. Based on a literature review on the subject, we investigated the role of environmental turbulence, market heterogeneity and competitive intensity as such conditions. The analysis of firm data from a broad range of industries showed that environmental turbulence and market heterogeneity have an indirect association with firm innovativeness through interorganizational collaboration. The relationship of market heterogeneity was fully mediated suggesting that collaboration is unavoidable for firms in heterogeneous markets. Contrary to arguments in the literature, the findings demonstrated that although competitive intensity is associated with less interorganizational collaboration and lower firm innovativeness, the mediation relationship was not significant.

Introduction

For many firms, improving innovativeness, or the capacity to introduce new products and services, is an issue of primary concern and a key source for competitive advantage and growth (Crossan and Apaydin, 2010, Damanpour, 1991). Both researchers and practitioners discuss the process of innovation and its extent relative to the boundaries of the organization as one of the main issues in innovation management (Crossan and Apaydin, 2010, Gupta et al., 2007). While some researchers have explored internal organization of innovation by examining portfolio-based (Faems, Van Looy, & Debackere, 2005) and project-based (Blindenbach-Driessen & Van Den Ende, 2010) approaches, others focus their attention on interorganizational forms of collaboration in the development and commercialization of new products and services (e.g. Ahuja, 2000, Powell et al., 1996, Yli-Renko et al., 2001). These studies discuss various outcomes that such strategy could cultivate, including: types of collaborations firms engage in (De Faria et al., 2010, Un et al., 2010), mechanisms for partner selection (Emden, Calantone, & Droge, 2006), value creation (Bhaskaran and Krishnan, 2009, Gadde et al., 2012, Sobrero and Roberts, 2002), and modification or termination of the interorganizational relationship (Young-Ybarra & Wiersema, 1999). These important advances notwithstanding, we still know much less about a firm's decision to engage in interorganizational collaboration and the conditions that motivate this choice (Fiedler and Welpe, 2010, Sriram et al., 1992).

The strategic choice perspective on organizational decision-making suggests that managers make strategic decisions by considering important dimensions of the organizational environment (Child, 1972, Child, 1997, McCarthy et al., 2010). Interorganizational collaboration is often such a strategic choice, but existing literature has not yet explored how managers' evaluations of different dimensions of the organizational environment are likely to influence it. Few studies investigate the simultaneous role of multiple environmental dimensions, although strategic choice theories suggest that this may be illuminating for key decision processes in organizations (Dess and Beard, 1984, Forbes, 2007, McCarthy et al., 2010).

Based on arguments in the literature, the study here investigates the role of environmental turbulence, market heterogeneity and competitive intensity as three environmental dimensions relevant for the context of interorganizational collaboration aimed at innovation. The study responds to a gap in the literature about more theory and evidence needed to better understand how firms make decisions for interorganizational collaboration and which dimensions of the environment managers are evaluating when deciding to collaborate with other organizations. In this paper, the relationships between these environmental characteristics and firm innovativeness are hypothesized and tested. The study proposes also that interorganizational collaboration plays an important role as a mediator of these relationships.

By doing this, the study here delivers three important contributions to the existing literature. First, the study contributes to research on interorganizational collaboration by offering a refined view on the role of the organizational environment in firm innovation strategy making and highlight collaboration as a bridge between the complexities in external conditions and firm innovativeness. This contribution is helpful for uncovering different mechanisms by which important environmental dimensions relate to firm innovativeness and how managers can successfully use interorganizational collaboration to this end. The present study proposes a model where interorganizational collaboration mediates between the decision makers' evaluations about environmental turbulence, market heterogeneity and competitive intensity on the one hand and firm innovativeness on the other. The study extends existing perspectives on the firms' choice to engage in interorganizational collaboration by exploring further how managers consider both the opportunities and threats of collaboration while aiming at reducing the information complexities that these costs and benefits might entail.

Second, the finer and multidimensional conceptualization of the organizational environment advanced in this study, allows to spotlight the different roles these dimensions may assume. Existing empirical research has often favored variables that characterize the environment in terms of turbulence while it has neglected other key strategic dimensions such as market heterogeneity and competition (Ang, 2008, Mehra and Floyd, 1998). Although existing works have studied the role of the environment in interorganizational collaboration, this paper elaborates further on the mechanisms which can show how collaboration can be a strategy to deal with the decision-making demands caused by its different dimensions.

Third, the study here offers empirical evidence for the studied relationships from multiple industries and firms of different sizes. Most existing studies may be limited in explaining only a fraction of a firm's motives for collaboration and in being biased toward larger and R&D-intensive firms (Frishammar and Åke Hörte, 2005, Van De Vrande et al., 2009). However, many firms use collaboration strategies to bridge innovation deficiencies caused by the unavailability of large R&D investments. Furthermore, many organizations do not concentrate development within a separate R&D unit. In many service firms for instance, innovation streams are distributed across the organization and innovation may be based on the combination and exchange of intangible resources and co-production with external parties (Bowen and Ford, 2002, Sundbo, 1997, Van der Aa and Elfring, 2002). This paper provides a broader evidence base for the existing literature discussing interorganizational collaboration as a means to address the need to understand innovation processes beyond firm investments in proprietary R&D capabilities.