Institutional voids and innovation governance: A conceptual exposition of the open versus closed architecture choice

• Published date: 01 January 2020
• Author: Tahiru Azaaviele Liedong,Joseph Ebot Eyong,Augustine Awuah Peprah
• DOI: http://doi.org/10.1002/jsc.2310
• Date: 01 January 2020

RESEARCH ARTICLE

Institutional voids and innovation governance: A conceptual

exposition of the open versus closed architecture choice

Tahiru Azaaviele Liedong

1

| Augustine Awuah Peprah

2

| Joseph Ebot Eyong

3

1

School of Management, University of Bath,

Bath, United Kingdom

2

Department of Business Administration,

University of Professional Studies, Accra,

Ghana

3

Leicester Castle Business School, De

Montford University, Leicester, United

Kingdom

Correspondence

Tahiru Azaaviele Liedong, School of

Management, University of Bath, Claverton

Down Road, Bath BA2 7AY, United Kingdom.

Email: t.a.liedong@bath.ac.uk

Abstract

The choice of open versus closed innovation is shaped by the interplay between

firms' analytical orientation and the institutional conditions within firms' operating

environments. Whereas there is a plethora of research about the antecedents of inno-

vation performance, there is a lack of understanding about the factors affecting and

influencing innovation governance. Regulatory, normative, and cognitive institutional

voids have differential impacts on the choice of open versus closed innovation. Firms'

analytical orientation, political connections, and collaborating partners' home country

institutionsmoderate the effect of institutionalvoids on innovation governance.

1|INTRODUCTION

Innovation is widely recognized as a cornerstone for profitability and

an important source of competitive advantage among firms in emerg-

ing and advanced economies (Hashi & Stojcic, 2013; Hult, Hurley, &

Knight, 2004; Tsai & Yang, 2013; Wadho & Chaudhry, 2018). Due to

this value-creation potential, governments, practitioners, and scholars

have increasingly shown interest not only in understanding what

drives innovation but also how to stimulate and promote it. Scholarly

research has revealed that innovation is impacted by a multitude of

factors (Crossan & Apaydin, 2010; M. Smith, Busi, Ball, & Van de

Meer, 2008) including access to capital (Mollick & Robb, 2016;

Stanko & Henard, 2016), managerial political and social connections

(Y. Gao, Shu, Jiang, Gao, & Page, 2017; Li, Xia, & Zajac, 2018), govern-

ment support (Szczygielski, Grabowski, Pamukcu, & Tandogan, 2017;

J. Wang, 2018), and firms' capabilities (Frambach & Schillewaert,

2002; Xie, Zou, & Qi, 2018).

While knowledge of these antecedents is useful, we note that

extant innovation literature has, so far, overlooked two crucial issues.

First, studies are dominantly focused on innovation performance,a

construct often operationalized as the market value of new products

(e.g., Foss, Laursen, & Pedersen, 2011; Li et al., 2018; Y. A. Zhang,

Li, & Li, 2014). Hence, previous research seems to be overly con-

cerned with the instrumentality of innovation, to the detriment of fos-

tering a deeper understanding of innovation processes in general and

innovation governance in particular. Whereas it is unequivocal that

the locus, organization or design of innovation could be closed

(i.e., firm only) or open (i.e., network) (Crossan & Apaydin, 2010), there

is limited knowledge about the conditions or factors that influence

firms' choice between closed and open governance modes (Almirall &

Casadesus-Masanell, 2010; Baldwin & von Hippel, 2011; Felin &

Zenger, 2014). This choice is fraught with trade-offs which have rami-

fications for competitive advantage (Chesbrough, 2003a, 2003b;

Manzini, Lazzarotti, & Pellegrini, 2017; Trott & Hartmann, 2009; von

Hippel, 2005), and is thus a crucial one whose understanding has both

theoretical and practical implications.

Second, research has sparingly explored the impact of nation-

level institutions on innovation performance and innovation gover-

nance. Review of the literature reveals that only a few studies have

examined the antecedents of closed versus open innovation, with the

determinants often clustering around problem complexity, managerial

personalities, and firm capabilities (e.g., Aylen, 2010; Felin & Zenger,

2014). Evidently, there is a paucity of conceptual theorization and

empirical testing to push and extend innovation governance bound-

aries beyond internal organizational dynamics. This has fostered and

accentuated an erroneous and implicit assumption that innovation is

internally driven, and that the external environment plays a passive

role in the process. In this respect, studies have ignored the centrality

of national and institutional contexts. North (1990), for instance,

argued that institutions dictate the business environments within

which firms operate. Institutions also influence firms' strategy (Luo,

2004; Oliver, 1991) and can thus shape firm innovation. This is

JEL classification codes: M10, O31, O32, O34.

DOI: 10.1002/jsc.2310

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