How to Make Open Innovation Work Better? Leverage Your Competitors

Corporate open innovation initiatives involving start-ups often fail to deliver the expected results. Such failure is due in part to the behavior of individuals within corporate business units. Specifically, we examine the notion of ‘not invented here syndrome’ (NIHS), a behavioral bias that leads employees to reject external innovations, thus hindering collaboration with promising start-ups. This paper explores how corporations can overcome individuals’ NIHS, thus collaborate more effectively with external start-ups. Our research, which is based on an in-depth case study of Telefónica, confirms that NIHS can be the result of a lack of information on start-up promises, use cases, and viability. We identify a three-step organizational routine that can help mitigate NIHS in the process of evaluating external start-ups: (1) referring external start-ups to competitors, (2) monitoring competitors’ collaboration with start-ups, and (3) diffusing this additional information with the aim of shifting individuals’ decision-making by reducing their reliance on behavioral biases against external start-ups. Our findings extend the behavioral theory of the firm by demonstrating that the organizational routines implemented to offset individual biases can involve external actors rather than being limited to internal processes. We also contribute to open innovation by revealing that bringing the knowledge possessed by outside start-ups into the organization is insufficient in isolation to ensure adoption; external perspectives on those start-ups provide a second opinion to the organization that may offset internal NIHS biases.