Successful Open Innovation Strategies

For multinational companies, cooperation with external partners is crucial for the development of new technologies and innovations. They are therefore increasingly pursuing an open innovation strategy and building up a portfolio of alliances with other companies. Why are some multinational companies more successful in such open innovation strategies than others? This research question was addressed by Professor Dr. Dries Faems, who currently holds the Chair of Entrepreneurship, Innovation and Technological Transformation at WHU - Otto Beisheim School of Management. Together with Brenda Bos, Florian Noseleit (University of Groningen) and Bart Leten (Katholieke Universiteit Leuven), he examined the alliance activities of 2,258 R&D subsidiaries belonging to 118 multinational firms in the pharmaceutical industry. The results of this study have been recently published in the Journal of Management.

© Adobe Stock / freshidea

Multinational companies are aware of the potential of collaborations with external partners. In the pharmaceutical industry, for instance, companies such as GSK, Johnson & Johnson and Pfizer have initiated multiple alliances with biotech firms to push their pipeline of drug development activities.

Faems and his co-authors found out that the internal network structure of multinational companies is an important factor in explaining the success of open innovation. Multinational companies consist of multiple subsidiaries, which each can have alliances with external partners. The study shows that subsidiaries can not only learn valuable knowledge from their own alliance partners, but can also receive important technological insights from the alliance partners of other subsidiaries. Moreover, the study finds that the extent to which subsidiaries can benefit from the alliances of sister subsidiaries depends on characteristics such as headquarters proximity, knowledge overlap, and size of the subsidiary’s own alliance network.

Based on these findings, Faems highlights the need for advanced knowledge management tools within multinational companies to optimize the returns on open innovation investments: “I often see that, within multinationals, subsidiaries have limited understanding of what other subsidiaries are doing in terms of open innovation. Our results highlight that such lack of knowledge is a missed opportunity. When companies are able to implement knowledge systems, providing information on the alliance activities of other R&D subsidiaries, they could foster additional knowledge flows that can help subsidiaries to excel in the generation of new knowledge and innovations.”