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Balancing knowledge sharing and protection in R&D collaborations

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Image: Balancing knowledge sharing and protection in R&D collaborations In their efforts to develop new technologies, firms increasingly rely on external knowledge to complement their internal knowledge base. Accordingly, an important element of "open innovation" is "the use of purposive inflows and outflows of knowledge to accelerate internal innovation".

Despite the growing importance of research and development (R&D) collaborations in particular, and open innovation in general, many important questions are still unexplored – also due to the (growing) complexity of such collaborative efforts and the nature of the underlying resources and knowledge. How can a firm balance knowledge sharing and protection in R&D collaborations?

Trends in collaborative knowledge sharing and protection

Several trends have given rise to the need of studying the tension between knowledge sharing and protection in R&D collaborations. Most importantly, firms have started to open their boundaries to tap knowledge from the outside and to use the market as an extension of the firm. As a particular application of this strategy, firms increasingly enter into collaborative agreements with other organizations. Collaborative efforts are, therefore, becoming of increasing importance for a firm's competitive advantage and the value of such collaborations is increasing.

At the same time, in recent years, there has been a rise in the importance of patents and markets for technology as well as the associated use of various licensing agreements. All-in-all, it is not surprising that it has been argued that we have entered an era of intellectual and alliance capitalism.

Governance of knowledge sharing and protection

The outcome of collaborative agreements depends on the effectiveness of the governance structure. Because of bounded rationality and opportunism, all complex contracts are unavoidably incomplete. Mutual commitment and trust, together with other relational and environmental characteristics, can deal with such uncertainty. Valuation of knowledge (and of the licenses or agreements that are used to transfer it) is a very delicate but crucial issue in R&D collaborations.

The valuation problem may increase transaction costs because of the difficult and perhaps manifold negotiations that have to take place. An additional problem is the "disclosure dilemma" or "information paradox" as knowledge has to be revealed in negotiations to show its value – effectively entailing the transfer of the knowledge. Research proposes some possibilities to solve such problems, like the establishment of collaborative trust, which in turn can be established by repeatedly collaborating with the same partner – with a particularly important role for licensing.

“…firms have started to open their boundaries to tap knowledge from the outside and to use the market as an extension of the firm.”

R&D collaborations are typically established to mutually profit from each other's resources and resource complementarities. Central to such efforts are the characteristics of the shared resources, which influence the coordination, integration and appropriation of the relevant resources. For example, in particular for knowledge as a resource, imitability plays an important role, also in relation to appropriability. The dynamic and personal nature of knowledge can furthermore give it a certain degree of tacitness.

Given the importance of knowledge sharing in R&D collaboration, a central element becomes the embodiment of the knowledge, which ranges from codified intellectual property rights (IPRs) and technology to knowledge that is tacitly held by people or in routines. Furthermore, as mutual learning is a main driver for the development of knowledge and technology within collaborations, knowledge complexity, as well as teachability, affect the ease with which knowledge is successfully shared.

Coping with the tension field

Knowledge exchange strategies

Based on a multiple case study approach with eight R&D collaborations, it was found that the collaborating firms developed an explicit or implicit strategy to cope with the tension between knowledge sharing and protection. The study included four cases from the Netherlands (Akzo Nobel, Lionix, KPN and Philips) and four from Sweden (Array, Eka Chemicals, Ericsson and Telia). The following identifies two general coping strategies.

1. Open exchange strategy

The first knowledge exchange strategy is the "open exchange strategy". In the case of Akzo Nobel, it was essential to very openly share the knowledge that was required for the technology to be developed. Despite the sensitivity of this knowledge and the geographical and cultural distance with Samsung, the potential of this collaboration was so high that the partners were able to overcome the factors that hampered an open exchange of knowledge.

In Array's collaboration with Matsushita, this evidence is largely corroborated despite some early frictions. In general, the foreground and sideground knowledge were exchanged in a rather open manner. However, patenting remained a difficult issue as the inventor was allowed (and even obliged) to apply for a patent. If however the other party helped in this invention, the patent should be co-owned. To solve potential problems, they had regular "invention inventory meetings" in which they discussed their lists with invention and contributions. In the end, most patents (including essential ones) were co-owned. The fact that these meetings took place at the practitioners' level was also considered to be valuable as this level is associated with an open sharing atmosphere, whereas the strategic level generally takes a more protective approach.

All-in-all, the importance of patents led to a relatively closed knowledge exchange strategy, although continuous attempts to create a more open exchange strategy were successfully made. Similar findings are found in the case of Eka Chemicals in which the open exchange strategy was reinforced by a tight secrecy agreement to keep knowledge within the collaboration. This in turn was important because of the relatively competitive and exploitative nature of this collaboration and the need for the two partners to privately internalize the results.

A final case in which such an open knowledge exchange strategy was identified is the collaboration of Lionix, although a trust-based relationship was initially hampered by the collaboration's characteristics (involvement of SMEs, involvement of university and the geographical distance) and the strong competition in the market. However, due to the importance of tacit knowledge, it was necessary to establish an open strategy.

2. Layered collaboration scheme

The existence of sub-collaborations distinguishes the other four cases, which adopted a "layered collaboration scheme" from the four cases discussed above. In the case of Telia this meant that it mostly collaborated with one specific partner in a very open way, whereas the knowledge exchange with the other partners was more limited. A similar conclusion can be drawn from KPN's collaboration, which also used a layered collaboration scheme. The main argument here was that not all partners need to know all details of every other partner's knowledge development. Towards the outer members in the collaboration, a more protective approach is used (e.g. secrecy).

In the case of Philips, a layered knowledge exchange strategy was also used but due to the importance of standardization (not only private internalization) the degree of knowledge exchange with external partners was higher – albeit still only moderate. Similar results are derived from the Ericsson case, although this collaboration is unique due to its large amount of participants, which essentially means that the establishment of sub-collaborations is the only practical strategy for knowledge exchange. In this case, these sub-collaborations consist of a limited amount of partners that, together, perform a certain task (or work package) within the scope of the collaboration. Each work package consists of seven to eight partners on average and typically involves partners from the same technical area (e.g. operators, vendors, academics). There is thus a core (inner members) and periphery (outer members) for each work package or sub-collaboration. In the Ericsson case, knowledge developed in a sub-collaboration was typically shared through a joint licensing scheme (through a general forum).

Determinants of coping strategy

In summary, the main differences between the two strategies are: Most clearly, the number of partners explains the adoption of either strategy to a large extent and might even be the main consideration. With regard to the characteristics of knowledge, there seems to be some relation between new and specific knowledge and the adoption of an open exchange strategy. The layered strategy on the other hand is especially present in the case of a wide variety of partners (i.e. vertical and horizontal nature of the collaboration). The involvement of a university also is highly related to the adoption of a layered scheme.

Firms can use these strategies and governance mechanisms to cope with the tension between knowledge sharing and protection in R&D collaboration. In that way, R&D collaboration can be a successful element in a firm's broader open innovation strategy, which ultimately has to entail a hybrid strategy between an open and closed approach towards knowledge sharing and protection.

July 2011.


This is a shortened version of " The open innovation paradox: knowledge sharing and protection in R&D collaborations", which originally appeared in European Journal of Innovation Management, Volume 14 Number 1, 2011.

The author is Marcel Bogers.