The role of prior experience, intellectual property protection and communication on trust and performance in innovation alliances

An important concept in innovation literature is open innovation, where firms may use knowledge of other companies to develop new products or processes. However, there is a tension between the desire to be open, to profit from the knowledge of others, and the desire to be closed to prevent others from making use of the firms own profitable knowledge. Formal and non-formal intellectual property (IP) protection mechanisms may protect the company in an innovation alliance, but are often costly and may hinder flexibility and creativity. In the present paper the role of formal and non-formal IP protection arrangements and communication on the building and maintenance of trust and ultimately on performance has been investigated. A survey questionnaire was combined with semi-structured interviews of CEOs and R&D managers of seven companies and two commercial research organizations in the seed sector, one agrifood company, one commercial research organization in the agrifood and one commercial research organization in the high-tech sector. Thirty-three innovation alliances were investigated in total. It was found that for companies active in an innovation alliance it is important to understand how prior experiences, IP protection and communication influence the level of trust in an alliance, and that the level of trust is positively related to innovation performance. Recommendations are given for open innovation managers how to make optimal use of the innovation potential of the alliance partner(s), by fostering communication within the alliance and by using formal IP protection arrangements as a platform to create trust within the alliance.