Firms as user innovators: An exploration of innovation by user firms
Marcel Bogers
Ecole Polytechnique Fédérale de Lausanne (EPFL)
College of Management of Technology (CDM)
Research has shown that user firms innovate because of their expected benefit of innovating and the stickiness of their knowledge. However, the more precise circumstances under which these users innovate have not yet been fully explored. I therefore address the question under what conditions user firms innovate. I split my study into two main units of analysis. First, I explore the firm-level conditions for user innovation by drawing on literature in economics of innovation and organization, social psychology and human resource management. Second, I explore the boundary between suppliers and users to explain why and when users innovate by drawing on literature in management of technology, transaction cost economics and the resource-based view of the firm.
In the first perspective, I attempt to extend the literature on user innovation and learning by doing by explicitly focusing on the innovation process inside user firms. User firms are user innovators if they develop and use their own process innovations. I use the results from a questionnaire (N=413) in Swiss manufacturing industries to show the pertinence of both major and minor process improvements in user firms. I also show what types of employees are involved in what way and how process innovation is monitored and budgeted. The results for example indicate that the process of process innovation is largely informal and that there are important differences between major and minor improvements. Particular emphasis is furthermore put on the role of production workers in process innovation as they are effectively the ones that learn by doing and thereby possibly innovate. I develop an overview of which practices can promote production workers to contribute to the innovation process. I moreover investigate to what extent these practices as well as the production workers' involvement lead to more process innovation in user firms. The results thereby reveal how firms can promote learning by doing to become more innovative.
In the second perspective, I take a different approach by exploring the boundary between a user firm and a manufacturer firm. I thereby address the question: Why is it that sometimes users, not manufacturers, innovate? I present a framework for exploring why users innovate. The theory is rooted in: (1) the observation that boundedly rational organizations (and individuals) are heterogeneous and therefore inherently have heterogeneous needs and capabilities, and (2) the fact that knowledge is often difficult to locate, evaluate, value, assimilate and transform into products. The theory provides a deeper understanding of why users innovate and may help us better understand the sources of competitive advantage. It also helps us better understand the interaction between transaction cost economics and the resource-based view of the firm. And while these theories are mainly firm-based, it opens some interesting questions that not only apply to user firms but also to individual consumers as user innovators.