Avimanyu (Avi) Datta, Ph.D.

Assistant Professor, College of Business,

Illinois State Universityhttp://avimanyu.weebly.com

Presentation Overview

About me› Glance› Career Objectives› Research Focus› Research work

Origins of Radical Innovations› Motivation› Paper

Avimanyu (Avi) Datta B.Sc. Computing and Information Systems, University of

London M.S. Information Systems, Hawaii Pacific University Ph.D., Washington State University (2011)

Assistant Professor of Management: Illinois State University (Fall 2011-Present)

Industry Analyst: Frost & Sullivan Analyst, Market Sizing: Access Market International (AMI)-

Partners

Enjoy Painting and Sketching: http://avimanyu.weebly.com/paintings-etc.html

Enjoying brewing Espressos

About me: A Glance

Research

Teach

Practice

Develop and test theories

Simplify the findings: Class room Teaching

Synthesize the findings: Prescriptive Recommendations

About me: Career Objectives

Strategy

Information Systems

Entrepreneurship

Firm Boundarie

s

Capabilities

IT Capabiliti

es

Innovation Commercializati

ons

Radical Innovatio

ns

About me: Research Focus

About me: Research work Published in

› Journal of International Management› Information Systems Research (ISR)› Journal of Virtual Communities and Social network › American Journal of Business› Communications of AIS› Journal of Cases on Information Technology (JCIT)› Journal of Management and Strategy › Technology and Investment› International Journal of Strategic Information Technology and Applications› International Journal of Innovation in Digital Economy (IJIDE) › Journal of Business and Management › Journal of Knowledge Management

Presented in:› Strategic management Society (2011)› AMCIS (2008, 2009, 2010)› Academy of Management (AOM: 2010, 2012)› Southern Management Association (2008; 2012 )› Atlanta Competitive Advantage Conference (ACAC: 2010)› Marketing Science Conference (2012)› INFORMS Conference on Marketing Sc. (2012)

Under Review› Organization Sc.› Technovation› R&D Management› Journal of Business venturing› Industrial Marketing Management› Decision Science Journal

A little bit more….

Combinatory effects of Exterior Sourcing and Technology Distinctness on Radical Innovations: A longitudinal look at Patents in the IT Industry

Avimanyu Datta

Motivation

With age firms tend to look inwards (boundary and industry) to source innovations

Radical Innovations are technologically “different” from a firms existing stock of innovations (patents)

Radicalness is often contingent upon access to technologies whose influence/application exceeds the territory of that technology’s definition (technology distinctness) and sourcing innovation outside a firm’s focal industry (exterior sourcing)

Radical Innovations Make a firm Long-Lived . Not all firms are capable of bringing radical innovations

MOTIVATION

Constructs and Definitions

Novel

UniqueImpact on

future Technolog

y

Radical Innovations: Innovation that are original and forms the foundation for future innovation outcomes

Exterior Sourcing: Degree to which an innovation is sourced outside a firm’s focal industry.

Technology Distinctness :Degree of distinctness between an innovation’s definition and its application/influence.

Interplay among Constructs: Exterior Sourcing and Radicalness

Positives: Tapping for sources of innovations outside the focal industry, stimulate intensive experimentation with new technological combinations, which furthers the possibility of creation of DIFFERENT Innovations (Ahuja & Lampert, 2001; Fleming, 2001; Phelps, 2010; Audia & Goncalo, 2007; Makri et al. 2010).

Negatives: Sourcing innovations outside focal industry result in 1. Costly, Expensive inconclusive innovations2. High Integration Cost

3. Thus, we argue that while exterior sourcing may enable radical innovation, it also creates confusion which negatively affects the radicalness of innovation

Thus, Hypothesis 1: There is a negative relationship between exterior

sourcing and radicalness.

Interplay among Constructs: Technology Distinctness and Radicalness

1. Access to technologies whose application and influence exceeds the definitional boundaries of prior technologies increases the set of possible technology combinations as well as the potential for highly novel and unique solutions (Fleming, 2001; Phelps, 2010)

2. Access to distinctly different technologies stimulates intensive experimentation with new technological combinations, which should also lead to more radical innovation outcomes (Ahuja et al., 2001b).

3. Access to more distinct technologies and experimentation with them not only helps in creation of novel and unique solutions leading to original innovation, but also increases the knowledge on how to productively put these technologies into use, thereby influencing the content and speed in developing future innovation.

Thus, Hypothesis 2: There is a positive relationship between

technological distinctness and radicalness

Interplay among Constructs: Interaction between exterior sourcing and technology distinctness

Sourcing Innovations outside focal industry is expensive: when a high number of exterior sources are employed this creates dual problems: information overload arising from exterior sourcing and difficulty in grasping the knowledge relating to novel applications of technologies

Getting access to distinct technology through minimal exterior links Cost optimizing solution

Thus, Hypothesis 3: Exterior sourcing will negatively moderate the relationship between technology distinctness and radicalness.

Hypothesis 4: Exterior sourcing and technology distinctness will interact in such a way that low exterior sourcing and high technology distinctness will result in the highest level of radicalness, and high exterior sourcing and low technology distinctness will result in the lowest level of radicalness.

Hypotheses

Exterior Sourcing

Technology

Distinctness

Radicalness

H1 : There is a negative relationship between exterior sourcing and radicalness.

-

-+

H2 : There is a positive relationship between technological distinctness and radicalness.

H3 : Exterior sourcing will negatively moderate the relationship between technology distinctness and radicalness.

H4: Exterior sourcing and technology distinctness will interact in such a way that low exterior sourcing and high technology distinctness will result in the highest level of radicalness, and high exterior sourcing and low technology distinctness will result in the lowest level of radicalness.

Sampling Strategy

Select the firms from IT Verticals. There are initially 82. Of which 69 had patents

69 IT FirmsS&P 500 Firms

IT FIRMS IT FIRMS

Filtration of 500 firms

69 Firms69 Firms500 FIRMS500 FIRMS

Get Total Patents from 1994-2009 of all 69 firms including their subsidiaries and Spinouts

192070 patents

2.6 million Citations

192070 patents

2.6 million Citations

FINAL SAMPLE

Exterior Sources (EC): [B-(I+P)]/B› Where B=all backward citations› I = backward self citation› P= Backward partner

When a patent application cites another patent from the firm itself, we considered that an internal citation.

When a patent application cites members of the S&P-500 IT or other IT firms, we considered that as a ‘partner’ citation.

To make sure that a non-S&P firm was belonged to the IT vertical we compared it’s SIC code with corresponding codes that collectively represents Information Technology Industry. Those SIC codes are: 4510 (software & services), 4520 (technology hardware & equipment), 4530 (telecommunication services)

METHODVariables

Technology Distinctness: degree of distinctness between an innovation’s definition and its application/influence.

From the standpoint of patents we look at its technological class and subclasses to see to assess its definition and its field of search to determine its application/influence.)

Technology Class: Technological classes and subclasses for a patent define its technological domain.

Field of search: Field of search shows the application of an invention which may or may not exceed the technological domain restricted by its class.

technology distinctness = 1-[technology class ∩ field of search]

METHODVariables

Radicalness Log(((1+FC)*F/(1+BC)*B)/N) where FC=Forward citation and f=forward class match;

BC=Backward citation and b=backward class match; N= number of years passed since the patent was announced.

We divided by N because older patents have more forward citations making them artificially more Radical than younger ones.

We too log value to have a normal distribution

METHODVariables

(a) Distribution of Radical Scores, Controlled for year

(b)Distribution after Log Transformation

Control Variables: R&D Spending, Firm Size, Age of Firm, No of patents and Patent Age.

Statistical Test› Using an Ordinary Least Squares Regression (OLS) Model we tested

Hypotheses 1, 2, and 3. The basic equation for this analysis was

Y i, (t’-t) = β0+ β1Ri, t-1 + β2Si, t-1+ β3Ai, t+ β4Pi, t+ β5PA i, (t ‘-t) + β6ES i, t + β7TD i, t+ β8 (ES×TD) i, t+ e,

For Hypothesis 4, the interaction between technology distinctness and exterior sourcing will be graphically depicted by categorizing Exterior Sourcing and Technology Distinctness as high (>0.5) or low (<0.5)

METHODControl variables Tests and Equations

High

(ES>0.5)

Low (E ≤ 0.5)

Exte

rnal

Sou

rces

Tech

nolo

gy

Dis

tin

ctn

es

s

High

(E>0.5)Low (E ≤ 0.5)

Variables Model 1Beta (Error)

Model 2Beta (Error)

Model 3Beta (Error)

Model 4Beta (Error)

R&D Spending .102**(.003) .110**(.000) .104** (.000) .103** (.000)

Revenue .002**(.000) .024**(.000) .017**(.000) .018 **(.000)

Firm Age .137**(.000) .091**(.000) .099**(.000) .099** (.000)

No. of patents -.138**(.000) -.154**(.000) -.158**(.000) -.158** (.000)

Patent Age .085**(.000) .105**(.000) .112**(.000) .112** (.000)

Exterior Sources

-.257**(.000)

-.260**(.000)

-.257**(.000)

Technology Distinctness

.169**(.000) .166** (.000)

ES * TD -.087**(.000)

R2 (R2 Improvement)

.020** (N/A) .083** (.063**) .111** (.028**)

.112**(.001**)

Information Criterion (Improvement)

328,119.29 325,557.86(2561.43)

318, 117.74(7440.12)

306,768.32(11349.42)

Hypotheses Test

n=192,070. Standardized coefficients are reported with standard errors in parenthesis. Dummy variables were included in analysis but not reported here.

**p<.001

Hypothesis, 1,2,3: Supported

Hypothesis

Model 1 Model 2 Model 3 Model 4

1 Only Control variables (NA)

Supported Supported Supported

2 Only Control variables (NA)

Supported Supported

3 Only Control variables (NA)

Supported

Model 4 is the best model with highest variance accounted for, lowest in terms of Information Criterion.

Hypothesis 4: Killer Combination

Killer Combination: Sourcing the Highest possible Distinct Technologies with minimal Exterior Sources.

Hypothesis 4: Supported

Implications: Theoretical1. Deeper investigation and enhance prior research on

exterior sourcing and technology complementariness by linking it with radicalness.

2. Further research on radical innovations by including perspectives on exterior sourcing and technology distinctness.

3. Logical understanding on the boundary conditions for which the relationships among the constructs will hold true.

4. Selection capabilities of partners, are crucial not only to develop radical innovation but also for long term performance

5. Future research can use radicalness as context to see how relative absorptive capacity gets affected when technologies are distinct and the entities involved in the network are from different industries

Implications: Practical1. Managers are not only expected to grasp new technologies, comprehend

fresh knowledge, but also deal with information overload arising from different industry

2. Commitment exterior sources should be made only when there are enough incentives to get past the frictions and frustrations of dealing with information overload, integration problems, and of comprehending technology that is drastically different from managers’ current stock of expertise.

3. Create incentive programs for managers for identifying (a) technologies with future potential and create radical markets, and (b) potential partners outside the industry for getting access to such technologies.

Limitations and Future Research

1. Future research should try to replicate this work with different industries like biotechnology, pharmaceuticals, automobiles, aerospace & defense, and so forth.

2. Relevance of this study may just be restricted to industries where patents are meaningful indicators of innovations

3. Radicalness of patents only partially captures the radicalness of innovation. Future research should be geared towards looking at the novelty of commercialized products and looking at the technology architecture to judge distinctness from the firm’s current portfolio.

ConclusionsParsimonious two-variable predictor of radicalness: Exterior sourcing and technology distinctness.

Before taking such risks of initiating product development, our findings can help firms at two stages:

1. When the patent is announced, a look at the exterior sources and technological distinctness combination can help in predicting the possibility of radicalness.

2. Three to five years later the firm can actually see if the patent met with the prediction of radicalness using our scores.

If a firm ventures outside its technology domain, and/or partners with firms outside its industry, that will increase the chances that any discovery will be radical. However, risks are high

Conclusions (Lighter Note)

is it not enough that I need distinctive technologies…I also need to know who to get it from?

Yes. You need to know who to source it from and also at what frequency.

And how would I know that?

I am sorry, but that is a relevant question. Relevance does not interest us.

No wonder you are in academia.

Sum up Questions