Open Innovation Strategies: A new pivot for OEM and Start-up Coopetition

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Department of Business Administration

Master's Program in Business Development and Internationalisation 2nd_{Year Master's Thesis in Business Administration, Spring 2019}

Supervisor: Zsuzsanna Vincze

Open Innovation Strategies:

A new pivot for OEM and

Start-up Coopetition

A Study of the German

Automotive Industry

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“It is said that it is not the strongest of the species

that survives, but the most adaptable”

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Abstract

“[A]s much as any other product, the car has shaped not only the global economy but how billions of people live”1_{, while the digital area is now shaping the car.}

Coopetition, a strategy presenting firms with the opportunity to collaborate and compete at the same time, is becoming a prevalent phenomenon among large OEMs and start-ups in the automotive industry. Respectively, considering that coopetition, in the context of open innovation and new technologies, has been identified as a successful strategy, this thesis will therefore analyse the relationship between OEMs and external start-ups in the context of coopetition and corporate open innovation strategies.

Several types of corporate incubators, accelerators and corporate innovation labs emerged within the last years, however an integration of all three of these has not yet been widely explored. Accordingly, while these open innovation streams are used by large corporations to get access to the start-up ecosystem and increase their innovation capabilities, the relationship between OEMs and external start-ups will further lead to CIIAs (a combined approach of corporate incubators, corporate innovation labs and corporate accelerators), demonstrated in the context of coopetition.

This exploratory study thereby contributes to the relationship between external start-ups and OEMs through a CIIA approach, answering the two following research questions;

• What are the main drivers of the OEM and external start-up relationship?

• How do OEMs and external start-ups coopete in the context of corporate open innovation strategies?

To duly answer these research questions, we chose a qualitative research method combined with an interpretivist and inductive approach as well as empirical findings generated from 6 semi-structured interviews. We further contributed to the illustration of the key aspects of CIIAs as well as the motives, management and implications behind the relationships between OEMs and external start-ups by a conceptual framework. Our analysis hence shows the significance of the access to complementary resources, the co-creation and co-development of value as well as the systematic implementation of a proof of concept in the light of these coopetitive relationships between CIIAs and external start-ups. However, considering that this research has been based on the German automotive industry only, it will require further research in other contexts, sectors or countries. To conclude, this thesis contributes to the management literature of coopetition, corporate innovation and entrepreneurship. We proposed a final framework to highlight the key motives, the management and the implications behind the coopetitive relationships between OEMs and external start-ups through the CIIA platform. This will expectedly help managers and entrepreneurs develop efficient management techniques as well as further recognize and understand the influential dynamics present in these relationships.

Key words: Automotive Industry. Corporate Innovation. Corporate Entrepreneurship. Strategic Entrepreneurship. Cooperation. Coopetition. Corporate Incubators. Corporate Accelerators. Corporate Innovation Labs. Start-ups. Open Innovation Strategies.

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Acknowledgements

We would like to thank the Umeå School of Business, Economics and Statistics for providing us with such a wonderful setting to thrive in but also our supervisor Zsuzsanna Vincze for supporting us throughout the whole process, especially by sharing valuable feedback with us.

To all our respondents, we greatly appreciate the time and effort you dedicated in participating in this study in spite of your busy schedules. Your contributions were greatly valuable to our research.

Lastly, we would like to extend appreciations to our families and classmates for the unconditional support and encouragement during these times as well as the Swedish Institute for the support brought to Ismaila’s education.

Umeå University, 24th_{of May 2019}

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Abbreviations

AI: Artificial Intelligence BM: Business Model CA: Corporate Accelerator CEO: Chief Executive Officer CI: Corporate Incubator CIL: Corporate Innovation Lab

CIIAs: Corporate Incubators, Innovation Labs and Accelerators COO: Chief Operating Officer

CSR: Corporate Social Responsibility CV: Corporate Venturing

CVC: Corporate Venture Capital EO: Entrepreneurial Orientation HR: Human Resources

IIA: Incubator, Innovation Lab and Accelerator IL: Innovation Lab

IoT: Internet of Things IP: Intellectual Property IT: Information Technology M&A: Mergers & Acquisitions MVP: Minimum Viable Product NDA: Non-Disclosure Agreement NPD: New Product Development OEM: Original Equipment Manufacturer R&D: Research & Development

SE: Strategic Entrepreneurship

SMEs: Small and Medium-Sized Enterprises USP: Unique Selling Proposition

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List of Figures

Figure 1: Hidden Knowledge and Problem Complexity (Felin & Zender, 2013, p. 919) . 9 Figure 2: Four Models of Corporate Entrepreneurship (Wolcott & Lippitz, 2007, p. 77)

... 11

Figure 3: Model of Strategic Entrepreneurship (Ireland et al., 2003, p. 967) ... 13

Figure 4: Input-Process-Output Model of SE (Hitt et al., 2011, p. 58) ... 15

Figure 5: The Nine CV Mode Profiles (Gutmann, 2019, p. 130) ... 17

Figure 6: Benefits, Challenges and Risks of the Corporate-Start-up Collaboration (adapted from World Economic Forum, 2018, p. 7-10) ... 22

Figure 7: Design Elements and Constructs of Corporate Accelerators (Pauwels et al., 2016, p. 17) ... 26

Figure 8: The Three Stages of CIIAs ... 28

Figure 9: CIIAs, External Start-ups and their Coopetitive Landscape ... 35

Figure 10: Illustration of Themes and Subthemes ... 52

Figure 11: The Coopetitive Dynamics Between OEMs and External Start-ups in the Context of Corporate Open Innovation Strategies ... 90

List of Tables

Table 1: Relationships Between Firms (Bengtsson & Kock, 1999, p. 180) ... 2

Table 2: Classification of Start-up Incubators in the Literature (Latouche, 2019, p. 21)23 Table 3: Forms of Corporate-Start-up Innovation Strategies (Vázquez Lucerga, 2018, p. 20) ... 27

Table 4: CIIAs Motives ... 28

Table 5: Start-up Motives ... 29

Table 6: An Explanatory Typology of Coopetition (Akpinar & Vincze, 2016, p. 56) ... 34

Table 7: Phases of the Thematic Analysis (Braun & Clarke, 2006, p. 87) ... 50

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1 Introduction

In this first chapter, we are going to introduce our research subject and purpose as well as our study aims. First, we will introduce some insights about strategic entrepreneurship and open innovation, and then relate it to the cooperation and coopetition that may exist between CIIAs and external start-ups. Second, we will elaborate on the theoretical background and portray some motivations concerning the relevance of the subject in the field of business administration. Third, we will identify the existence of research gaps and further explain how we intend to contribute to these theories. Lastly, we will state our research questions, the purpose of the research and the delimitations of the study.

1.1 Problem Background

In the current fast-paced business environment, large corporations are constantly challenged to find ways for quick innovation to efficiently thrive in this new context. Yet, start-ups are good at questioning the status quo and bring in new disruptive innovations that challenge the existing ones (Hitt et al., 2011, p. 70). Some examples are Uber, Spotify and Airbnb, that revolutionized the way big firms used to compete in their respective industries. These start-ups therefore come up with novel innovations that open up new markets, thus gaining competitive advantages. Accordingly, as these young firms may have the expertise and the innovation capabilities that large corporations may lack, the collaboration between start-ups and large enterprises transforms into a valuable sourcing of innovation (Hitt et al., 2011, p. 67). Additionally, cooperation and coopetition have been used as strategic means in the purpose of co-innovation for a high amount of years now. Considering the fast-changing business environment, the most successful companies will therefore be the ones that engage in cooperative ties with their suppliers, customers and strategic partners (Huff Eckert, 2017). Huff Eckert (2017) further posits that one particular area that proves to be especially fruitful is the start-up ecosystem. According to the PwC’s 20th _{CEO survey, executives respectively predict that in the}

coming years, 28% of CEOs expect to collaborate with start-ups or entrepreneurs. With the above in mind, corporates have started to broaden the barriers of corporate innovation and search for knowledge and resources outside the organization in the form of open innovation (Chesbrough, 2006; Dahlander & Gann, 2010; Elmquist et al., 2009). As a result, firms increasingly engage in collaborations with other businesses (Hagedoorn, 2002, p. 477) to gain competitive advantages, resulting in an overall increase of the value of such collaborations (Dittrich & Duysters, 2007, p. 520).

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to increasingly gain access to knowledge and capabilities in their related industries in order to be able to recognize, assimilate and integrate this knowledge into new products or services. The disruptive and innovative ideas and capabilities can thereby be linked to the wish to further shape the future of the automotive industry. Accordingly, a surge of corporate incubators and accelerators as well as corporate innovation labs, seeking to partner up with external start-ups, can be detected. An international statistic shows that between 2010 and 2016, the cooperation between corporate incubators and corporate accelerators among automotive companies rose from 2% to 44% (IESE Business School, 2018). Appropriately, this makes the investigation of the coopetitive relationship that could exist between corporate IIAs and external start-ups timely and extremely relevant. Finally, and in light of corporate open innovation strategies, new technologies and the need for successful coopetitive approaches should be considered (Chesbrough & Bogers, 2014; Ritala & Sainio, 2014). In this regard, a high density of business relationships and collaborative interactions among suppliers, customers, and even competitors lead to higher uncertainties (Gnyawali & Park, 2009). Previous work has so far been beneficial in improving the general understanding of coopetition, but it leaves unanswered the questions concerning the reasons why SMEs and large corporations engage in coopetition, how they organize these coopetitive partnerships as well as what benefits and risks prevail in these unequally-sized partnerships (Hora et al., 2017, p. 412). Correspondingly, in the automotive industry, open innovation strategies aiming at the acceleration of corporate innovation, without however provoking an excessive change in the current structures and organizational culture, are preferred (Hjalmarsson et al., 2019, p. 6001). Thus, a variety of agile and lean-oriented innovation formats, such as jams, hackathons, lean start-up camps, corporate incubators and accelerators, have evolved (Kuratko & Audretsch, 2013). However, the cooperation between OEMs and external start-ups in the context of open innovation strategies has, at this point in time, received less attention in the academic research and we therefore wish to explore this by bringing in new insights to this field.

1.2 Theoretical Background

In accordance with Michael Porter’s (1980, p. 31) five competitive forces, for a firm to gain sustainable competitive advantages strong bargaining power, the development of entry barriers and the fight against substitution threats play a major role. While the resource-based view argues that good performance is based on the organizations’ possession of rare, valuable and hardly reproducible resources and capabilities (Barney, 1991, p. 117), the relational view relates collaborations to jointly gained competitive advantages (Dyer & Singh, 1998, p. 675). The later view further enlightens that firms in isolation, irrespective of their capabilities, cannot enjoy the advantage gained through the collaboration with other firms. Thus, firms’ source of competitive advantage by cooperation as well as the different forms of collaborative relationships between firms are not new concepts (Table 1). Nevertheless, it is the relationship between start-ups and established enterprises that needs to be further studied.

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These relationships between organizations, as depicted on the above table, can therefore take four different forms: coexistence, competition, cooperation and coopetition. Firstly,

coexistence emerges when the organizations have the need for external resources and

their relative position in the industry seem to be weak. Secondly, competition exists in presence of a weak need for external resources combined with a strong relative position in the industry. Thirdly, cooperation, on the other hand, means that there is a strong need for external resources and a weak relative position in the industry. Lastly, coopetition occurs when the need for external resources and the relative position in the industry are both strong. Bengtsson and Kock (1999, p. 178) thereby define coopetition as a “dyadic

and paradoxical relationship emerging when two firms are cooperating in some activities, while competing with each other in the remaining activities’’. The cooperation

strategy, diversely, can be generally defined as a relation between two or more parties with compatible or additional interests or aims, where the relationship is foreseen to be of reciprocal advantage (Wortelboer-van Donselaar & Kolkman, 2010, p. 271).

Furthermore, strategic entrepreneurship is a theory that combines both strategic management and entrepreneurship and involves the methods of exploration and exploitation (Ireland et al., 2003, p. 964). Thus, start-ups are good opportunity explorers while large firms are effective advantage exploiters. However, for a company to bring disruptive innovations into the market it has to employ a combination of the opportunity-explorer and advantage-exploiter behaviour (Ireland et al., 2003, p. 982). Additionally, start-ups are often related to new technologies, novel innovations, the identification of new opportunities and the according expertise (Hogenhuis et al., 2016; Ireland et al., 2003, p. 966; Latouche, 2019, p. 40), clearly needed by OEMs, while the OEMs have a strong position in the industry and valuable strategic partnerships (Ketchen et al., p. 372). The strength of large corporations thereby lies in the capability to develop and sustain competitive advantages over time (Ireland et al., 2003, p. 966). Finally, the need for external knowledge and innovative solutions for the OEM to gain competitive advantages, motivates the existence of a possible coopetitive relationship between both of these market players. In this study we thereby aim to analyse the relationship between external start-ups and large corporations in the automotive industry and more specifically understand their opportunity and advantage seeking behaviours in the context of CIIAs. 1.3 Research Gaps

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When it comes to coopetition, on the other hand, Bengtsson and Johansson (2014) studied the management of small firm coopetition in the tech-industry, while others conducted empirical studies exploring the relationship between competing SMEs (e.g. Morris et al., 2007a; Levy et al., 2003; Bengtsson & Johansson, 2014). However, at this point in time, SME and especially start-up coopetition is not sufficiently explored (Roig-Tierno et al., 2018, p. 380). While the coopetition between large corporations and start-ups is being further investigated (e.g. Hora et al., 2017), in the broader context of the entrepreneurial activity it has not been clearly defined (Bouncken et al., 2015; Gast et al., 2015). Additionally, Drain (2015, p.12) states that coopetition literature does not yet include the study of incubators and accelerators whereas Fecher et al. (2018) add that ILs should be further investigated in general. Finally, furthering the understanding of the relationship that exists between corporate IIAs and their partnering external start-ups in the contexts of the German automotive industry and coopetition, is a contribution that our research aims to bring forth. With this in mind, to further enlighten the cooperation and coopetition literature on this specific topic is another one of our main goals.

1.4 Research Questions

In connection to our study background and research gaps, our research aims to answer the following questions clearly figuring in the overall context of the German automotive industry:

• What are the main drivers of the OEM and external start-up relationship?

• How do OEMs and external start-ups coopete in the context of corporate open innovation strategies?

Appropriately, our first research question aims at exploring the competitive advantages gained through the OEM and external start-up relationship, simultaneously identifying the most relevant motives of this relationship. To further understand the motives behind these relationships we will thus conduct a qualitative study of this relationship between OEMs and external start-ups through the approach of so-called CIIAs. Subsequently, the second research question’s purpose is to gain more insights on how these two actors coopete, especially in the context of a combined corporate innovation strategy. Therefore, in order to be able to answer the second research question and better understand the aspects of coopetition in this relationship, we will first need to showcase the different intentions and dynamics of the collaboration between OEMs and external start-ups as well as its transformation into a coopetitive relationship. Correspondingly, the second research question is not only intended to showcase the key motives as well as the management and implications of the relationship between CIIAs and external start-ups but also answers the according sub question of When do OEMs and external start-ups

coopete in the context of corporate open innovation strategies? This therefore includes

the expectation that our and theoretical framework together with our empirical findings will enlighten us on the changes in the relationship between CIIAs and external start-ups from a ‘normal’ collaboration to a coopetitive relationship.

1.5 Research Purposes

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p. 482) of the different corporate incubation, acceleration and innovation methods, especially in light of their combined approach. Our research will therefore help to further understand the role of corporate IIAs, their internal mechanisms as well as the management and implications of their relationship with external start-ups. We will portray the theories around corporate innovation and corporate entrepreneurship to analyse the relationship between OEMs and their partnering start-ups in the context of corporate innovation strategies. Accordingly, the strategic entrepreneurship theory will help us better understand how firms use cooperation and coopetition to seek opportunities and exploit them in their surroundings, with the aim to gain novel innovations and thus competitive advantages. To appropriately respond to our previously described research questions, our qualitative research design will be supplemented by semi-structured interviews with three CIIA managers and three start-ups founders. Lastly, the creation of the final framework through the combination of our theoretical framework and empirical findings, figuring in Chapter 5 of our master thesis, intends to display the coopetition dynamics present in the relationship between CIIA, and simultaneously OEMS, and external start-ups. Correspondingly, and especially in light of our second research question we hope to contribute to the coopetition literature and expect to showcase some significant managerial implications through our empirical findings, and thereby help managers and entrepreneurs, in the automotive industry, better understand how these specific relationships work and illustrate what motives, benefits and risks might be present in this ecosystem.

1.6 Delimitations and Limitations

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2 Theoretical Framework

Our theoretical framework we will now assess the existing literature on corporate innovation and corporate entrepreneurship and display the different corporate open innovation strategies that exist between OEMs and external start-ups, in an attempt to combine them in light of coopetition in the context of the German automotive industry. First, we will provide theories on corporate innovation. This will be followed by insights on strategic entrepreneurship and corporate venturing, introduced through the process of corporate entrepreneurship. We shall then discuss the collaborative relationships that exist between large OEMs and external start-ups in light of open innovation strategies. Lastly, we will propose a conceptual framework to further enlighten how a coopetitive relationship could help attain corporate entrepreneurship, foster innovation and build as well as sustain competitive advantages for both the OEMs and external start-ups.

2.1 Corporate Innovation

2.1.1 A Definition of Corporate Innovation

The first definition of innovation was coined by Schumpeter in the late 1920s stating that; “innovation is reflected in novel outputs: a new good or a new quality of a good; a new

method of production; a new market; a new source of supply; or a new organizational structure” (Schumpeter, 1934). However, there are various authors that contributed to the

definition of innovation (Lansisalmi et al., 2006; Camison-Zornoza et al., 2004; Hobday, 2005; Klein & Knight, 2005; Kline & Rosenberg, 1986). Following an extensive literature review, Crossan and Apaydin (2009, p. 1155) provide a suitable definition, characterising innovation as the

“production or adoption, assimilation, and exploitation of a value-added novelty in

economic and social spheres; [the] renewal and enlargement of products, services, and markets; [and the] development of new methods of production; and establishment of

new management systems. It is both a process and an outcome”.

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innovative are prevalent due to changing customers' demands, technology fusions and environmental consciousness (Ili et al., 2010, p. 246). According to Ireland et al. (2009, p. 21) corporate innovation represents ‘‘[…] a vision directed, organization-wide

reliance on entrepreneurial behavior that purposefully and continuously rejuvenates the organization and shapes the scope of its operations through the recognition and exploitation of entrepreneurial opportunity”. These challenges seem to force companies

to find new ways to be innovative and acquire knowledge from external sources, where open innovation is regarded as more adequate compared to the traditional closed innovation model (Ili et al., 2010, p. 246; Lazzarotti et al., 2013, p. 53).

2.1.2 Closed Innovation

Traditionally, companies’ innovations are done internally by research and development (R&D) departments and taken to market by the firms' own channels. Chesbrough (2003, p. 1) described it as a vertical “[…] integration model where internal R&D departments

develop technology in‐house”. Research projects are carried out by science and

technology fields, among which the projects with the most potential are selected for further development and launched in the market (Chesbrough et al., 2006, p. 2). The whole process, from the idea generation over the idea development and the innovation of products or services to commercialisation is thereby done internally and only financed by the firm itself (Chesbrough, 2003). Although, many firms have begun to use open innovation approaches, some projects still require closed innovation methods (Boscherini et al., 2012, p. 229) Correspondingly, some innovations require some level of

“closed-ness” because its outcome are critical to the firms' competitive advantage (Christensen et

al., 2005, p. 1535). Hence, in instances where there is a high risk of knowledge spill-overs or there are no partners that hold competences required for the exploration and exploitation of the technology due to its complexity to be pursued through open innovation, firms will do better by using closed innovation strategies (Almirall & Casadesus-Masanell, 2010, p. 28). Almirall and Casadesus-Masanell (2010) further argue that as the complexity is high, closed innovation offers a better development opportunity (Almirall & Casadesus-Masanell, 2010, p. 33).

In addition, Felin & Zender (2013, p. 918) discussed two distinct forms of internal governance; authority-based hierarchy and consensus-based hierarchy, each consisting of distinctive governance attributes. In the authority-based hierarchy, the transmission of knowledge is cheaper as communication is more centralized. Therefore, hierarchy through its access to authority, low-powered incentives and property rights can both minimize the need for transmission of knowledge (Felin & Zender, 2013, p. 919). Further, Arrow (1974, cited in Felin & Zender, 2013, p. 919) posits that “the centralization of

decision making […] serves to economize on the transmission and handling of knowledge”. Hence, minimizing the authorities need to persuade the employees to act

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As described by Felin and Zender (2013, p. 919), the consensus-based hierarchies centralized on;

“[…] rich horizontal communication channels that support knowledge exchange among peers, are ideally suited to solving the most com-plex, non-decomposable problems, where widespread knowledge sharing is critical to the formation of theory essential to

exploration.”

For this type of hierarchy, moderately complex problem can be restructured to sub-problems to ease the solving of the problem by individuals or groups, thus requiring a less central coordination. Additionally, these hierarchy’s, due to the above-named advantages, can be seen as the most suitable and efficient in solving more complex and differently structured problems (Macher & Boerner, 2012, p. 1032). Similarly to the other approach, the incentives are low and the intellectual property rights remains with the focal firm (Felin & Zender, 2013, p. 919). However, hierarchy is also characterized by the burden it places on managers for centrally identifying problems and together with low incentives and property rights been ceded in focal firms, rich communication channel loose value, which can compromise motivation (Felin & Zender, 2013, p. 918).

However, organizational boundaries exist even if some may argue that the knowledge economy and the associated linkages will make them superfluous (Hadfield, 2011). The need for corporations to integrate both open and close innovation is therefore interpreted by Enkel et al. (2009, p. 312);

“Today’s business reality is not based on pure open innovation but on companies that invest simultaneously in closed as well as open innovation activities. The future lies in companies or institutions which use every available tool to create successful products and services faster than their competitor and at the same time foster the building of

core competencies and protect their intellectual property.”

In the end, Felin and Zender (2013, p. 915) further argue that the integration of open and close innovation governance is based on different situations, affecting the openness of the organizational boarders depending on the nature of the innovation problem.

2.1.3 Open Innovation

Open innovation, on the other hand, has received considerable attention among researchers (Chesbrough, 2006; von Hippel, 2005; von Hippeland & von Krogh, 2003). Accordingly, open innovation is defined by Chesbrough et al. (2006, p. 1) as a method that enhances company internal innovation and profits from an increased use of external innovation through intended in- and outflows of knowledge. Chesbrough et al. further state that open innovation can be conceptually separated in two dimensions; the first, inbound or outside-in open innovation, which is ‘‘the practice of leveraging the

discoveries of others’’ (Chesbrough et al., 2006, p. 2). This dimension involves building

relationships with external stakeholders with the aim of accessing their knowledge and technology for improving the firm’s innovation. Whereas the second; outbound or inside-out open innovation, suggests that ‘‘rather than relying entirely on internal paths to

market, companies can look for external organizations with business models that are better suited to commercialize a given technology’’ (Chesbrough, 2002, cited in

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source, which means that technology is acquired and transferred back to the market through different channels. Respectively, Felin and Zender (2013, p. 919) suggest four different approaches to open innovation and their suitability to different innovation problems. The four types of open innovation are: markets and contracts; partnerships, alliances and venture capital; contests, tournaments and innovation platforms and; users and user communities (Figure 1). Markets and contracts are more suited to solving problems that are less complex and require less hidden knowledge. Externally owned technology, knowledge and solution come in the form of exchanged property rights and licensing (Felin & Zender, 2013, p. 920). Licensing can therefore be a critical and important source of input for innovation (Arora & Fosfuri, 2003, p. 277). Besides, the knowledge transfer can be defined as a complete solution, as there is less exchange of communication and knowledge (Felin & Zender, 2013, p. 920). Felin and Zender (2013, p. 920) additionally assert that due to high incentives, the engaged actors are motivated to participate in the solution search.

Figure 1: Hidden Knowledge and Problem Complexity (Felin & Zender, 2013, p. 919)

Beyond, partnerships, alliances and CVC involve more openness and a collaboration that supports more knowledge transfer among collaborators. It thence encourages knowledge transfer and communication among partners (Felin & Zender, 2013, p. 920). Partnerships and alliances are stronger and can be considered as multi-face relationships that provide better problem solving and access to external knowledge (Kogut, 2000, p. 412). Contracts and property rights, contrarily, are more open-ended, and focus more on the efforts by partners than the actual outcomes (Reuer & Arino, 2007). While the incentives are more structured, to motivate collaboration between partners and simultaneously increase the knowledge exchange, property rights are more open-ended and negotiated between partners (Felin & Zender, 2013, p. 920).

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their time effort. Rewards in such contest may therefore bring an increase in reputation, better chances for employment and the possibility of setting up an own venture. The property rights are usually ceded to the focal firm and the solution providers get prizes and benefits of selling the solution to the focal firm. “Contests and tournaments are

ideally suited to solving decom-posable problems—clearly defined, well-structured and simple (i.e. non-complex) problems or sub-problems” (Felin & Zender, 2013, p. 921).

Users and user communities voluntarily engage users to contribute to the valuable knowledge of the focal firms in regard to innovation or product improvement (Felin & Zender, 2013, p. 922). Appropriately, users voluntarily participate in the problem solving, property rights are ceded by focal firm and users usually benefit from using innovation generated by their contribution. The communication channel is relatively strong and when users or the user community usefully innovate, then the solution might be adopted by the firm and benefits will be shared. However, the communication channels between enterprises and the innovation community are rather complex as they seek for problem solving and innovation (Felin & Zender, 2013, p. 922). The user community and its diverse knowledge promotes incentives and property rights, encourages knowledge sharing and is most suited for solving complex problems with high level of hidden knowledge (Felin & Zender, 2013, p. 921). Hence, the user community lacks in control by the focal firm and selects problems individually, which induces that the focal firm acts more passively in managing innovation.

In conclusion, open innovation proves to be more adequate for achieving innovation in the automotive industry than closed innovation (Ili et al., 2010, p. 246). Relating this to Peter F. Drucker (cited in Ili et al., 2010, p. 254), who affirms that; “The greatest danger

in times of turbulence is not the turbulence: it is to act with yesterday’s logic”.

Accordingly, to lead the organizational culture and the mindset towards innovation is the biggest challenge (Ili et al., 2010, p. 246). Thence, SME’s employ open innovation primarily as a means of reaching out to customers and to minimize the challenges of competition (Vrande et al., 2009, p. 423). In a similar note, corporations that step outside their borders to seek for knowledge and ideas particularly in uncertain environment, yield more innovation outcomes (West & Bogers, 2017, p. 47). At last, Lazzarotti and Manzini (2013, p. 53) found out that in context of open innovation in automotive industry, corporations seek to enlarge their competence base, explore new ideas and reduce costs in regard to innovation activities. Accordingly, one approach to explore and exploit new ideas is through corporate entrepreneurship (Ireland & Webb, 2007; Wolcott & Lippitz, 2007), which will now be further discussed.

2.2 Corporate Entrepreneurship

2.2.1 A Definition of Corporate Entrepreneurship

Corporate entrepreneurship is defined as “the process by which teams within an

established company conceive, foster, launch and manage new business that is distinct from the parent company but, leverage the parents’s assets, market position, capabilities or other resources” (Wolcott & Lippitz, 2007, p. 75). Wolcott and Lippitz (2007, p. 75)

further indicate that this could involve external partners and capabilities but engage the company resources.

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to the venture). Based on these dimensions they identified the four following models: the opportunist, the enabler, the advocate and the producer. Under the opportunist model, there is no designated ownership or resource allocation but, as employees comes with innovative idea, it is often presented to management for approval. Once approval is given the opportunity is exploited by using the organization resources. This model works well in organizations that have a trustful and experimentation culture embedded in their organizational structure. In the absence of executive support such opportunities often spill-out through organizational cracks (Wolcott & Lippitz, 2007, p. 77).

Figure 2: Four Models of Corporate Entrepreneurship (Wolcott & Lippitz, 2007, p. 77)

The Enabler model explains that resources are dedicated and teams within the organization can pursue opportunities so far as they are within the organization strategic framework. In this model, clear criteria for opportunity selection, guideline for funding, decision making transparency and senior management support is provided. They use Google as an example of companies that use the enabler model. At Google, employees are allowed to spend 20% of their time to explore for innovative ideas and opportunities. Potential ideas are further exploited with funding provided and help from other teams within the firm. The entrepreneurial culture, dynamic market and financial slacks make google difficult to replicate. The Boeing Co. and Whirlpool Corp. are also example of firms that use the enabler model. Resource allocation alone is not the driver for entrepreneurial engagement but, personal development and executive support are critical (Wolcott & Lippitz, 2007, p. 77). Corbett and Hmieleski (2007, p. 115) argue that for employees to act entrepreneurially it is beyond providing resources and expert scripts but, employees should be allowed to step outside the box of the “traditional corporate role

schemas and cultivate new entrepreneurial schemas”. They further assert that top

executive should “be careful not to reinforce the development of event schemas (i.e.,

encourage or mandate that employees build the knowledge structures to create new ventures) without recognizing the need to simultaneously develop, encourage, and change the corresponding role schemas necessary to carry out the events” (Corbett &

Hmieleski, 2007, p. 115).

The advocate model, as they put it, advocate organizations act as evangelists and

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units provide the primary funding for opportunity exploration. Top leaders in these models spend most time advocating for new business creation and provide all the support needed in opportunity exploration.

Finally, the producer model, similar to the enabler and advocate model for promoting entrepreneurs within but, this model further encourages cross-unit collaboration, building disruptive businesses and encourage executives to look beyond its unit boundaries for opportunities. Since this model is open for opportunities outside the strategic framework, such opportunities are passed through a business accelerator that will bring the offering to market. This model has the advantage of its openness for both internal and external ideas. Thus, exploration for new ideas is extended beyond the scope of internal business units to come with innovative ideas. Ideas, both from the inside or outside the organization are giving limited time. They explain that the accelerator aims to produce profits within few years to avoid what they called pie-in-the-sky research. This model however comes with its challenges, it may require significant investment over many years, the integration of successful projects into business units can be challenging. project team can be perceived as threats to business unit employees thus, building trust and credibility is critical for producer model success. Communication within business units and corporate management is critical successful promotion of corporate entrepreneurships (Wolcott & Lippitz, 2007, p. 78).

2.2.2 Strategic Entrepreneurship

Strategic entrepreneurship, a function of corporate entrepreneurship (Phan et al., 2009; Morris et al., 2011; Corbett et al., 2013) is a theory developed by Hitt and Ireland in the early 21st_{century, which has attracted a lot of attention by scholars on how firms can}

explore and exploit opportunities in their surroundings (Hitt et al., 2011, p. 57). Resulting from the combination of two distinct research areas, accordingly strategic management and entrepreneurship (McGrath &MacMillan, 2000), Meyer and Heppard (2000) further argue that these two are inseparable. As the two terms depicts, it is a combination of strategy and entrepreneurship. Venkataraman and Sarasvathy (2001) even use a metaphor of “Romeo and Juliet” to relate to these terms. They suggest that strategic management research without integrating an entrepreneurial perspective is like a balcony without Romeo, whereas an entrepreneurial research without the integration of a strategic perspective should be seen as Romeo without a balcony (Venkataraman & Sarasvathy, 2001).

Hence, strategic entrepreneurship is defined as “the integration of entrepreneurial (i.e.,

opportunity seeking behaviour) and strategic (i.e., advantage seeking) perspectives in developing and taking actions designed to create wealth” (Hitt et al., 2001, p. 481). As

put by Hitt et al. (2001, p. 479);

“The age of progress is over. It was born in the Renaissance, achieved its exuberant

adolescence during the Enlightenment, reached a robust maturity in the industrial age, and died with the dawn of the twenty-first century”.

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should focus on identifying and exploiting these opportunities (Shane & Venkataraman, 2000, p. 218).

Historically, small companies and start-ups are found to be relatively skilled in the opportunity recognition but lack the capabilities to effectively develop a sustaining competitive advantage in exploiting these opportunities (Ireland et al., 2003, p. 966). Ireland et al. (2003, p. 966) further elaborate that larger organizations demonstrated more skills in developing and sustaining competitive advantage. However, they show less competences in recognizing entrepreneurial opportunities. All firms, small or large must therefore engage in both opportunity-seeking and advantage-seeking behaviour (Ireland et al., 2003). Ireland and Webb (2007, p. 49) argue that firms should employ strategic entrepreneurship to exploit their current competitive advantages while exploring opportunities for the future. Therefore, the process of SE implementation has received a lot of attention. Ireland et al. (2003) put forth the model of strategic entrepreneurship, widely recognized by researchers among other processes of SE (Mazzei, 2018, p. 663). Their model presents key dimensions as the entrepreneurial mindset, entrepreneurial culture and entrepreneurial leadership, the strategic management of resources, the application of creativity and the development of innovation. Alternatively, Kyrgidou and Hughes (2010) interpret SE as a linear process that aims at developing competitive advantage. This could be achieved by employing entrepreneurial action and managing resources effectively (entrepreneurial behaviour). The whole process can be seen below (Figure 3).

Figure 3: Model of Strategic Entrepreneurship (Ireland et al., 2003, p. 967)

Strategic entrepreneurship, therefore, involves the integration of exploration and exploitation of business opportunities. Firms can undertake effective SE practices by separating exploration and exploitation activities and supporting each with distinct operational, structural and cultural mechanisms (Ireland & Webb, 2007, p. 52). However, for firms to reach an effective strategic entrepreneurship, they need to balance their action of exploration and exploitation (Ireland & Webb, 2007, p. 58).

Exploration occurs as firms seek to acquire new knowledge to add onto to their stock of

knowledge. Ireland and Webb (2007, p. 53) see a knowledge breadth, when a firm seeks knowledge outside to add onto its existing knowledge. They further explain knowledge

depth as when a firm seeks to increase its knowledge both internally and externally. In an

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Exploitation on the other hand, involves firms taking the advantage of the opportunities

created by exploration. Ireland and Webb (2007, p. 55) state that exploitation rests on knowledge of proven innovation. Firms that are able to meet market opportunities early can thereby use the first mover advantage and gain competitive advantage. Exploration is a method that is most efficient in times of uncertainties, while exploitation works best in times of stable and calm periods. Depending on the current condition the enterprise should therefore try to balance its action more towards one than the other. For firms to achieve effective SE they need to employ and balance both exploration and exploitation simultaneously (Ireland & Webb, 2007, p. 58). Furthermore, the model of strategic entrepreneurship (Figure 3), could be seen as combination of both exploration (e.g. entrepreneurial mindset, entrepreneurial culture and leadership) and exploitation (e.g. strategic managing of resources), leading to creativity and innovation.

Ireland et al. (2003, p. 968) define the entrepreneurial mindset as “a growth-oriented

perspective through which individuals promote flexibility, creativity, continuous innovation, and renewal”. Additionally, creating an entrepreneurial culture in an

organization is an important aspect of attaining SE. Ireland et al., (2003, p. 970) described it as an environment in which new ideas and creativity is expected, risk taking, failures are tolerated, and the continuous innovation of products and services is championed. An entrepreneurial culture is promoted when leaders employ entrepreneurial mindsets. For firms to create an entrepreneurial culture and employ entrepreneurial mindsets, it has to be supported by its leadership. Thus, entrepreneurial leadership seeks to influence others to manage resources strategically with the goal to use both opportunity and advantage seeking behaviour simultaneously (Ireland et al., 2003, p. 971). Firms that create the culture of an entrepreneurial mindset and support it through leadership set the ground for exploration capabilities. The opportunities explored could thus be exploited by managing resources strategically, which helps in the effective exploitation of these opportunities. Amit et al. (2002) further elaborate on the fact that possessing resources alone is unlikely to predict firms’ competitive advantage. Accordingly, resources possession by firms produces a sustained competitive advantage only when they are managed strategically (Gove et al., 2003). In addition, Ireland et al. (2003, p. 973) argue that resources are strategically managed only when they are leveraged to simultaneously seek opportunity and advantage-seeking behaviour.

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Levinthal, 1990, p. 128). Thus, human capital could be the most valuable resource for new ventures and large corporations that seeks to act entrepreneurially as well as gain and sustain competitive advantages (Ireland et al., 2003, p. 976). Finally, social capital is the relationship that bonds the firms’ internal and external social capital to promote collaboration and combined efforts. Trust is a key component in these relationships (Hitt et al., 2003) and promotes the successful transfer of knowledge between collaborators (Ireland et al., 2003, p. 976). It not only helps to build norms of reciprocity but parties in these relationships will also be more willing to share resources as they expect an exchange (Ireland et al., 2003, p. 976). Through reciprocity firms can then gain new knowledge from collaborators, possible to use for innovations.

Considering the above-named capital resources, it is clear that firms need strategies to manage them effectively. Correspondingly, managing resources strategically involves, the use of financial capital to acquire human and social capital (Ireland et al., 2003, p. 978). When firms create a culture of entrepreneurial mindset supported with entrepreneurial leadership and combined with the strategic management of resources, this would result in a creativity and innovation fostering atmosphere (Ireland et al., 2003, p. 980). Ireland et al. (2003) further develop the theory of the creative destruction coined by Schumpeter’s in the early 20th_{century by arguing that it helps in significant firm growth}

and take market leaders by surprise. It involves the process in which organization’s act and react toward market dynamics. Schumpeter’s concept of a creative destruction thereby highlights the importance of creativity and innovation in a dynamic environment. Furthermore, the dimensions of strategic entrepreneurship discussed above seem complex and challenging for a firm to attain. Kyrgidou and Hughes (2010) challenged the strategic entrepreneurship model by emphasizing on the lack of robustness of SE. Thus, Hitt et al. (2011, p. 58) responded to the criticism through the input-process-output model of SE by including environmental factors, better resource orchestration and benefits SE could provide to societies, organizations and individuals.

Figure 4: Input-Process-Output Model of SE (Hitt et al., 2011, p. 58)

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build capabilities needed for competitive advantages (Hitt et al., 2011, p. 61). Ketchen et al. (2007, p.371) argue that collaboration between small and large firms to co-innovate by sharing ideas, knowledge and opportunities supports SE. New ventures are creative and big firms are more effective in exploiting current products to maintain competitive advantage. Therefore, the partnership between small and large firms can be productive due to their complementary resources of knowledge, market opportunities, reputation and access to internationalization. Firms lacking the resources needed to attain innovations internally, can use their external network of partners to locate needed resources to develop innovation (Hitt et al., 2011, p. 67). Hence, producing new innovations requires questioning the status-quo (Sood & Tellis, 2005, p. 164).

Resource orchestration deals with how the firm in possession could effectively manage the firm resources to create a benefit. In the resource orchestration process a risk of imitation from competition when exploiting opportunities of the firm exists. Therefore, firms usually use patent and copyright protection in protecting of imitation from others (Burgelman & Hitt, 2007, p. 350). Entrepreneurs however use other means like negotiated contracts, to protect their knowledge or intellectual property (Hitt et al., 2011, p. 66). They further argue that regardless of the means used, the protection of intellectual property and complementary resources is critical to the value that resource orchestration creates. Competitors efforts to imitate firms value creation is difficult to avoid. Thus, the use of current knowledge to exploit advantages while exploring opportunities for continuous innovation is the source for sustained competitive advantage (Hitt et al., 2011, p. 69).

2.2.3 Corporate Venturing

Alongside strategic entrepreneurship, corporate venturing (CV) being another path of corporate entrepreneurship is therefore equally relevant to discuss (Phan et al., 2009; Morris et al., 2011; Corbett et al., 2013). While, as seen before, strategic entrepreneurship is mostly concerned with the strategic, organizational as well as business model regeneration and renewal (Covin & Miles, 1999; Morris et al., 2007b), CV, on the other hand, can be seen as the creation of new business through either a company internal innovation or an outside-in approach (Miles & Covin, 2002). Strategic entrepreneurship hence includes all other corporate entrepreneurship streams not concerned with the creation or take-in of new businesses (Ireland et al., 2003). With outside technologies, products or services as well as business models being made available to the internal organization (Markham et al., 2005), the main purpose of CV is to further expand and share resources as a response to new technologies and the growing challenge of cultural change (Dushnitsky, 2011; Vázquez Lucerga, 2018, p. 13). Accordingly, CV can be related to the use of venture capital methods (Campbell et al., 2003) and the development of the corporate strategy (Ireland et al., 2001), “by building new capabilities and

businesses that enable renewal, foster strategic change and enhance a company’s profits and growth in domestic as well as international markets” (Zahra & Hayton, 2008, cited

in Narayanan et al., 2009, p. 58).

Furthermore, when focusing on the outside-in approach, including external strategic opportunities and outside-in innovation streams, the investment in external high-tech start-ups leads the way (Ibrahim, 2016, p. 1741; Weiblen & Chesbrough 2015, p. 67). Correspondingly, an expanding “[…] heterogeneity of CV modes can be observed such

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types of CV modes, with the intention for corporations to adapt their value creation, capture and delivery activities correspondingly, into nine categories structured by the prioritization of objectives as well as the direction of innovation flow (Figure 5).

Figure 5: The Nine CV Mode Profiles (Gutmann, 2019, p. 130)

While keeping in mind that “[e]xploratory learning is the process of knowledge

acquisition through recognizing external knowledge and assimilating it” (Lane et al.,

2006, cited in van der Steen et al., 2013, p. 283), the external explorer or the explorative model can therefore be connected to external strategic partnerships, most probably with external start-ups (Miles & Covin, 2002), to enhance entrepreneurial growth (Mian et al., 2016). A current example for the external explorer, in the German automotive industry, is the Mercedes-Benz Challenge or the BMW Start-up Garage, created to enhance corporate innovation and shape product development through the discovery of external opportunities and the incorporation of external innovation and digitalization (Juell-Skielse & Hjalmarsson, 2017, p. 2). To close the gap between the corporation and external start-ups, BMW is thereby using an approach named ‘venture client’ (BMW, 2019; Gimmy et al., 2017). Lastly, instead of the exchange of investment against equity, the BMW Start-up Garage purchases their technologies and provides the start-ups with guidance, customers as well as other growth insurances (BMW, 2019). This definitely opens up to new ways of corporate entrepreneurship possibilities.

2.2.4 New Directions for Corporate Innovation & Corporate Entrepreneurship

The notion corporate foresight, introduced by Rohrbeck (2011, p.11) as “an ability that

includes any structural or cultural element that enables the company to detect discontinuous change early, interpret the consequences for the company, and formulate effective responses to ensure the long-term survival and success of the company”, has

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today’s unpredictability regarding the creation of innovation opportunities together with the ease of creating strategic partnerships, corporations are increasingly focusing on opening up their innovation processes to ensure knowledge and expertise inflows (Matzler et al., 2018, p. 14-18). According to Nonaka and Takeuchi (1995) new expertise and the acquisition as well as the increase of company internal knowledge are strictly related to competences and innovation, and therefore also the company’s competitive and strategic advantages. The shift in corporate innovation strategies can therefore be linked to the increased role and importance of start-ups in this digital area (Latouche, 2019, p. 30; Macheleidt, 2016, p. 39).

Especially, in the automotive industry, where complexity and inertia in the organization structures, cultures and technologic capabilities prevailed (Dodourova & Bevis, 2014), digitalization and emerging new technologies are taking over. Traditional cars are now remodelled into self-driving, battery-powered, big data machines (Mikusz et al., 2015; Swan, 2015), and a change of mindset closely linked to this new source of external innovation, called start-ups, is prevailing (Ili et al., 2010, p. 249). New Original Equipment Manufacturers (OEMs), as for example Tesla or Google, high-tech and big data start-ups but also venture capitalists and research labs are now part of the new ecosystem of the automotive industry (Ferràs-Hernández et al., 2017, p. 857). Yet, the right integration of these external innovation opportunities still represents an important challenge to this day (Wilhelm & Dolfsma, 2018, p. 232). To ensure the most gain out of corporate innovation activities, where entrepreneurial and innovative behaviour form the base (Kuratko et al., 2014b), it is therefore extremely important that all involved stakeholders are as free to be innovative and creative as possible (Kuratko et al., 2014b, p. 654).

2.3 OEM and External Start-up Collaboration 2.3.1 OEMs and Start-ups

Being only a few major players within the automotive industry (Pavitt, 1984), the leading vehicle manufacturers, also called Original Equipment Manufacturers (OEMs), (Juell-Skielse & Hjalmarsson, 2017, p. 2), represent large corporations enhancing national economic growth through their profitability, salary disbursements and international strategies (Rubini et al., 2012). To maintain the sustainable success of these corporates, rightful management of the core competencies regarding the technical value creation but also non-technical aspects concerning the firms’ environment is needed (Ruff, 2015, p. 38). Moreover, recent developments, especially in the German automotive industry, show that these large corporations are slowly moving away from vertical knowledge stream structures (Köhler et al., 2013) and the creation of innovation solely through internal R&D departments (Pavitt, 1984) and are now focusing on enhancing corporate innovation with the help of external start-ups (Macheleidt, 2016, p. 36). In the context of becoming the major innovator, their competitive advantages lie in their technological resources and skills (Ferràs-Hernández et al., 2017, p. 857). However, the stability but also the rigidity of internal structures, the need for large amounts of investments and the scaling mechanisms in place make it harder for smaller player to get involved in this ecosystem but also shield the OEMs from their own innovation potentials (Ferràs-Hernández et al., 2017, p. 857; Juell-Skielse & Hjalmarsson, 2017, p. 3).

Luger and Koo (2005, p. 19) characterize a start-up as “[…] a business entity which did

not exist before […] and which is neither a subsidiary nor a branch of an existing firm”.

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start-ups can be identified as disruptive innovators, initiators of growth and creators of employment and value (Kollmann et al., 2016; Latouche, 2019; Reid et al., 2015; Weiblen & Chesbrough, 2015). While mostly active in specialized fields, concerned with new technologies or creative business models, they exhibit creativity and adaptability as well as agility and speed (Hogenhuis et al., 2016; Latouche, 2019, p. 40). Successful entrepreneurs are characterized by being elaborated risk identifiers and takers (Ibrahim, 2016, p. 1768), equally risk-taking can be closely related to innovativeness (Rauch et al., 2009). However, due to their newness and smallness (Hora et al., 2017, p. 411), start-ups are limited when it comes to resources, expertise, networks, and reputation (Freeman & Engel, 2007) uncertainty, insecurity and instability are therefore inevitable (Neff, 2012; Gill, 2014).

Furthermore, and according to Ahl and Marlow (2012, p. 544): “Entrepreneurialism

celebrated as the foundation of opportunistic individualism […] enables the realization of human potential for creativity and innovation when freed from the confines of organizational and institutional regulation”. Inside an organization, this would figure as

entrepreneurial orientation (EO), defined as “the extent to which the top managers are

inclined to take business-related risks (the risk-taking dimension), to favor change and innovation in order to obtain a competitive advantage for their firm (the innovation dimension), and to compete aggressively with other firms (the proactiveness dimension)”

(Covin & Slevin, 1988, p. 218). Accordingly, while the following five dimensions; innovativeness, risk taking, proactiveness, autonomy and competitive aggressiveness, constitute the base for EO (Lumpkin & Dess, 1996), the main goals require sustaining vision and the purpose of the corporation as well as develop competitive advantages (Rauch et al., 2009; Freitas et al., 2012). Finally, considering that start-ups are innovation creators and simultaneously give large corporations the possibility to widely access new technologies and disruptive ideas, a collaboration in this context is especially attractive for both parties (Marion & Friar, 2012; Weiblen & Chesbrough, 2015).

2.3.2 A Cooperative Relationship

According to Chen (2008, p. 299); “organizations typically operate in an environment of

relational interconnectedness, and that an organization’s survival and performance depend on its linkages to other organizations”. Additionally, the process of the

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When it comes to corporate innovation, however, large corporations seem to be unable and still unexperienced to correctly implement innovative growth strategies (Chang et al., 2012; Kuratko et al., 2014a; Rohrbeck, 2011, p. 34). Even high performers in the market (Birkinshaw & Hill, 2005), have to cope with time-intensive processes (Rohrbeck, 2011, p. 34), organizational inertia (Bullinger et al., 2009), focusing on their current capabilities more than exploring the market for new radial innovation possibilities (Chang et al., 2012). Especially in the automotive industry, where complexity and difficulties arise due to the increase in range in regard to the implementation of new technologies (Laursen & Salter, 2006), OEMs showcase some significant innovation management issues, prevailing throughout the whole organization (Juell-Skielse & Hjalmarsson, 2017, p. 3). Accordingly, all this is proof that these large corporations are neither ready to face change (Rohrbeck, 2011, p. 34) nor to create disruptive innovations (Chang et al., 2012) yet. Christensen (1997) defines this as the innovator’s dilemma; whereby large organizations nearly solely focus on successful strategies sustaining innovations, but are however, still going to face disruption by start-ups. Hence, to keep their current positions on the market as well as be able to continuously satisfy the fast-changing market demands (Birkinshaw & Hill, 2005), corporates have to engage in disruptive innovations. Whereas intrapreneurship can be a possibility in this regard (Ibrahim, 2016, p. 1765), car manufacturers and other large corporations actively choose to do this through outside-in innovation flows instead (Laursen & Salter, 2006). Correspondingly, firms directed at entrepreneurial orientation show enhanced performances (Rauch et al., 2009; Moreno & Casillas, 2008) and the collaboration with external start-ups, a choice made by 35 per cent of the large corporations in Germany (Depiereux, 2017), exonerates the corporations from possible agency costs, restricted asset complementarity, rigidity and long-lasting administrative processes that play a role for intrapreneurship activities (Henderson, 1993; Anton & Yao, 1995; Klepper, 2001; Helfat & Lieberman, 2002). Both parties working differently (Depiereux, 2017), the focus of the collaboration still lies on similar objectives (Latouche, 2019, p. 40). These are; connecting with customers rather than competitors (Parker, 2011, p. 20) and getting ahead of digitalization through cooperation (Depiereux, 2017). The importance of the collaboration between large corporations, or OEMs in the automotive industry, and external start-ups being established, the benefits, challenges and risks of this relationship will now be further elaborated.

Benefits

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OEMs, moreover, the start-up cooperation brings in new possibilities regarding the application of digital technologies into new product development processes but also facilitates ameliorations in the context of efficiency, sustainability and security (Juell-Skielse & Hjalmarsson, 2017, p. 2). Finally, these new ventures give the corporates the opportunity to promote themselves in the start-up ecosystem (Latouche, 2019, p. 40), enter new markets and enlarge their customer segments (Latouche, 2019, p. 30), by, at the same time, being vectors of employment and transformation in regard to societal and managerial change (Latouche, 2019, p. 31). On the other hand, start-ups can benefit from large corporations in the opposite ways. Large corporations offer operational scalability and investment capital (Kupp et al., 2017, p. 48), whilst allowing access to resources, market and industry specific knowledge, routines, stability and power (Depiereux, 2017).

Risks and Challenges