1 Master: Msc BA S&I 2011-2012
Name: Koen Fransen Student Number: S1767593 Adres: Antillenstraat 1-177 E-mail: k.fransen.1@student.rug.nl
1st supervisor: Dr. C.Kearney. 2nd supervisor Dr. P.M.M de Faria
Open Innovation in the Dutch SMEs: Exploring the open innovation capacities absorptive and desorptive capacity.
Abstract
2 Table of contents
Theme: Page number
1. Introduction 4
Problem statement and relevance 6
2. Theoretical background 7
2.1 The open innovation model 7
2.1.2 Inbound open innovation 8
2.1.3 Outbound open innovation 9
2.2 Small to medium sized enterprises 9
2.3 Urgency to study open innovation in SMEs 10
2.4 Absorptive capacity 12
2.5 Desorptive capacity 13
2.6 Absorptive capacity and desorptive capacity and knowledge
2.6.1 Importance of knowledge 15
2.7 Limitations of extant literature 17
2.8 Framework 20
2.9 Explanation of framework 20
3. Research approach 22
3.1 Research typology 22
3.2 Case study methodology 24
3.3 Data collection 25
3.4 Reliability and validity 26
3.5 The interview
3.6 The transcription of audio recordings 30
3.7 Method of analysis 33
4. The case studies 34
4.1 Case selection and response rate 34
4.1.2 The key informants 35
4.2 The case studies 37
4.2.1 Polyganics 37
4.2.2 Solenne B.V 37
4.2.3 The Soil Company 38
4.2.4 Agrosolutions 38
4.2.5 de Ontwikkelfabriek 39
5. Analysis of the constructs 39
5.1 Introduction 39
5.2 Absorptive capacity: acquisition 40
5.3 Absorptive capacity: assimilation 43
5.4 Potential absorptive capacity 46
5.5 Absorptive capacity: transformation 47
5.6 Absorptive capacity: exploitation 50
5.7 Realized absorptive capacity 51
3
5.9 Desorptive capacity: identification 53
5.10 Desorptive capacity: transfer 54
5.11 Desorptive capacity in SMEs 55
6. Discussion 56
6.1 Limitations 57
6.2 Future research 57
6.3 Managerial and strategic implications 58
6.4 Conclusion 58
7. References 59
Appendix A Transcripts interviews 68
Appendix B Fieldnotes 95
Appendix C email Lichtenthaler 96
Appendix D interview 97
4 1. Introduction
Traditionally large companies relied on their own in-house Research and Development (R&D) and internal processes to create new products. Large R&D labs were considered strategic assets in the major industries and created entry barriers for smaller firms. As a result, the large incumbent firms that had possessed these strategic assets and complementary assets could outperform smaller rivals (Teece, 1986). The process in which firms rely on internal R&D processes to commercialize new products has been labeled by Chesbrough (2003) as the closed innovation model. The closed model of innovation views innovation as the outcome of effective internal research and development processes (Huang and Rice, 2009). The open innovation model as described by Chesbrough (2003) is based on a totally different set of assumptions. Basically there are two kinds of open innovations as described by Chesbrough and Crowther (2006); these two are inbound-open innovation and outbound open innovation. In inbound open innovation the company scans its external environment to source for
5 packaged goods industry have also been leaning toward open innovation. Although
Chesbrough (2003) is the most cited author in the field of open innovation, there are numerous other authors (e.g Gassmann, Enkel and Chesbrough , 2010) that claim the importance and rise of open innovation activities. Vanhavebeke, Vermeersch and Zutter (2012) report that SMEs are collaborating more frequently with external innovation partners than large companies. The last Community Innovation Survey in Belgium shows that large firms with 250 employees and more are collaborating on average with more external partners than small firms. Yet, smaller firms rely more on open innovation than their larger counterparts when the number of collaborative deals is divided by the number of employees thus measuring the open innovation intensity. This again demonstrates that open innovation in the context of SMEs is very prevalent and deserves scholar attention. SMEs are different than their larger
counterparts in many different ways. For instance, SMEs generally have fewer resources available and also generally tend to have a short term planning and work from project to project (Riege, 2005). These differences contribute to the fact that results derived from studying corporations such as Xerox and Procter and Gamble cannot be generalized to SMEs, and that SMEs should be studied separately. Open innovation can be defined as ‘’ the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively (Chesbrough et al, 2006). This definition is being adopted by most authors (e.g. Parida, Westerberg and Frishammer, 2012). This paradigm assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology. However, the concept of open innovation, with its focus on the use of external knowledge remains quite a black-box. Authors such as Lee et al,.(2010) and van de Vrande et al,.(2009) focus
specifically on open innovation in the context of SMEs, but do not mention how those activities unfold and what steps are necessary before a SME can use external knowledge for its own purposes. One construct that focuses on external knowledge acquisition and
6 systematically unfold the construct of absorptive capacity. Zahra and George (2002) provided a reconceptualization of absorptive capacity. In their article Zahra and George (2002) state that absorptive capacity is path-dependent and prior knowledge is crucial. Absorptive capacity however, has been recognized as only to facilitate open inbound innovation (Spitshoven et al, 2010). Recently Lichtenthaler and Lichtenthaler(2010) identified a new open innovation capacity, desorptive capacity to facilitate outbound open innovation. Lichtenthaler and Lichtenthaler (2009 and 2010) complement absorptive capacity with the concept desorptive capacity, which facilitates firms in identifying outward technology transfer opportunities and transferring this technology and knowledge to the recipient firm. However, most studies study inbound open innovation in isolation for example the article by Spitshoven et al,. (2010). The authors Lichtenthaler and Lichtenthaler (2010) conclude in their article “Technology Transfer across Organizational Boundaries: Absorptive Capacity and Desorptive Capacity” that both concepts are interdependent and influence each other. Besides, the lack of current academic studies focusing on SMEs, the plethora of existing studies is primarily devoted to quantitative methods (Lichtenthaler, 2009 and Muller-Seitz, 2012), whereby only a few studies adopt qualitative empirical approaches and apply a practice perspective. As a result, previous research remains silent about how absorptive capacity and desorptive capacity are actually pursued. Understanding how absorptive and desorptive capacity both unfold in SMEs can be beneficial to these firms, as open innovation models become increasingly adopted by SMEs, and the competitive and economic environment increasingly both become more harsh ( Vanhavebeke et al, 2012) .
1.2 Problem statement
7 pinpointing the gap in the current literature and explaining both absorptive and desorptive capacity in the context of open innovation. Section 3 explains the methodology that has been used, and section 4 discusses the case studies and section 5 analyzes and discusses the findings. The main contribution of this study is by unfolding the concepts absorptive and desorptive capacity in a qualitative setting, this gap in the literature has also been recognized by (Müller-Seitz, 2012). Section 6 concludes the findings and describes the limitation of this research, whilst also suggesting directions for future research. Section 6 concludes the paper. 2. Theoretical background
This chapter serves to identify the gaps that exist in the current literature. It also serves the purpose of clarifying the constructs and placing them in the context of open innovation. At last, this chapter serves to address why open innovation should be studied more extensively in the context of SMEs. The chapter is structured as follows, first the open innovation model is presented, and the different types of open innovation are discussed. Secondly, the importance of studying open innovation in the context of SMEs, and the different open innovation capacities are being elaborated. The chapter concludes with a framework that graphically depicts what is being examined in this research and what concepts are being studied. 2.1 The open innovation model
Many firms started to implement open innovation models as a necessary organizational
adaptation to changes in the environment (Chesbrough, 2003). In a world with mobile workers and an abundance of venture capital, reduced product life cycles and widely available and distributed knowledge firms can no longer easily innovate on their own (Vrande, de Jong, Vanhaverbeke, and de Rochemont, 2009). The open innovation model as depicted below consists of both inbound open innovation and outbound open innovation.
8 2.1.2Inbound open innovation
Dahlander and Gann (2010) split up inbound open innovation in two types, these are acquiring and sourcing, as depicted in their table.
Table 1
Structure of different forms of openness. Source: Dahlander and Gann (2010)
Structure of our different forms of openness
Inbound innovation Outbound innovation
Pecuniary Acquiring Selling
Non-pecuniary Sourcing Revealing
The first type is pecuniary which means money is involved in the exchange, and with non-pecuniary exchange there is no money involved but are indirect-effects involved in exchange (Dahlander & Gann, 2010).
The first type of openness refers to acquiring input to the innovation process through the market place. Following this reasoning, openness can be understood as how firms license-in and acquire expertise from outside (Dahlander & Gann, 2010). The second type refers to sourcing. This type of openness refers to how firms can use external sources of innovation. Chesbrough et al. (2006) claims that firms scan the external environment prior to initiating internal R&D work. If existing ideas and technologies are available, the firms use them. Accounts of corporate R&D laboratories show that they are vehicles for absorbing external ideas and mechanisms to assess, internalize and make them fit with internal processes
9 2.1.3 Outbound open innovation
The first type refers to revealing. This type of openness refers to how internal resources are revealed to the external environment. In particular, this approach deals with how firms reveal internal resources without immediate financial rewards, seeking indirect benefits to the focal firm. (Dahlander and Gann,2010. The second type refers to selling. This type of openness refers to how firms commercialize their inventions and technologies through selling or licensing out resources developed in other organizations (Dahlander and Gann, 2010). No distinction between the two types will be made, for the reason that both share the fundamental characteristics of outbound open innovation (Dahlander and Gann, 2010). Whereas inbound open innovation has received substantial more empirical and academic attention, outbound open innovation still remains a less academically studied concept and has been more resistant to implementation and research efforts ( Enkel et al,. 2009). In practice, external technology commercialization and thus outbound open innovation has been traditionally regarded as an ad-hoc activity (Kutvonen, 2011). Also, companies face many challenges with external technology exploitation as such does not represent the core business of most industrial firms, and their prior experience is relatively limited ( Teece, 1998; Davis and Harrison, 2001). As such, most companies are not achieving their external technology exploitation potential (Fosfuri, 2006). Many firms are not able to see simply the potential of their in-house shelved technology and knowledge assets. In sum, outbound innovation remains quite under examined in the field of academics, while many companies not yet benefit the most from this kind of open innovation. Lichtenthaler (2009) and several other authors such as Lichtenthaler and Ernst (2007) note that outbound open innovation is increasingly becoming a trend in practice. Implications and facilitators of outbound open innovation has been largely neglected in academic research Lichtenthaler and Ernst (2007).
2.2 Small to medium-sized enterprises
10 potential application to the SME sector has been excluded from mainstream literature.
However, given that the argument about the effect of firm size on the effectiveness of innovation is still ongoing, it is worth addressing the issue from an SME perspective”. This statement is in line with the observation of Spitshoven et al,. (2010). It seems that there is still quite some research to be done in the context of SME’s. According to the MKB service desk, 99% of the Dutch business’ are in the group SMEs which is 58% of total profit of business’ in total (MKB service desk, 2011). Because of this, it is interesting to examine what encourages and withholds open innovation from happening in SME’s. According to Chesbrough (2006) and Lee et al,. (2010) it is therefore interesting to study open innovation in the SME context. 2.3Urgency to study open Innovation in SMEs
11 and González (2012) , Lichtenthaler and Lichtenthaler (2009) and Christensen, Holsen and
12 2.4 Open innovation capacities
Table 2
Open innovation capacities
Source:Lichtenthaler and Lichtenthaler (2009) Knowledge exploration Knowledge retention Knowledge exploitation
Internal (intrafirm) Inventive capacity Transformative capacity
Innovative capacity
External (interfirm) Absorptive capacity Connective capacity Desorptive capacity
Although the framework is highly useful in identifying the open innovation capacities, not all capacities are equally relevant for this research. The concept of absorptive capacity, as
described by Zahra and George (2002) captures both the capacities absorptive capacity and innovative capacity as depicted in the model of Lichtenthaler and Lichtenthaler (2009).
13 2.4 Absorptive capacity
Open innovation models are based on external knowledge flows. Whereas closed models rely on the internal processes and capabilities of the firm, the opposite holds for open innovation models. External information and knowledge is more important for open innovation models, as external information can become input for internal processes and R&D activities. Simply grasping external knowledge is not sufficient in staying competitive or at being innovative. A prerequisite for grasping new knowledge is identifying it first. One particular
concept/construct in the academic literature that covers this particular issue is absorptive capacity. Cohen and Levinthal (1990:128) describe absorptive capacity as “the ability of a firm to recognize the value of new external information, assimilate it and apply it to
14 2.4.1 Absorptive capacity and inbound open innovation
Key to open innovation is the transparency of the firm’s boundaries to take into account the available knowledge outside the company boundaries (Chesbrough, 2003 and
HustonandSakkab, 2006). Yet, little attention is paid to absorptive capacity which his needed to be developed in companies in order to successfully engage in inbound open innovation activities (Spitshoven et al,.2010). Open inbound activities consist of networking,
collaborating with other firms or universities for product development, involving customers or end users in product development activities, and licensing-in of intellectual property from other organizations ( Parida et al,. 2012). Also, Parida et al,. (2012:289) state that
“specifically, we study four inbound open innovation activities: technology scouting, vertical technology collaboration, horizontal technology collaboration, and technology sourcing”. All these activities are characterized by their reliance on external knowledge. For example, technology scouting is concerned with scanning the external environment for valuable knowledge. Therefore the concept of absorptive capacity is key in understanding successful inbound open innovation (Spitshoven et al, 2010).
2.5 Desorptive capacity
Where absorptive capacity facilitates and organizes inbound open innovation (outside-in processes) the opposite of absorbing is important for outbound open innovation, as outbound open innovation is concerned with inside –out processes (Lichtenthaler and Lichtenthaler, 2010). In science, the process of desorbing is the opposite of absorbing (Zytner, 1992). Recently this concept of desorptive capacity was suggested as a complement to absorptive capacity with regard to technology transfer (Lichtenthaler and Lichtenthaler, 2010). Outbound open innovation consist of either selling or revealing as defined by Dahlander and
Gann(2010), for both these types of outbound open innovation the processes of identification and transfer and their importance may vary. The definition of desorptive capacity used by Lichtenthaler and Lichtenthaler (2010:158) is “desorptive capacity is defined as an
15 although it constitutes a critical managerial challenge for a firm’s technology transfer strategy (Lichtenthaler and Lichtenthaler, 2010). The identification of possible profitable opportunities for the transfer of technology is very important as it is estimated that the market for such technology transfers could be about 70 percent larger than what is currently licensed (Lichtenthaler and Lichtenthaler, 2010). However, many firms fail in successfully outward transferring technology because they do not succeed in identifying the opportunities (Davis and Harrison, 2001).
2.5.1 Desorptive capacity and current literature
Whereas absorptive capacity received extensive academic attention e.g. Zahra and
George(2002), de Jong and Freel (2010), Müller-Seitz (2012), desorptive capacity according to Parida et al,2012 falls behind. When searching for articles that cover desorptive capacity the amount of articles that cover this concept is rather low. The only articles that explicitly
mention desorptive capacity are those of Lichtenthaler and Lichtenthaler (2009 and 2010) and Müller-Seitz (2012) . Lichtenthaler and Lichtenthaler (2009) were the first to introduce the concept in their article A Capability-Based Framework for Open Innovation:Complementing Absorptive Capacity . Besides a clear definition of the dimensions (identification and transfer) there is no qualitative operationalization that exists in the literature. Nevertheless, the concept captures the important processes associated with outward technology transfer and the
managerial and strategic difficulties that comes with outward technology transfer. Desorptive capacity can be split into two processes, identification of external opportunities and the transfer of the technology or knowledge to an identified recipient.
Prior related knowledge in a particular technology field determines a firm’s ability to profit from external technology. Cohen and Levinthal (1990) acknowledged the path dependency of absorptive capacity. The greater the extent of prior related knowledge the better a firm can identify relevant external knowledge, and past experiences influences future acquisition
16 that firms increasingly rely on outward technology transfer in addition to inward technology transfer, and that this trend will likely to continue and intensify. Transformative capacity refers to the process stages of maintaining knowledge in a firm’s knowledge base and subsequently reactivating this knowledge (Garud and Nayyar, 1994; Walsh and Ungson, 1991). The more a firm possesses prior knowledge in a given field, the easier it is to maintain and reactivate additional knowledge (Garud and Nayyar, 1994). These benefits from prior knowledge indicate path dependencies in knowledge retention (McGaughey, 2002; Pandza and Holt, 2007).
2.6 Absorptive and desorptive capacity and knowledge
Absorptive capacity and the other capacities are much related to knowledge management and knowledge in general. Therefore, knowledge as a concept is explained. And also the issues regarding Knowledge Management practices in SMEs are being discussed. Knowledge and information are used interchangeably a lot, yet they are two separate concepts. It all starts with raw data which represents unorganized and unprocessed facts; no meaning is attached to it. When data gets meaning, and aids decision making it becomes information. The next level is knowledge a valuable intangible resource that most companies still struggle with to manage. Viewing the two innovation capacities, absorptive and desorptive capacity in isolation would mean neglecting the fundament of the capacities, which is knowledge. Therefore this section aims to define knowledge and the properties of knowledge.
2.6.1Importance of knowledge
17 linked to meaningful behaviour .This implies that knowledge is more than just raw data and information, it has meaning. Another description of tacit knowledge comes from the author Zack, he describes tacit knowledge as “subconsciously understood and applied, difficult to articulate, developed from direct experience, and usually shared through highly interactive conversation, storytelling and shared experience” (Zack, 1999;46). Tacit knowledge is thus something can is difficult to articulate and share through interaction but also to express and codify (Droege & Hoobler, 2003).
Knowledge in a company setting tends to be somewhat vague and fuzzy in nature and “sticks” close to the person that holds it (Davenport and Prusak, 1998). In organizations knowledge can be divided in several levels, the individual level, group level and eventually the organization level (De Long and Fahey, 2000). The importance of individual knowledge was first
recognized by Nonaka and Takeuchi (1995). According to Nonaka and Tekeuchi (1995) the creation of knowledge is the process of individually held knowledge that eventually is being internalized by the company so that the once individually held knowledge becomes part of the organizations knowledge-base. This internalization process happens through personal
interaction, thus knowledge sharing is a prerequisite for knowledge creation and eventually retention. Too further stress the importance of individual employee knowledge Nonaka and Tekeuchi (1995) argue in their work that if individual knowledge is not being shared with other individuals and groups, the knowledge that is being hold by the employee is not likely going to affect organizational performance and effectiveness Few studies differentiate between knowledge management initiatives in large corporations and SMEs, authors such as McAdam and Reid (2001) and Beijerse (2000) make the distinction. Yet, according to Riege (2005; 5) “there seems no specific and conclusive empirical evidence that clearly compares and
18 companies face difficulties capturing the valuable knowledge before it walks out the door. On the flipside, Riege (2005:22) states that “there are suggestions that most SMEs perform poorly in terms of knowledge exploitation, integrating existing knowledge into a wider strategic perspective, and thus obtaining sustainable competitive advantage from organizational
learning and innovation”. This statement of Riege (2005:22) is very interesting, he also gives a possible explanation for this poor performance of SMEs, he states that “many SMEs appear to lack strategic focus due to their being preoccupied with day-to-day viability”. Perhaps that this day to day thinking negatively influences the awareness of the employees that they actually possess valuable knowledge that only he or she possesses. Similar Beijerse (2000:177) concluded that “SMEs are knowledge generators but often do not have a systematic strategic approach to developing, capturing, disseminating, sharing, or applying knowledge”. In general, there seem to be little explicit plans or guidelines on an operation level on how to retain knowledge and this may or not lead to problems regarding absorptive and desorptive capacity. This research also focuses on the knowledge management issues that may prohibit the innovation capacities.
2.7 Limitations of the extant literature
Although the importance of absorptive capacity for inbound open innovation has been
20 2.8 The research framework
Open innovation in SME context, with absorptive, transformative and desorptive capacity as facilitators has been under examined in the current literature. A study that examines these capacities in SME setting can provide new insights and provide future research directions. The aim of this model is to examine the how the concepts are unfolded in. The aim is to move away from assumptions and from the conceptual level to a more empirical evidence setting.
Inbound open innovation Outbound open innovation Acquisition Assimilation Transformation Exploitation Transfer Identification Desorptive Capacity Realized absorptive capacity Potential absorptive capacity facilit
ates facilitate s Facilitators Inhibitors Inhibitors Facilitators fa ci lit at es Source: Fransen, K. 2012
Fig 2. Research framework. 2.9 Explanation of the framework
The framework is a graphical representation of the research questions and directions. Each line consists of “how” and “what” questions. The model incorporates the multi-dimensional
21 absorptive capacity. This multi-dimensional approach provides the ability to evaluate why some SMEs benefit more from engaging in open innovation.
The proposed model:
Explores how SMEs acquire and assimilate new external knowledge.
Explores how SMEs transform and exploit the new externally acquired and assimilated knowledge.
Explores how SMEs identify and potential external technology commercialization opportunities. And how SMEs transfer the technology to the recipient firm.
Explores what the facilitating and inhibiting factors are for each construct.
As depicted in figure 2, the importance of exploring what factors facilitate and what factors inhibit the constructs has incorporated in the model. Current studies examining absorptive capacity and desorptive capacity (e.g. Huang and Rice, 20090 and Müller-Seitz, 2012) have not incorporated these factors. Open innovation has been widely acknowledged as a
possibilityfor SMEs to remain competitive and face the ever increasing harsh market
conditions and government regulations (e.g. Vanhaverbeke et a, 2012, Huang and Rice, 2009 and Parida et al,. 2012). The model also incorporates desorptive capacity, which has been largely neglected in current literature although it has been recognized that outbound open innovation activities can be very beneficial (Lichtenthaler and Lichtenthaler, 2010).
Examining what facilitates, and what inhibits the constructs and thus the associated processes, can potentially be very beneficial to managers and entrepreneurs in SMEs. Several
22 3. Research approach
This section of the paper investigates the multiple research approaches and types that are available to researchers. The aim is to identify the proper approach and type that is most appropriate to this research. This section will stepwise come to the preferred method based on available literature. After having identified the most appropriate method, issues like sampling , sample size and data gathering and analysis will be discussed. Also the issues of reliability and validity will be addressed.
As mentioned earlier in the research approach paragraph, this study can be considered a
qualitative study. However, as there are multiple types of qualitative studies it is useful to have a clear distinction, with their advantages and disadvantages. This allows the researcher to choose the best alternatives that best suits his research based on for instance the timeframe at hand
3.1 Research typology
Saunders, Lewis and Thornhill (2009) describe several research purposes. Having a clear consensus on what the purpose of the research is very important as the research purpose
provides the basic direction for carrying out the research (Saunders et al,. 2009). As mentioned earlier, the purpose of this research is to study open innovation capacities in SME context. These capacities are not well understood and examined in a practical matter and are mostly described in a theoretical setting (Lichtenthaler and Lichtenthaler, 2009). There are three main types of qualitative research, these types are described below.
1. Explanatory
23 2. Descriptive
This type of research is concerned with observations of the researcher and the description of the people or environment studied (Babbie 2004). This type of research purpose is frequently used when a problem is well structured.
3. Exploratory case studies
Exploratory case study research is employed when a researcher is examining new
phenomenon or under examined relationships (Saunders et al. 2009). The purpose is to gain better understanding of the unknown situation.
In this research, which is of exploratory nature, the preferred method of data gathering is through face to face interviews. The research can be best described as a communication study (Cooper and Schindler, 2008). In the communication study the researcher questions the subjects and collects their responses by personal or impersonal means. The next theme is the power of the researcher to produce effects, in this research which can be classified as ex post facto studies a phenomenon that already occurred. Therefore, I as researcher have no
significant power in producing effects. Thus, I can only report what happened or what is happening. In order to guarantee this, I have tried to steer the interview as little as possible. However, the interview was protected from covering all sorts of irrelevant topics. This has been done by recapturing the essence during the interview or intervene during the interview when the topic was prone to go severely off -topic. The purpose of our research can be best described as descriptive, according to Cooper and Schindler (2008) the purpose of a
descriptive study is to answer questions such as ‘’how’’, ‘’what’’ and ‘’when’’. Cross-sectional studies represent a snapshot of one point in time, after having interviewed the respondents no further research will be conducted at that particular company. Therefore, the nature of this research is cross-sectional. The study scope, breadth and depth can be best classified as case study. This type of scope emphasizes on context and events. The
environment of study is at the company site, thus closest to field setting. As the research is exploratory in nature, using hypotheses in not necessarily most appropriate. Fisher and Foreit (2002:26) state “Diagnostic or exploratory studies do not normally require hypothesis
24 reason is that not using hypotheses gives the researcher the advantage of staying objective, as no outcome is expected.
3.2 Case study methodology
Other authors that also have conducted an exploratory case study are Vanhaverbeke et al,. (2012). In their article, which explores “How can small companies and start-ups benefit from open innovation strategies?”, in-depth interviews are also conducted with respondents working in the respective SMEs. According to Vanhaverbeke et al,. (2012) open innovation is a
25 This research uses an inductive mode of reasoning towards the generalization of the research findings. The inductive approach starts with specific observations and eventually moves to broader generalizations and theories. The inductive approach is more concerned with theory building, and smaller sample sizes might me appropriate with this approach (Saunders et al,.2009).
3.3 Data collection
Two different kinds of data can be collected by the researcher. When the researcher collects the data him or herself this data is referred to as primary data. Already existing data which can be collected is often referred to as secondary data. Secondary data can consist of archival data, manuals, information on websites (Cooper and Schindler, 2006). In the case of an exploratory qualitative study , the collection of primary data is the most appropriate method, since it has the most potential in exploring unknown phenomena as it is more explanatory and rich in nature(Cooper and Schindler, 2006). Other studies that apply similar research designs include Kapsali (2011) and Lowman, Trott, Hoecht and Sellam (2012) and they also focused at
collecting primary data through face to face interviews.
Mack et al,. (2005) describe the three most common techniques of data collection in qualitative research. These methods are; in-depth interviews, focus groups and participant observation and surveys. Each will be briefly discussed and the most appropriate method for this research will be chosen.
In-depth interviews: This technique is very effective in developing an understanding from the users point of view and attach meaning to his or her answers.
Focus groups: This technique is very effecting in eliciting data from groups, marketing studies often use this technique to gain data on user norms and values.
Participant observation: This technique is most useful for studying natural behaviors in their natural context.
The most appropriate technique for this research is that of in-depth interviewing. This technique provides the ability to gain a better understanding of how the open innovation capacities are shaped in the context of SMEs. There are different forms of in depth
face-to-26 face, and can happen a-synchronous or synchronous. The next step is to describe the sample from which the interview will be taken. As mentioned earlier, this sample consists of small to medium sized companies in the Netherlands. Small to medium sized companies are different from large companies such as Xerox for example, SMEs are generally less formalized and hierarchically structured than the larger companies. Locating higher management and specialized workers therefore becomes somewhat more difficult. Nevertheless, the persons that have been targeted for the surveys are higher management. Suitable employees are employees with functions related to R&D or operations. Effort has been put in identifying knowledgeable employees at the targeted SME, in conjunction with the SME the right key informant has been targeted.
3.4 Reliability and validity
Reliability and validity are important issues in all research including qualitative research (Lacey and Luff, 2001). To ensure that the concepts are measured correctly, the questions are tailored to capture the essence of absorptive capacity and its four dimensions. These four dimensions were first used by Zahra and George (2002). And desorptive capacity and its two dimensions, which are identified by Lichtenthaler and Lichtenthaler (2009). Ulrich
Lichtenthaler, one of the leading authors on absorptive and desorptive capacity has been emailed. Ulrich Lichtenthaler is also the author that first wrote about open innovation
capacities. The e-mail can be found in the appendix. Unfortunately, since desorptive capacity is a fairly new concept there is no qualitative operationalization of the concept. The only operationalization that exists so far measures the extent to which a company engages in desorptive capacity activities (identification of external transfer opportunities and transfer of external technology). This study however, focuses on the “how” rather than the “to what extent”, this makes the only existing operationalization not suitable for this study. As mentioned earlier, pre-testing is one of the tools available to the researcher to increase reliability, by testing whether questions are clear and that the questions do not confuse the respondent. The next section covers the pre-testing stages and steps that have been taken to ensure the quality and reliability of the interview questions.
27 a measuring instrument (Cooper and Schindler, 2008). Pretesting, according to both authors saved countless interviews from disaster by using the suggestions of the respondents to identify and change confusing, awkward or offensive questions and techniques. The pretesting of the questionnaire used for this research consisted of the following steps , represented in the table below.
Table3
Interview checklist
Soure: Cooper and Schindler (2008)
Steps Explanation
1.Identification of testers
Cooper and Schindler (2008) stress the importance of selecting testers with different scholarly education and backgrounds. More diversity increases the amount of perspectives and provides more insights into possible weaknesses. 2. Sending the testers the interview questions/ present interview questions
Sending the interview if the tester is not in the immediate area.
3. Receiving feedback
This step concerns reviewing the feedback that has been received. Not all feedback leads to adjustments. Carefully reviewing the suitability and whether incorporating the feedback leads to improvements is part of this step. 4. Adjusting
questionnaire
Once the feedback has been approved as useful and valuable to incorporate, the interview is adjusted accordingly.
5. Double checking
28 The testers consisted of relatives( father, mother and sister). A psychology student,
Econometrics student and fellow business administration students. More than half of the testers have no business administration or economics background. Their insights were very useful, especially because the concepts covered were fairly new to them. Because of them being unfamiliar with the concepts testing whether the questions were clear was possible. Few interview questions are flawless when developed for the first time, our questions were no exception. Most feedback received consisted of grammar flaws and spelling mistakes and provided alternatives that eliminated grammar and spelling mistakes. In a few occasions the received feedback concerned issues such as questions being vague not being sufficiently clear. Besides the issue of pre-testing there is the issue of conducting the interview in a different language than the language that is used in the report. The language in which the interview questions are and the answers is different than the language used in this paper. This means that the answers and findings have to be translated from Dutch to English. The most common reason for translating interviews is to be able to field an instrument not available in the
29 there is evidence that suggest that translation may put at risk the findings of a
phenomenological study. In particular when the purpose of the study is to capture the essence of the phenomenon from the perspective of the participant (Brenner, 1994). For this research where the purpose indeed is to study the phenomenon from the participant’s perspective, it is important to reduce the risk of decreasing validity and reliability. An interview translation process should focus on the conceptual equivalence instead of solely focusing on the linguistic equivalence (Twinn, 1997). In view of this, the forward –backward-forward translation
technique should be applied (Twin, 1997). This means that the research findings should be translated from Dutch to English, and afterwards from English to Dutch and then as final step back to English. Important is to keep an eye on the conceptual equivalence. This means that no other conceptual meaning should be attached to the results in the translation process. When this forward-backward-forward translation technique has been applied successfully, and has been checked by fellow students the translation will be send to the respondent as a final check. This step has the aim to check whether no other meaning has been attached to his or her answers, if the respondent agrees it is almost certain the translation has not caused a decrease in validity and reliability.
3.5 The interview
Conducting a qualitative face-to-face interview is also subject to methodological steps and errors. In this section the steps that have been taken are discussed that try to eliminate as much error as possible to ensure the quality of the data. One of the errors to which the interview is subject, is that of the interviewer. From the introduction to the conclusion of the interview, there are many points where the interviewer’s control of the process can affect the quality of the data (Cooper and Schindler, 2008). Cooper and Schindler (2008) list three sources of interviewer error, these are respectively:
1.Failure to secure full participant cooperating (sampling error): This source of error results in the respondent not cooperating as fully as is desired. This can result in short and un-serious answers. The interviewer should always stress the importance of the questions and the overall research.
30 equipment should function properly so that the researcher does not have to attach his/her own meaning to the words of the respondents, doing so would result in biased data.
3.Failure to consistently execute interview procedures. In practice this implies that for all respondents should be given the same definitions and questions.
Another error that is also important to take into account is the participant error. Cooper and Schindler (2008) describe three broad conditions that must be met by participants in order for the interview to be successful. Although these conditions might seem very obvious, not meeting them can result in lower data quality, which from a researcher perspective is something you want to zero down as much as possible. The three broad conditions are: the participant must possess the information being targeted towards him. Second, the participant must understand his or her role in the interview as provider of accurate information. And the last condition is, the participant must have adequate motivation. All of these three conditions are very important. By stating explicitly what the purpose of the research is, the value of the research, and what is expected of the company, the chance that condition three is met increases. By selecting the appropriate employees to conduct the interview with condition 1 has a bigger chance of being met. Appropriate employees for the interview would be R&D employees or operation managers or similar functions. And thus, efforts are directed to involve these functions as much as possible. In sum Cooper and Schindler (2008) again address the importance of willingness to cooperate. They state ‘’ the quality and quantity of information secured depends heavily on the ability and willingness of participants to cooperate’’(Cooper and Schindler, 2008:220). In this research attempts have been made to increase the willingness to cooperate, by meeting the preferences/wishes of the respondents, examples of these
preferences are date and time of the interview, but also the location. 3.6The transcription of audio recordings
31 McComisch and Greenberg, 2000; Fielding, 1994; Poland 1995). Transcription is defined as the process of reproducing spoken words, for instance such as those from an audio-recording into written text. The main issue that the article of Halcomb and Davidson addresses is that of verbatim transcription and whether or not verbatim transcription is always necessary.
Verbatim transcription refers to the word-for-word reproduction of verbal data, where the written words are an exact replication audiorecorderd words (Poland, 1995). Poland
32 An alternative method of data management
The proposed alternative method of data management consists of six steps, and basically is a mixed method of using the audio recordings and using the written field notes that have been taken during the interview. The method consists of the following six steps, adapted from Davidson and Halcomb (2006):
Step 1: Audio taping of interview and concurrent note taking. Step2: Reflective journalizing
Step3: Listening to the audiotape and amending revising field notes and observations Step 4: Preliminary content analysis
Step 5: Secondary content analysis Step 6: Thematic review
33 3.7 Method of analysis
The interview that has been conducted consisted of open-ended question, but with a pre specified order, the order of questions during the interviews has not been changed. Because the interview questions are based on definitions of the concepts absorptive and desorptive capacity, the need to use coding extensively has been reduced. In fact, at every construct the interview question was spoken out loudly, so that analyzing the recordings would be easier. This leads to having a clear structure, and that in fact, most of the times the answer given by the interviewee corresponds to the dimension: acquisition, assimilation, transformation, exploitation, for absorptive capacity. And for desorptive capacity: identification and transfer. When presenting the findings, this pre-specified order has been used, also the distinction between potential and realized absorptive capacity has been made. In sum, the structure of the findings looks like this: All interview findings concerning: acquisition, assimilation,
34 4. The case studies
In this research five case studies have been conducted, this resulted in five in-depth interviews with key informants. The companies and the key informants are listed below. For privacy reasons the name of one company has been changed to a fictitious company name, and has been changed to Agrosolutions. Also the name of the key informant has been changed to a fictitious name namely, Operations Manager., which is the actual function of the key informant at Agrsolutions.
4.1 Case selection and response rate
The companies that have been selected are participating in the RuG Houdstermaatschappij. The RuG Houdstermaatschappij is founded in 1996 to invest in knowledge-intensive
companies that emerge from the Rijksuniversiteit Groningen (RUG) and to give content to the exploitation of results of scientific research. Since the foundation, the RuG
35 consist of (Appendix E: example of such an e-mail. The response rate of this study is
considered low. In total 33 companies have been contacted, this resulted in five companies cooperating (15%). The main reason most companies did not cooperate was because of time constraints. Most companies have been contacted in the months of May and June. These months prior to the summer holidays are very busy for most SMEs.
4.1.2 The key informants
36 Table 4
Key informations and company info
Company name Key informant Short description Number of employees 1.The Soil Company,
Groningen
Drs. E.H. Loonstra (director)
The Soil Company specializes in
producing detailed soil maps with data from ground sensors. Used to be 8, currently 2. 2. Polyganics, Groningen Dr. Robbert de Graaf( R&D Director) Polyganics develops and markets bioresorvable products 36 3. Company Agrosolutions (fictitious name for privacy reasons)
OpMan High-tech company
that develops and supplies Agri Yield Management systems to arable farms around the world.
40 (Netherlands only, World total 55). 4. Solenne B.V , Groningen Dr. Alex Sieval ( Head of-Laboratory &Sales)
Solenne produces and sells fullerene derivates used in organic electronic applications. 13 5. De Ontwikkelfabriek, Groningen Drs. Peter van Kampen
Designs and creates concepts with / for our customers giving them the opportunities that fully capture the chances that internet offers.
37 4.2 The cases
This section aims to present the cases with more background information, so that the cases can be put into context. Some companies that have been interviewed were subject to their own unique characteristics. Some examples include: spin-off from the University, strict supervision due to ISO-certificate. Four out of five companies are part of the RuG Houdstermaatschappij. 4.2.1 Polyganics
Polyganics is a privately held biomedical company founded in 1998 as a spin off from the Groningen University in the Netherlands with a legacy of more than 25 years successful research experience, on bioresorbable medical implants. Polyganics harbors all the
commercial, chemical, medical, biological and clinical knowledge and expertise needed for the development, manufacturing and marketing of innovative biomedical products based on bioresorbable polymers (Polyganics.com, 2012). Polyganics quality system complies with ISO 13485, and dictates quality-management standards and requirements for a comprehensive management system for design, manufacture and distribution of medical devices. Polyganics also complies with the USA FDA 21 CFR 820 corresponding subparts. The Polyganics' Quality Management System is ISO13485:2003 certified by Dekra Certification BV. By internal and external audits Polyganics actively maintains and improves the quality system. Our most recent external audit was performed in January 2012. The current certificate was originally issued on 1st September 2003 and will be valid until 1st of July 2015
(Polyganics.com, 2012). 4.2.2 Solenne B.V.
38 fullerene derivatives, like ICBA and fulleropyrrolidines, and special compounds for research purposes, such as d5-[60]PCBM, which is deuterium-labeled [60]PCBM. Most compounds can be supplied from inventory and many are available as both C60- and C70-derivative. For large-scale applications Solenne B.V. produces technical grades of PCBM. These grades work as good as the research-quality compounds, but the purity is somewhat lower. Solenne has several patents and patent applications in the field of organic electronics (Solennebv.com, 2012).
4.2.3 The Soil Company
The Soil Company specializes in making high resolution soil maps based on soil sensor data. Our company focuses on using mobile sensors that measure gamma radiation. The digital soil maps of The Soil Company have a distinctive high resolution. The combined use of mobile soil sensors and the large database with fingerprints The Soil Company possess, enable this resolution. The sensors enable the relatively fast collection of high resolution information about the soil and our knowledge of the fingerprints of the soil enables The Soil Company to translate the sensor data into soil property maps with high accuracy and quality. The Soil Company specializes in visualizing the relevant soil information for the desired application. After all, various users and managers of soils base their decisions on observations of the soil. Detecting and visualizing soil variation – if possible quantitatively – offers advantages during the decision making process. Whether it is a farmer who uses precision agriculture techniques, a manager of a sports complex who needs to renovate his fields or a nature conservation
manager who wants to convert newly bought agricultural land into nature. Since 2003 The Soil Company has conducted over 500 projects in 11 countries. Typically in those projects cases related to nature conservation, precision agriculture, managing sports fields or test fields for agronomical purposes are addressed (soilcompany.nl, 2012).
4.2.4 Agrosolutions
The name of this particular company has been changed for confidentially reasons. Therefore, it is not possible to provide extensive background information about the company.
39 technology, internet and scientific knowledge, growers can continuously monitor and fine-tune their production process throughout the growing season.
4.2.5 de Ontwikkelfabriek
De Ontwikkelfabriek is open to new ideas and gives people the space to come within her organization to development. Creativity, curiosity, enthusiasm and commerce are core values. De Ontwikkelfabriek innovates, researches, advises, develops and supports its customers through knowledge of technology and market (holding.rug.nl, 2012).
5. Findings and discussion 5.1 Introduction
The analysis largely revolves around the exploring the six constructs. The first four constructs apply to absorptive capacity, these are: acquisition, assimilation, transformation and
exploitation. The remaining two are related to desorptive capacity, these are: identification and transfer. In the subsequent sub-sections of this paper, at times when most appropriate the paper refers to key informants to lend support to the observations and judgments that are being made in this paper. Where there is no reference to specific key informants, the observations are based on previous research, and will therefore, be referenced as such and /or on the confirmation of a majority of the five key informants that have been consulted for this research. This section is structured as follows; each construct is being analyzed separately, based on all the observations of the specific key informants. First the two constructs
acquisition and assimilation will be discussed separately and each construct will be concluded accordingly within the context of this study and research question. Then the two constructs are being discussed as they both form the construct potential absorptive capacity. The constructs transformation and exploitation are being discussed in a similar fashion. Distinguishing
40 Lichtenthaler (2010), as distinguishing between them might lead to new insights, this study has found support that absorptive capacity and desorptive capacity are interdependent. 5.2 Absorptive capacity, acquisition
Sources of external knowledge
Acquisition refers to a firm’s capability to identify and acquire externally generated knowledge that is crucial to its operations (Zahra and George, 2002). The key informants confirmed that they have a wide range of external sources at their disposal. And these sources are being used adequately to acquire external knowledge. The informants were able to describe the sources, and a majority of the informants identified as important sources of external knowledge: academic literature, symposia and congresses, collaboration with third parties. These findings are congruent with prior research. Prior research (e.g Biondi, Frey, Iraldo, 2000 and de Bruijn and Hofman , 2000) suggest that more recently Universities and research laboratories have also become an important source of external knowledge for SMEs. As such, this research finds no new evidence with regard to the type of external sources of knowledge, but suggests that SMEs have proper access to sufficient sources. Prior research that examined knowledge acquisition abilities of SMEs (e.g Almeida, Dokko and Rosenkopf, 2003 and Gray, 2006) primarily focus on SMEs that are situated in high-technology sectors (Gils and Zwart, 2004). Gils and Zwart (2004: 687) state: “However, these research projects almost solely focus on high-technology sectors” . In this research one of the five companies can be classified as operating in a high-technology sector, the company in question is
Polyganics. Solenne B.V. operates in a medium-high technology sector (OECD classification, 2012). This research found no evidence to conclude that companies that find themselves outside the high-technology sector experience more difficulties in identifying and acquiring external knowledge. Four out of the five cases represent companies that operate outside of the high-technology sector, as classified by the OECD (Organisation for Economic Co-operation and Development), and none of the five cases experienced troubles acquiring external
knowledge. For instance, Robbert de Graaf states the following about the ability of
41 Company resources and external knowledge acquisition
The amount of time spent on acquiring external knowledge varies between the cases that have been examined. For instance at Polyganics, which operates in a high-technology sector
(Medical, precision & optical instruments) spends around 30 percent of the employee time at scanning the external environment for identification and acquiring purposes. The other four companies all, too some extent recognize the importance of acquiring externally generated knowledge. Several studies (e.g Spitshoven et al, 2010 and Vanhaverbeke et al, 2012) argued that SMEs suffer from a lack of resources and this negatively affects the absorptive capacity of the SMEs (Gray, 2006 and Spitshoven et al,.2010). Although time and manpower has been identified by the majority of the cases as an inhibiting factor, no evidence has been found that suggest that the acquisition of external knowledge was influenced negatively in such an extent that it posed a real issue for the SMEs that have been consulted with. Some authors when addressing absorptive capacity in context of SMEs, consistently do not distinguish (e.g. Spitshoven et al,. 2010,Huang and Rice, 2009) between the four dimensions which constitute absorptive capacity. As such, findings that state that a lack of resources negatively influence the absorptive capacity of a SME, provide no insights about what dimension and particular processes and routines. Therefore, the findings of this research suggest that a lack of resources seems to become an issue in a later stage of absorptive capacity (assimilation, transformation, exploitation). Absorptive capacity is very path-dependent (Zahra and George, 2002) and therefore the distinction of what dimensions make up absorptive capacity is very important. Knowledge of the market
Market knowledge can be defined as organized and structured information about the market (Calantone, 1998). All five key informants have identified market knowledge as an important facilitator, at least when the levels of knowledge are sufficient enough. When not sufficient, a lack of market knowledge can inhibit the identification and acquisition of external knowledge.. Although no SMEs that have participated in this research had in-sufficient market knowledge levels, the majority identified trust issues amongst SMEs to negatively influence the levels of market knowledge (The Soil Company, Polyganics, Agrosolutions and Solenne B.V). For example, the Operations Manager of Agrosolutions stated that:
“SMEs, as I experience it, and as far as I can tell can be best described with a
42 to get across. However, nobody is aware of the water temperature, depth. What if they freeze? The point is, nobody likes to go first, there is some kind of mistrust, which causes you so stay on the dry”.
Mistrust leads to lesser knowledge sharing between SMEs, which in turn negatively influences the market knowledge. Adler (2001) suggests that trust becomes increasingly important in a knowledge intensive economy. Prior research (e.g . Lööf and Andersson, 2010) also claims that economies increasingly become knowledge intensive. Therefore the importance of mistrust as an inhibiting/ market knowledge hampering factor should not be taken lightly. Studies that cover absorptive capacity in SMEs such as Huang and Rice (2009), Spitshoven et al,. (2010), Gray (2006) and de Jong and Freel (2010) do not mention the issue of trust.
In summary, none of the key informants identified the acquisition dimension to be problematic in terms of the amount of external knowledge that can be acquired from the external
environment. All SMEs that have been consulted with have enough external sources at their disposal and knowledge retrieval from those sources is also relatively easy. Although according to the majority of the informants there is always room for improvement no major problems have been identified by all five key informants. Robbert de Graaf (Polyganics) reported that a possible improvement is the management of the limited resources. Managing them more efficiently can improve the acquisition of external knowledge in his opinion and experience. The findings of this research suggest that SMEs face problems at dimensions that come after the acquisition dimension. Although the current literature acknowledges that SMEs generally have shallower and narrower absorptive capacities (e.g. de Jong and Freel, 2010, Gray, 2006, and Nooteboom, Vanhaverbeke, Duijsters, Gilsing,, van den Oord (2007). The path-dependency of absorptive capacity (Zahra and George, 2002) makes it even more
43 of all these dimensions, and distinguish properly between them. Also, identifying the “bottle-neck” dimension is important, as a firms absorptive capacity is as strong as its weakest dimension.The research findings of this exploratory study suggest that the first dimension of absorptive capacity: acquisition, is not causing severe problems, and thus dimensions that follow, and the related routines and processes should be managed and observed more
intensively by SME managers and higher staff ( e.g Operations Managers, General Directors etcetera).
5.3 Absorptive capacity: assimilation
Assimilation refers to the firm’s routines and processes that allow it to analyze, process, interpret and understand the information obtained from external sources (Zahra and George, 2002). This dimension has been identified by the Operations Manager of Agrosolutions as the bottleneck process. However, Robbert de Graaf, R&D director at Polyganics identified no significant problems at interpreting and evaluating the acquired knowledge. When analyzing the transcripts one possible reason why both companies have such different experiences is the way both companies have these routines and processes formalized. This possible facilitator (if sufficiently formalized) and inhibitor (almost no formalization) is worth looking closer
because the results of this research suggest that the extent of formalization explains why Polyganics outperforms Agrosolutions in terms of absorptive capacity, covering all dimensions.
Formalization
Formalization is the degree to which rules, procedures, instructions, and communications are formalized or written down (Khandwalla, 1977).At Agrosolutions, the Operations Manager which has been consulted, identified this particular dimension of absorptive capacity (assimilation) to be the “bottleneck”. Because Agrosolutions grew so rapidly in size, the structures of the company are not supporting the routines and processes that allow Agrosolutions to analyze process and interpret the acquired knowledge sufficiently. The opposite situation holds for Polyganics, as the company operates in a high-technology sector (medical devices) the company is audited very frequently. Also Polyganics has an
44 Polyganics. The key informant at Polyganics identified this as an important facilitator, matter of fact this formalization has been identified by the informant as helpful at all dimensions of absorptive capacity. Jansen, van der Bosch and Volberda(2005: 1002) state:
“Moreover, formalization also inhibits rich, reciprocal knowledge interaction and hinders individuals in assimilating new external knowledge. Accordingly,
formalization negatively influences acquisition and assimilation of new external knowledge underlying potential absorptive capacity”.
This is interesting as it conflicts with the findings of this research. The study by Jansen et al,. (2005) does not focus specifically on SMEs, in fact they studied a large multi-billion dollar financial company. However, the case study findings that formalization contributes positively to potential absorptive capacity are based on the experiences of one company. But, the other four cases that lack such high forms of formalization (Solenne B.V, Agrosolutions) experience problems whilst interpreting and evaluating the acquired knowledge.
Routines and processes
The majority of the informants ( Agrosolutions, Solenne B.V and de Ontwikkelfabriek) identified consulting with colleagues as an important evaluation and interpretation process. Exchanging knowledge with colleagues is very important in sense-making of the externally acquired knowledge, drs. E.Loonstra, managing Director at The Soil Company identified that generally the consults with fellow colleagues are about subjects such as “what can we do with this knowledge” and “what is your opinion and idea?”. Knowledge sharing in SMEs is a topic that has been examined extensively, for instance Riege (2005) identified three knowledge sharing barriers. As mentioned earlier, absorptive capacity is closely related to Knowledge Management (KM) therefore, KM practices in SMEs are relevant to consider. Riege (2005) and other authors that cover the field of KM in SME setting (e.g Pillania, 2008) argue that SME characteristics such as their smaller size are in favor of knowledge sharing. This research found no evidence for that particular argument whilst studying the findings derived from the majority of the case studies. For instance Agrosolutions and Solenne B.V explicitly
45 “Well, now you mention this...I have to say that currently our company isn’t running efficiently at this particular point. Our employees for instance, when they work on a project they develop some kind of specialism, the knowledge that they have, remains largely in the heads of the employees. Two problems are present, A: the knowledge is not being shared with others sufficiently enough. And B: if the employee were to leave the company, all the valuable knowledge literally walks out the door”.
The problem of knowledge sharing is also causes problems at Solenne B.V, but to a far lesser extent. Key informants identified problems with knowledge sharing. For instance
Agrosolutions and Solenne B.V explicitly mentioned knowledge sharing to be an issue. This again leads, according to the key informants of Solenne B.V, and Agrosolutions to
“re-inventing” the wheel over and over again. This is in line with the research findings of Beijerse (2002) and Levy, Loebecke and Powell (2003), their findings concluded that that SMEs are knowledge generators but often do not have a systematic strategic approach to developing, capturing, disseminating, sharing, or applying knowledge. In general, there seem to be little explicit plans or guidelines on an operation level on how to retain knowledge, utilize flat structures and make the mostly informal cultures motivating to encourage more effective collaboration with colleagues. The routines and processes that aid the interpretation and evaluation of acquired knowledge, such as knowledge sharing often pose a problem to the SMEs that have been examined. At Agrosolutions, the Operations Manager has identified that this leads to problems such as “re-inventing the wheel”. SMEs need to adequately manage these processes, and move from individualization to more group-oriented ways of working, this includes knowledge sharing and storing.
Prior knowledge
Prior knowledge plays an important role when interpreting and evaluating the acquired knowledge. This antecedent has been explicitly identified by two companies ( de
46 In summary, the acquisition dimension of absorptive capacity is not problematic for the SMEs that have been examined. However, the assimilation dimension is more of a problem in the majority of the cases (Polyganics is an exception). The main reason is that knowledge is not being shared adequately, and the interpretation and evaluation process remains often at the individual level as evident in Agrosolutions, de Ontwikkelfabriek, and Solenne B.V. Although prior research suggests that SMEs are in favor of knowledge sharing, due to their smaller size and more personal relationships among colleagues (Riege, 2005), the case study findings suggest that there is still room for improvement. Examples of such improvement include: systematically storing of new knowledge and more knowledge sharing between colleagues. The suggested area for improvements may appear very obvious, but as Riege (2005) concluded, SMEs are being preoccupied with day-to-day viability and lack strategic focus. The main conclusion therefore is that SMEs can improve the routines and processes related to the assimilation dimension by systematically storing and sharing knowledge. This may sound easy to achieve. However, although SMEs are in favor at these areas when compared to MNEs, in practice SMEs still struggle with adequately doing so.
5.4 Potential absorptive capacity
Potential absorptive capacity has received disproportionately less empirical scrutiny in comparison to realized absorptive capacity (Liao, Welsch and Stoica, 2003). This means that current literature has paid less attention to how firms acquire, interpret and evaluate external knowledge and yet, this seems to be the area in which SMEs are at a disadvantage (Gray, 2006). Potential absorptive capacity makes the firm receptive to acquiring and assimilating external knowledge (Lane and Lubatkin, 1998). But it does not guarantee successful exploitation of this acquired and assimilated knowledge (Zahra and George, 2002). The findings of the this case study seem to point in this same line of reasoning, and also suggest that realized absorptive capacity is dependent/a function of potential absorptive capacity. This means that if an SME lacks the ability to successfully assimilate externally acquired
knowledge, but is good at acquiring external knowledge, realized absorptive capacity is still influenced negatively. Distinguishing between potential and realized absorptive capacity shows that some firms are inefficient in leveraging their potential and therefore cannot improve performance (Zahra and George). The case study findings confirm this, especially in the case of Agrosolutions. The importance is that companies tend to focus on realized
