Thursday, 27 February 2020
11:00 – 12:30
Strategy and Entrepreneurship
UCL School of Management is delighted to welcome Natalia Levina, NYU Stern, to host a research seminar discussing: ‘Organizational Impacts of Digitally Crowdsourced Ideas: Firm Boundaries in Question’.
In the digital age, boundaries between organizations and markets are becoming increasing blurred. New digitally-enabled ways of conducting distant search and exploring a broad solution landscape have prompted organizations to question whether activities should stay within the firm (Afuah and Tucci 2012; Josefy et al. 2015; Lakhani et al. 2013). The rise of digital networks and platforms has decreased the cost of tapping into “intellectual marketplaces” (Malone and Crowston 1994, p. 110) and increased the efficiency in accessing expertise that lies outside of the firm (Boudreau et al. 2011; Felin and Zenger 2014; Jeppesen and Lakhani 2010; Lifshitz-Assaf 2018). An emerging literature explores the new organizational realities associated with the use of digital platforms to crowdsource R&D and innovation activities (Bayus 2013; Dahlander and Piezunka 2014; Fayard et al. 2016; Lifshitz-Assaf 2018; Lopez-Vega et al. 2016; Piezunka and Dahlander 2015, Forthcoming; Schlagwein and Bjørn-Andersen 2014; Terwiesch and Xu 2008). This early wave of studies has offered some insights into the ways firms open up and reconfigure their boundaries to conduct digitally-enabled distant search and exploit crowdsourced ideas. However, the full impact of relying on digitally-enabled crowdsourcing platforms on firm’s innovation practices is still poorly understood. Developing such an understanding is critical in unpacking the impact of digital platforms on firm boundary decisions. In this paper, we build on the early literature on this subject by exploring how organizations open up their boundaries to conduct distant search in the context of R&D and with what consequences. As an organization engages with digital platforms to crowdsource innovation, what outcomes are produced and how? To address this question, we conducted an in-depth, qualitative, interpretive study of a start-up company, GreenCo (a pseudonym), which decided to use digitallyenabled crowdsourcing to address some of its critical long-standing R&D problems. First, we observed that a firm’s decision to tap into the ‘wisdom of the crowd’ can be aimed at not only accessing distant expertise (as suggested by extant literature), but also retrieving “negative knowledge” (Knorr Cetina 1999), obtaining a quasi-objective evaluation of the firm’s own past R&D efforts and mapping the solution landscape. Second, our study reveals that opening up firm boundaries to use digital platforms gives rise to numerous problem formulation dilemmas. As a firm engages with crowdsourcing, it encounters distinct transaction costs/ management tradeoffs. These dilemma stem from various types of ambiguities that the firm encounters in opening up its R&D processes: transaction-related ambiguity (how much to reveal to crowds (Alexy et al. 2013)); epistemic ambiguity (what problems to broadcast and how to modularize them (cf. Lakhani, et al. 2013); communication ambiguity (how to effectively communicate the firm’s R&D context to a diverse group of actors with different technical backgrounds). Third, these ambiguities also give rise to numerous solution evaluation challenges that go beyond turf protecting and rather stem from the actual difficulty in ascribing value of external ideas to the firm. While the cost of reaching out and engaging with an almost infinite number of external actors was minimized by the digital platform, the platform did not reduce significant knowledge ‘translation costs’ associated with distant search. The communication medium (impersonal, internet-enabled exchange of information, with few opportunities to engage in a dialogue or debate) made it difficult for the firm to fully communicate its needs, recognize the relevance of new ideas, and determine the organizational implications of externally suggested solutions. We interpret these findings and develop new theory by unpacking how communicating problems (by the firm) and solutions (by crowds) through digital platforms shapes the outcomes of organizational boundary reconfigurations. In brief, we argue that, while the “syntactic” cost of transmitting information (e.g. about the firm’s problem, crowds’ ideas/solutions) may be significantly lowered (although TCE risks remain), significant costs of spanning “semantic” and “pragmatic” knowledge boundaries between firms and crowds emerge (Carlile 2002, 2004; Carlile and Rebentisch 2003). Our main theoretical contribution to the strategic management literature lies in unpacking the effort needed to translate and transform relevant information and knowledge across these boundaries and better understanding the impact of external digital platforms on firm boundaries. Broadcasting problems and listening to the voice of the crowds is not only enabled but also constrained by the nature of digitally-enabled innovation contests. We draw theoretical implications for how firms can strategically respond to emerging digital opportunities to reconfigure their boundaries and effectively engage with crowdsourcing. We also discuss in which situations “knowledge translation” problems may be less significant increasing the potential shift of economic activities from firms to markets.
Last updated Friday, 21 February 2020