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

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

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

4. TIME Research Area | Innovation, Strategy and Organisation Group (ISO) 4 © David Antons Not Researched Yet? Not-Invented-Here in the literature „Anecdotal evidence suggests that this phenomenon induces R&D workers to discount or ignore sources of knowledge external to their team or organization...“ (Agrawal et al., 2010)

5. TIME Research Area | Innovation, Strategy and Organisation Group (ISO) 5 © David Antons Towards a framework of Not-Invented-Here The decision setting Decision setting: different sources of knowledge externalities Let‘s build a model of NIH

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

7. TIME Research Area | Innovation, Strategy and Organisation Group (ISO) 7 © David Antons Towards a framework of Not-Invented-Here The inner structure of Not-Invented-Here Decision setting: different sources of knowledge externalities -contextual (disciplinary) externality -organizational externality -spatial externality Decision setting: different sources of knowledge externalities -contextual (disciplinary) externality -organizational externality -spatial externality Inner structure of Not-Invented- Here Let‘s build a model of NIH

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

9. TIME Research Area | Innovation, Strategy and Organisation Group (ISO) 9 © David Antons Not-Invented-Here Behavioral trajectories of attitudinal functions

10. TIME Research Area | Innovation, Strategy and Organisation Group (ISO) 10 © David Antons Towards a framework of Not-Invented-Here The inner structure of Not-Invented-Here Decision setting: different sources of knowledge externalities -contextual (disciplinary) externality -organizational externality -spatial externality Decision setting: different sources of knowledge externalities -contextual (disciplinary) externality -organizational externality -spatial externality Attitude towards external knowledge -ego-defensive function -value-expressive function -social-adjustive function -knowledge function -utilitarian function Attitude towards external knowledge -ego-defensive function -value-expressive function -social-adjustive function -knowledge function -utilitarian function Possibly triggered heuristics, e.g. -psychological ownership -selective information processing -confirmation bias Possibly triggered heuristics, e.g. -psychological ownership -selective information processing -confirmation bias Not-Invented-Here Bias -underestimation of utility -overestimation of costs Not-Invented-Here Bias -underestimation of utility -overestimation of costs Inner structure of Not-Invented- Here Let‘s build a model of NIH

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

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

13. TIME Research Area | Innovation, Strategy and Organisation Group (ISO) 13 © David Antons David Antons | antons@time.rwth-aachen.de QUESTIONS AND DISCUSSION Thank you for your attention