The Institute for Business Innovation supports research activities in innovation, entrepreneurship, information technology, dynamic capabilities, intellectual capital, governance, competitive strategy and related fields. The Institute provides this support by disseminating research results, organizing academic conferences and seminars, hosting visiting scholars to pursue joint work with our faculty, administering fellowships to support graduate students, and facilitating the process of grant applications to fund future research. The Institute also publishes the academic journal Industrial and Corporate Change (with Oxford University Press).
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Recent work by our faculty on innovation and entrepreneurship
Berkeley-Haas faculty investigate entrepreneurship and innovation from multiple perspectives, rigorously developing theoretical models to illuminate the forces at play, and piloting empirical evaluations to distinguish among competing theories. Below we present some of our faculty’s recent research.
David Teece on managing innovation
David Teece with Deepak Somaya and Simon Wakeman: “Innovation in Multi-Invention Contexts: Mapping Solutions to Technological and Intellectual Property Complexity”
David Teece and coauthors develop a framework to commercialize new patent-based products that takes into consideration two challenges: One, overcoming the organizational barriers and transaction costs involved with accessing intellectual property, and, two, evaluating how to appropriate value from the unique combinations that multiple inventions and organizations create.
The framework includes a set of guidelines to assist managers in choosing from among three types of commercialization arrangements: licensing, componentization, and integration. The paper goes on to explore three strategies for appropriating the value of the innovator’s own patent(s): proprietary, defensive, and leveraging. The choice of a strategy determines the scope of the intellectual property portfolio that needs to be assembled to best capture value. The paper includes four case studies to demonstrate the application of the key theoretical concepts in real-world situations. This article won the California Management Review 2012 Best Article Award
Henry Chesbrough takes stock of the open innovation literature
Henry Chesbrough with Marcel Bogers: “Explicating Open innovation: Clarifying an Emerging Paradigm for understanding Innovation” in Henry Chesbrough, Wim Vanhaverbeke, and Joel West, eds. New Frontiers in Open Innovation. Oxford: Oxford University Press, Forthcoming
Henry Chesbrough and his coauthor explore the growth, scope and impact of the academic literature that has arisen since the publication of his Open Innovation book in 2003. They clarify and develop the conceptualization of open innovation, which they define as a distributed innovation process based on purposively managed knowledge flows across organizational boundaries, using pecuniary and non-pecuniary mechanisms in line with the organization’s business model. These flows of knowledge may involve knowledge inflows to the focal organizations (leveraging external knowledge sources though internal processes), or knowledge outflow from a focal organization(leveraging internal knowledge through external commercialization processes) or both (coupling external knowledge sources and commercialization activities).They discuss divergent views on open innovation and address some of the critiques. Finally, they consider the progress open innovation research has made, relative to the research agenda identified in Chesbrough, Vanhaverbeke, and West (2006), and extend the possible research subjects and units of analysis. See: http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2427233
Toby Stuart on innovation at work: social networks and corporate strategy
Toby Stuart, with Adam Kleinbaum, “Inside the Black Box of Corporate Staff: Social Networks and the implementation of Corporate Strategy“, Strategic Management Journal, 2014
Using email analysis, Toby Stuart and coauthors examine empirically the impact of corporate staff in implementing corporate strategy in multidivisional firms. They finds sharp cross-sectional differences in communication patterns: corporate staff have larger, more integrative networks, with larger structural holes. However, much of the difference is due to a sorting process rather than being caused by employment in the corporate staff. Further, once people receive the corporate imprimatur, they retain aspects of it even when they move back to the line organization. The results imply that the emphasis on structure as a mean to achieve coordination undervalues a selection process in which individuals with broad networks match to coordination-focused jobs in the corporate staff. This paper challenges the conventional wisdom that the primary means to implement a coordination-based corporate strategy is through the formal structure of the corporate center alone.
Terry Hendershott on assessing the impact of financial market innovations:
Terry Hendershott, with Jonathan Brogaard and Ryan Riordan: “High Frequency Trading and Price Discovery“, in Review of Financial Studies, 27, August 2014
Terry Hendershott’s work contributes to understanding how a new financial market intermediary, high frequency trading (HFT), affects market structure and performance. In an empirical investigation using transaction level data from NASDAQ, Hendershott and his coauthors find that HFT increases the efficiency of prices by trading in the direction of permanent price changes and in the opposite direction of transitory pricing errors. This greater trade price efficiency, however, is balanced against the adverse selection costs that HFTs impose to other traders.
Jose Guajardo on the impact of innovations in business models
Jose Guajardo with Morris Cohen, Sang Kim and Serguei Netessine: “Impact of Performance-Based Contracting on Product Reliability: An Empirical Study“. Management Science, 2012.
Using a proprietary data set provided by a major manufacturer of aircraft engines, Guajardo and co-authors investigate empirically how product reliability is impacted by the use of two different types of after-sales maintenance support contracts: time and material contracts (T&MC) and performance-based contracts (PBC). They offer a number of competing arguments based on the theory of incentives that establish why product reliability may increase or decrease under PBC. They build an econometric model that explicitly accounts for the endogeneity of contract choices, and find evidence of a positive and significant effect of PBC on product reliability. The estimation indicates that product reliability is higher by 25%–40% under PBC compared to under T&MC, once the endogeneity of contract choice is taken into account. Their results are consistent with two mechanisms for reliability improvement under PBC: more frequent scheduled maintenance and better care performed in each maintenance event.
Steve Tadelis on the impact of innovations in online advertising
Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment (with Tom Blake and Chris Nosko). Working Paper, February 2013
Tadelis and coauthors study the effectiveness of online advertising. In recent years, internet advertising has been the fastest growing advertising channel with paid advertisements on search platforms (e.g., Google and Bing) comprising the bulk of this revenue. Tadelis and co-authors present results from a series of large-scale field experiments done at eBay that are designed to detect the causal effectiveness of paid search advertisements. Results show that brand-keyword ads have no short-term benefits, and that returns from all other keywords are a fraction of conventional estimates. They find that new and infrequent users are positively influenced by ads but that existing loyal users whose purchasing behavior is not influenced by paid search account for most of the advertising expenses, resulting in average returns that are negative. They discuss implications for advertising decisions in large firms.
Ulrike Malmendier on the effect of entrepreneurial peers on becoming an entrepreneur
Ulrike Malmendier and Josh Lerner, “With a Little Help from my Random Friends: Success and Failure in post Business School Entrepreneurship“. Review of Financial Studies, 2013.
Ulrike Malmendier and her coauthors made the startling discovery that close acquaintance with entrepreneurs does not motivate people to become entrepreneurs themselves. Studying the records of 6,000 Harvard Business School students who are randomly assigned to class sections, they show that a higher share of entrepreneurial peers reduces, rather than increases, entrepreneurship after graduation. The decrease is driven by a decrease in unsuccessful entrepreneurial ventures, while the effect on successful ventures is significantly more positive. The results are consistent with peer learning, where the close ties between students in a section lead to an enhanced understanding of the merits of proposed business ideas.
Ross Levine on the characteristics of entrepreneurs
Ross Levine and Yona Rubinstein “Smart and Illicit: Who Becomes an Entrepreneur and Does it Pay?” Working Paper, 2014
In the first study to disaggregate the self-employed into incorporated and unincorporated, Levine and his co-author are able to examine the characteristics of entrepreneurs. They find that the incorporated self-employed (entrepreneurs) have a distinct combination of cognitive, noncognitive, and family traits. Besides tending to be white, male, and come from higher-income families with better-educated mothers, the incorporated–as teenagers–typically scored higher on learning aptitude tests, had greater self-esteem, and engaged in more aggressive, illicit, risk-taking activities. The combination of smart and illicit tendencies as a youth accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. In contrast to a large literature, they also find that entrepreneurs earn much more per hour than their salaried counterparts.
John Morgan on the drivers of entrepreneurship
John Morgan and Dana Sisak “Entrepreneurship and Loss Aversion in a Winner-Take All Society”. Working Paper 2014.
John Morgan and co-author investigate what motivates entrepreneurs to give up the safety of employment for the hazards of entrepreneurship. They describe entrepreneurs as those who work at running corner stores, beauty salons, real estate brokerages, and ethnic restaurants, up to well-known large success stories such as Facebook. They note that most ventures stay small, but some make it big. Their model explains this pattern through the variation in the outside—employment wage—option. In their model all individuals have the same characteristics, including being loss-averse: thus, a rise in employment wages increases entrepreneurial investment and effort, and also raises returns.
For a Haas School news story on this paper, please click here.