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Open-System Orchestration as a Relational Source of Sensing Capabilities: Evidence from a Venture Association

Giudici, A; Reinmoeller, P; Ravasi, D; (2018) Open-System Orchestration as a Relational Source of Sensing Capabilities: Evidence from a Venture Association. Academy of Management Journal , 61 (4) pp. 1369-1402. 10.5465/amj.2015.0573. Green open access

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Research on innovation networks has highlighted the pivotal role that actors with more prominence and power, such as hub firms, may play in orchestrating the activities of other network members along a collective innovation effort. Our study examined the under-theorized, but no less important, type of orchestration that characterizes other organizations, such as business incubators and venture associations, who seek to support the dispersed entrepreneurial efforts of network members. We refer to this type as “open-system” orchestration, as opposed to the commonly studied “closed-system” type performed by hub firms. Our findings reveal how the processes of open-system orchestration differ markedly from those of closed-system orchestration, and detail how these processes influence the micro-foundations of network members’ sensing capabilities. By doing so, we also offer empirical substantiation and theoretical elaboration to the idea that dynamic capabilities might not reside exclusively inside firms, but could be co-created relationally with other parties in the business ecosystem. Entrepreneurship and innovation often occur within large networks of independent or semi-independent firms (Freeman, 1991; Howells, 2006; Powell, Koput, & Smith-Doerr, 1996). Previous studies have drawn attention to the fact that, in some of these networks, a central actor takes a leading role in “orchestrating” collaboration among member firms (Dhanaraj & Parkhe, 2006; Paquin & Howard-Grenville, 2013). This line of inquiry has focused on so-called “hub firms”—typically large corporations attempting to harness the resources and capabilities of several smaller partners to pursue a collective innovation goal (Nambisan & Sawhney, 2011)—and has begun to unpack the processes through which these orchestrators govern their networks (see Dagnino, Levanti, & Mocciaro Li Destri, 2016, for a review). Recent studies, however, indicate that in other types of innovation networks, rather than attempting to extract value from members’ coordinated efforts as hub firms do (Dhanaraj & Parkhe, 2006), central actors primarily support members’ dispersed and largely independent search and pursuit of new business opportunities. This is the case, for instance, of business incubators and accelerators, national and regional agencies, or associations of small and medium-sized enterprises. Scholars have referred to organizations that perform this supporting role as “bridging organizations” (Berkes, 2009; Sapsed, Grantham, & DeFillippi, 2007) or “open-system intermediaries” (Dutt, Hawn, Vidal, Chatterji, McGahan, & Mitchell, 2016). These organizations are widely diffused, and past research has acknowledged their importance for growth and innovation at the organizational or regional level (Pittaway, Robertson, Munir, Denyer, & Neely, 2004). In the U.S. alone, for instance, there are over 4,000 venture associations with different nature and scope (Spillman, 2012) whereas the International Business Innovation Association claims to serve more than 2,200 members in over 62 nations, with over 25% of its members from non-US countries (www.inbia.org). Similarly, the U.S. Small Business Administration (U.S. SBA) is an independent agency of the federal government whose mission is to “aid, counsel, assist and protect the interests of small business[es]” to strengthen the national economy (www.sba.gov/about-sba/what-we-do/mission). Past research has examined these organizations separately, focusing on their role as providers of resources and training to individual firms—e.g., workspace, personal coaching, referrals, finance, etc. (Amezcua, Grimes, Bradley, & Wiklund, 2013; Hanssen-Bauer & Snow, 1996). While some studies have acknowledged that these organizations frequently broker inter-organizational relationships (Amezcua et al., 2013; Howells, 2006), the fundamental orchestrating role that such organizations play—which, paraphrasing Dutt and colleagues, (Dutt et al., 2016),1 we refer to as “open-system orchestration,” as opposed to the “closed-system” type performed by hub firms—remains undertheorized. While we have a solid theoretical understanding of how hub firms coordinate the collective contribution of network members to a common innovation effort, we know far less with regard to the processes through which open-system orchestrators encourage collaboration within the network to support members’ search and pursuit of their own business opportunities. In order to illuminate this important issue, we conducted a field study of a large networking initiative organized annually for over 2,000 participant firms by one of these organizations. Our study combined multiple data sources (interviews, observation, archival documents) and rounds of data collection. Our analysis was informed by a dynamic capability perspective (Teece, 2007; Teece, Pisano, & Shuen, 1997). We found this perspective particularly useful because its conceptualization of entrepreneurial innovation as the search for novel recombination of complementary knowledge, resources, and skills dispersed among different actors (Teece, 2012) portrays well the type of innovation encouraged and supported by open-system orchestration. According to this perspective, effective pursuit of entrepreneurial innovation depends, in particular, on a firm’s sensing capabilities, that is, on its capacity to systematically undertake activities involving “exploring technological opportunities, probing markets, and listening to customers, along with scanning the other elements of the business ecosystem” (Teece, 2011). Examples of these activities found in the literature include research and development (Helfat, 1997), partner selection (Dyer & Singh, 1998), and market intelligence (Danneels, 2002). Our analysis revealed four processes through which open-system orchestration supports network members’ sensing capabilities. It suggests that, together, these processes support search activities by diffusing assumptions of mutual trustworthiness among members (which is key to encouraging interaction and knowledge sharing; see Dyer & Singh, 1998), by enhancing their self-awareness (thereby supporting and directing their search for new opportunities; see Helfat & Peteraf, 2015), and by promoting the positive affect required to energize and enhance their search (Baron, 2008). Our findings significantly advance our theoretical understanding of both network orchestration and dynamic capabilities. We contribute to research on network orchestration by theorizing the less studied but no less important type of orchestration that characterizes organizations supporting entrepreneurial networks (business incubators and accelerators, national and regional agencies, venture associations, etc.). While scholars examined these organizations separately, we argue that they may serve the same open-system orchestration function to support the dispersed search for business opportunities in the entrepreneurial networks. We begin to unpack this function and we articulate how its underlying processes differ markedly from those described by previous research associated with closed-system orchestration. We also contribute to research on dynamic capabilities (for reviews, see Giudici & Reinmoeller, 2012; Peteraf, Di Stefano, & Verona, 2013) by unpacking the cognitive and emotional micro-foundations that enable open-system orchestration to support the co-construction of sensing capabilities as a joint accomplishment of orchestrators and network members. While the possibility that dynamic capabilities may sometimes reside outside a firm has been recently suggested (Teece, 2012), our study takes this notion seriously and offers empirical evidence to substantiate and elaborate it. By doing so—and in line with a relational ontology of social phenomena (Crossley, 2011; Emirbayer, 1997)—our findings encourage a rethinking of dynamic capabilities as being built relationally by the ongoing interaction of multiple actors conditioned yet not determined by the overarching social structure.

Type: Article
Title: Open-System Orchestration as a Relational Source of Sensing Capabilities: Evidence from a Venture Association
Open access status: An open access version is available from UCL Discovery
DOI: 10.5465/amj.2015.0573
Publisher version: https://doi.org/10.5465/amj.2015.0573
Language: English
Additional information: This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: dynamic capabilities, micro-foundations, network orchestration, sensing
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management
URI: https://discovery.ucl.ac.uk/id/eprint/10058206
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