The influence of trust and collaboration with external partners on appropriability in open service firms

This study explores how service firms in an open exchange of knowledge protect themselves against opportunistic behavior while trying to acquire some knowledge from the partner, and appropriate returns from innovation. We derive a model and propositions to show how variations in trust and innovation-related collaboration with specific external actors relate to formal and informal appropriability mechanisms. The results show that while trust was strongly associated with open service firms collaborating with other firms, and specifically supply chain partners, in the absence of trust firms pursued a closed approach to innovation or relied on contracts to govern inter-organisational collaborations and appropriability. Formal contracts also underpinned all firm–university interactions to structure and coordinate research and development collaborations and delineate the basis for appropriation of intellectual property (IP) outcomes. Formal Intellectual Property Rights were predominately utilised by firms to capture value from their innovative activities with universities. In contrast, firms negotiated informally IP arrangements with supply chain partners, usually based on shared IP. Thus, a further pattern in the data was that firms’ approaches to IP protection and appropriability were contingent on the actor the focal firm was collaborating with.