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Outsourcing Of New Product Development And The Opening Of Innovation In Mature Industries: A Longitudinal Study Of Fiat During Crisis And Recovery

Author

Listed:
  • LUCIANO CIRAVEGNA

    (Royal Holloway School of Management, University of London, Egham, TW20 0EX, United Kingdom;
    INCAE Business School, Costa Rica)

  • GIULIANO MAIELLI

    (School of Business and Management, Queen Mary, University of London, Mile End Road, London, E1 4NS, United Kingdom)

Abstract

During the 1990s mature industries, such as car manufacturing, restructured their production and innovation processes, changing from vertical integration to high outsourcing. Open innovation is antithetic to vertical integration. Analyzing whether this restructuring influenced the emergence of open innovation is an important step towards improving our understanding of open innovation (Chesbrough and Crowther, 2006).During the 1990s, Fiat, one the largest European car producers, increased the extent to which it involved external firms in new product development (NPD). Unlike its competitors, Fiat outsourced the NPD of core products, resembling the opening of innovation that "radical innovators" implement in high technology industry (Laursen and Salter, 2006, 137). However, it failed to transition towards open innovation because its "opening" to external firms also entailed downsizing in-house NPD divisions, which caused a "hollowing out" of its knowledge (Becker and Zirpoli, 2003). The products developed through this system did not perform well. After a dramatic decline in market shares, Fiat changed its NPD system: it reduced outsourcing of NPD, whilst opening it to customers for the first time. This contributed to the development of highly successful models, which fuelled Fiat's recovery after 2004.The paper explains the Fiat case by looking at the drivers of its organizational changes from a historical perspective. It argues that Fiat's cost-cutting routines, developed because of its intangible specialization in small vehicles, explain why it opened NPD to suppliers but failed to adopt open innovation. The case study is relevant for the study of open innovation because it provides evidence of the relationships between outsourcing and open of innovation in a mature industry that went through a profound process of restructuring during the 1990s.

Suggested Citation

  • Luciano Ciravegna & Giuliano Maielli, 2011. "Outsourcing Of New Product Development And The Opening Of Innovation In Mature Industries: A Longitudinal Study Of Fiat During Crisis And Recovery," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 15(01), pages 69-93.
    • Handle: RePEc:wsi:ijimxx:v:15:y:2011:i:01:n:s1363919611003088
    DOI: 10.1142/S1363919611003088
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    References listed on IDEAS

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    1. Bahemia, Hanna & Sillince, John & Vanhaverbeke, Wim, 2018. "The timing of openness in a radical innovation project, a temporal and loose coupling perspective," Research Policy, Elsevier, vol. 47(10), pages 2066-2076.
    2. Jolanta Sloniec, 2021. "A Longitudinal Analysis of IT Outsourcing in Large Polish Organizations," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 2), pages 439-452.
    3. Felix Homfeldt & Alexandra Rese & Hanno Brenner & Daniel Baier & Til Fabio Schäfer, 2017. "Identification And Generation Of Innovative Ideas In The Procurement Of The Automotive Industry: The Case Of Audi Ag," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 21(07), pages 1-31, October.
    4. Ganotakis, Panagiotis & Angelidou, Sofia & Saridakis, Charalampos & Piperopoulos, Panagiotis & Dindial, Miguel, 2023. "Innovation, digital technologies, and sales growth during exogenous shocks," Technological Forecasting and Social Change, Elsevier, vol. 193(C).

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