Managing the risks and motivations of technology managers in open innovation: Bringing stakeholder-centric corporate governance into focus

Open innovation (OI) has drawn significant attention over the years, and there is considerable evidence documenting the benefits of technology firms opening the R&D process to external stakeholders. Less appreciated, however, are the intra-organizational risks of misaligned managerial motives and asymmetries across different stakeholders that are also invariably associated with OI. In this conceptual paper, we draw on stakeholder theory and use examples from the high-tech industry to underscore the corporate governance practices (rewards and control mechanisms) that incumbent technology firms can implement to minimize these OI risks. We develop a tripartite scheme of OI governance to clarify how senior leaders (primary agents) can be incentivized to generate OI from the top, how project leaders (secondary agents) can be motivated to absorb OI at the backend, and how external stakeholders (tertiary agents) can be engaged to disseminate the benefits of OI to society. We contribute to the discussion on the paradox of OI by demonstrating that despite senior leaders’ enthusiasm to generate OI, their current emphasis on appeasing myopic shareholders unwittingly sabotages the absorption and dissemination of OI at the backend, preventing incumbent companies from institutionalizing OI to benefit society. We highlight the value of holistic stakeholder centric OI governance as a superior alternative to the shareholder primacy model currently adopted by mature technology companies. To institutionalize OI fully, we stress the value of using non-pecuniary rewards and informal controls to ensure OI creates stakeholder value. Several implications follow for managers and scholars to mitigate OI risks and to advance our understanding of OI stakeholder governance to create shared value.