Open innovation and cooperation in emerging economies. study of innovation strategies of Kazakhstan companies

NTRODUCTION. The role of cooperation in the global and turbulent business environment cannot be underestimated. The cooperation skills create great advantage for the companies’ innovativeness, and the capability to utilize external knowledge is a significant factor of innovation performance (Cohen & Levintal, 1990). The need for collaborative approach has significantly increased in

the open innovation era (Enkel et al, 2010). This paper addresses the R&D cooperation within the open innovation framework. The author applies the classification proposed by Gassman and Enkel (2004) to define three core processes within Open innovation: 1) The Outside – In process – search and incorporating the external knowledge of supplies, customers, competitors, universities and research organizations, etc; 2) The Inside-Out process – transfer of the ideas, technologies, intellectual property to the market; 3) Combination of Outside-In and Inside-Out processes. The author suggests the differences mainly come from the degree of openness of innovation strategy (adopting zero, one or more of the constructs of OI) and proximity or the partner – both in the sense of location and in the sense of intensity of cooperation.

Also the article studies the role of R&D cooperation with external partners within the innovation strategy. The analyzed factors are the type and importance of R&D cooperation, openness of the innovation model applied, and the innovation and financial performance.

The study is based on the survey consisting of 25 Kazakhstan R&D oriented companies selected from the most innovative regions. The interviews were conducted in September – December 2013. The survey consists of 50 questions and provides the opportunity to analyze the types and importance of R&D cooperation with external partners, different types of innovation activities.

LITERATURE REVIEW. The traditional strategy orientation states that companies have to diversify strategies in order to use opportunities and avoid threats emerged due to market turbulence (Porter, 1979). However, business environment was considered still relatively stable in the mid to late 1980s. Since beginning of 1990s, world market and environment turbulence have increased and companies have been forced to competition fight and the flexibility has become

a mean for companies’ survival. In earlier times companies had orientation to control all stages of innovation process themselves and thus most of R&D were produced internally (in-house R&D) (Wheelwright & Clark, 1992). Not only R&D, but NPD (New Product Development), technology innovations along with commercialization of new products and technologies were conducted within company’s borders. This approach is nowadays referred as traditional or closed approach to innovations.

It has become obvious, that traditional approach to innovation and R&D does not fit to

this changed environment. Thus many companies have started transition towards new, more open policy on innovations. Companies have to develop more open business models if they want to get the best use of their internal R&D, search and acquire new technologies and use effectively commercialization channels, decrease costs and save time (Christensen, 1997). When Chesbrough (2003; 2006) launched a term “Open innovation” to describe the new phenomena, it was very appropriate time to describe the latest transformation processes in the field of innova

tions. Nowadays open approach has become essential for many companies’ innovation practices. The organized search for new ideas is important for open innovation framework development (Laursen & Salter, 2006). The open innovation can be exploratory (emergent innovation process) and focused (predetermined search) (Holmes & Smart, 2009). Also this framework copes with the direction which the President of the Republic of Kazakhstans N.A.Nazarbayev shows to follow: be open to new innovative ideas in order to be competitive in global market of labor.

Chesbrough (2003) introduced several factors that influenced to the beginning of open innovation era:

acces to the best available knowledge sources improved both inside and outside the company because of the increase of the educated labor force availability;

increased the number of possible sources of financing for R&D projects;

companies started to cooperate more and search for ideas and technology outside and incorporate them into innovation policy.

RESEARCH DESIGN. The empirical study was conducted during September – December 2013. 25 Kazakhstan^,s companies from various industries agreed to participate in the study through structured interviews. The key respondents were representatives of the innovation department of the firm. The numbers of criteria were used in order to select companies, including region, industry and annual revenue or the company. The sampling method was based on the satisfied sample approach, which means not a representative, but a meaningful structure of the sample. The questionnaire consists of 50 questions. The questionnaire structure was developed based on the recommendations for conducting the innovation surveys (Frascati manual, 1993, Oslo manual, 2007) and using the constructs and scales for analyzing cooperation of the companies with internal and external partners, international activities or the companies, and the number of the indicators. The structure of the questionnaire is presented below in the Table 1.

Table 1. Structure of the Questionnaire

Due to the selection of key respondents it was possible to obtain information on the innovation activities of the companies and the on the cooperation with external partners in relation to R&D. Key information on the sample is presented in the Table 2.

Table 2. Respondents of the survey

According to the survey the average age of the companies in the sample is 18 years, while the year of foundation varying from 1995 till 2009. The share of companies conducting internal R&D is not high – 45,6 %, of which 18,5 % conduct R&D systematically and 27,1 % irregularly. The R&D intensity (ratio of R&D expenditures in company’s sales) is between 1,1 and 2,3 % for 28 % of companies.

FINDINGS. There are some key findings of the survey. The interview with all respondents of the survey summarized the influencing factors of innovations implementation. They are:

• pressure from foreign supplies (35,7 %);
• pressure from foreign consumers (9,8 %);
• pressure from Kazakhstan supplies (2,3 %);
• pressure from competitors on international market (21,2 %);
• government policy on innovations (7,3 %);
• pressure from foreign (especially Russian) competitors in Kazakhstan (41,2 %);
• better control of quality of the goods (6 %);
• pressure from Kazakhstan consumers (1,2 %);
• pressure from Kazakhstan competitors (5 %).

The main assumption of this research paper is to prove the important role of cooperation for companies with open innovation strategies compared with companies focusing on the traditional approach to innovations: The companies more successful in cooperation with external stakeholders are more actively implement the open innovation approach.

There are not many statistically significant differences in perceived importance and success of collaboration with partners by firms with and without internal R&D. Generally, importance of collaboration in the sphere of innovations is perceived almost equally important by all the firms in the sample, with the only case when firms with internal R&D have higher importance of collaboration – in case of external R&D partners.

While this overall assumption on the role of open innovation strategy elements combination in shaping company’s collaboration with external stakeholders no strong evidence was found to support it. In fact that results confirm statistically significant difference between firms with

OI strategy and without OI strategy – in case of collaboration with external commercial R&D organizations, the overall trend identifies higher

scores both on importance and perceived success of collaboration by firms following OI strategy.

DISCUSSION. Companies from transitional economies, such as Kazakhstan, experience pressure from the both global turbulence of the market and from the ongoing transformation process within companies. They need more resources to compete with foreign rivals and need more knowledge to fulfill the innovation

gap caused by the centrally planned economy heritage. Developing the cooperation skills and increasing the innovativeness provides opportunity for companies to compete successfully both on domestic and international markets.

As discussed earlier, the role of cooperation depends on the type of innovation (Srivatas and Dwyer, 2000; Nord and Tucker, 1987; Smirnova, et als, 2009). The role of R&D cooperation studies in many scientific papers (Suzumura, 1992;

Leiponen, 2001; Tether, 2002; Veugelers and Cassiman, 2005), they support the evidence that cooperation on R&D with suppliers, customers, or research institutes and universities is important for innovating companies. The initial findings of

this paper show how the process of cooperation is developing in Kazakhstan. Our analysis proved that importance of cooperation with external partners, differs for companies with different innovation strategies. Cooperation is important for all companies, however, the clear difference is observed for companies, grouped based on their innovation strategies.

Author’s main assumption has been that following at least some of the open innovation strategy elements would have impact on company’s collaboration policy in regard to external stakeholders. Summing up the findings, it may been concluded that all in one, the results show that firms with OI involve more actively external partners.

CONCLUSION. The open innovations theory puts cooperation on the mile stone place in the process of implementing open innovation principles in practice. The logic behind this statement is defined by the nature of this externalization

process – the acting through the companies’ borders on all stages of innovation process always involve certain level of cooperation with external partners. In addition, the effect of partner location was found in the data analysis. The companies value more the cooperation with domestic supplies, than foreign supplies. This is explained by the easier transfer of knowledge locally due to proximity, better communication and cultural similarity.

This study has shown that cooperation with partners plays an important role for open innovation implementation. Open innovation considers inbound innovation – search and acquisition of external knowledge, R&D and technology, outbound innovation – promoting the internal innovation through external commercialization channels, and coupled process – combination of inbound and outbound innovation. The role of cooperation for increasing innovativeness of companies is seen even more important for companies from the transition economies, because the issue of competing on the local and international markets is of extreme importance there. Companies from transition economies, in our case Kazakhstan, experience pressure from the both global turbulence of the market and from the ongoing transformation process within companies. Developing the cooperation skills and increasing the innovativeness provides opportunity for companies to compete successfully both on domestic and international markets.

The results are crucially important to managers because they show how cooperation matters for companies with different innovation strategies. These insights are essential especially now, when the internationalization of Kazakhstan companies is increasing on the international markets and their business strategies are interesting for other participants of the global markets. Based on the findings of this paper, author fore sees the more detailed and extensive future research into the cooperation (both conceptual and empirical) with different types of stakeholders and open innovation paradigm implementation.

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