Institutionalising information asymmetry: governance structures for open innovation

Purpose This paper aims to explore the ways in which firms utilise hierarchical relationships and the market system to supply and acquire intellectual property (IP) and/or innovation capabilities from sources external to the firm. Design/methodology/approach The authors conduct a field study to explore emerging governance structures for open innovation, using multiple data sources including documents (e.g. white papers) and interviews published by the firms studied, analysis of the firms' web-based systems (where applicable), secondary content (e.g. news articles) and elite interviews with key personnel. Findings The analysis of seven exemplars of open innovation reveals that inter-organisational relationships that facilitate open innovation can be categorised based on whether they are mediated or direct, and seek to exchange intellectual property or innovation capability. Using this categorisation, the authors present an analysis that reveals four governance structures along ten dimensions, and discuss the influence of knowledge dispersion, uncertainty and transaction costs on the emergence of such structures. The authors conclude that the appropriateness of hierarchical/market relationships or intermediaries to source IP and/or innovation capability is dependent on the information asymmetry in relation to the existence and availability of potential solutions/solvers; the suitability of potential innovation partners (solution providers and solvers); and the acquisition process for external innovations (including problem specification, solution evaluation, transfer, etc.). Research limitations/implications The research is exploratory in nature, and designed to serve as a foundation for future research efforts. In particular, the work highlights the need for research that takes an inter-organisational perspective on facilitating open innovation. Practical implications The research highlights the prominence of information asymmetry as a key issue in choosing and designing appropriate governance structures for open innovation. Originality/value The paper presents an exploratory study of an emerging, and consequently under-researched phenomenon.