Competitive Advantage, Open Innovation, and Dynamic Capabilities: Is Sanofi Employing an Open Innovation Strategy?

Competitive Advantage, Open Innovation, and Dynamic Capabilities: Is Sanofi Employing an Open Innovation Strategy?

Geoffroy Labrouche, Med Kechidi
DOI: 10.4018/978-1-5225-0135-0.ch006
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This chapter deals with a particular type of dynamic capability: dynamic relational capabilities. They are defined as the organisational ability of a firm to enter into successful business relationships with other actors. It is shown that these abilities, based on organisational memory, are expressed in particular through the acquisition of assets and the conclusion of partnerships/alliances. In the pharmaceutical industry, open innovation strategies are the concrete proof of such abilities. Indeed, this sector is considered to be a High-Velocity Environment characterized by a high rate of change. Such change, challenging firms' competitive advantage, fosters the development of dynamic capabilities and open innovation strategies. These theoretical considerations are illustrated by reference to the innovation strategy adopted by the Sanofi group, particularly since 2008.
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How can a firm develop and maintain a competitive advantage in a turbulent environment? What are the determinants of the performance of an organisation in this kind of environment? The concept of dynamic capabilities, proposed by Teece and Pisano (1994), can help us to answer these fundamental questions of strategic management. For these authors, dynamic capabilities are: the firm’s ability to integrate, build and reconfigure internal and external competences to address rapidly changing environments (Teece et al., 1997, p. 516). This approach allows the concept of competitive advantage to be extended: a competitive advantage remains effective throughout the recurring modification of the firm’s core resources and skills. In the same way, it offers a dynamic approach to the firm’s resources, insufficiently taken into account in the Resource-Based View approach (Barney, 1986, 1991; Grant, 1991; Peteraf, 1993; Wernerfelt, 1984).

There is no consensus as to the definition of dynamic capabilities. Although many authors (Eisenhardt & Martin, 2000; Helfat et al., 2007; Pavlou & El Sawy, 2011) have used this concept, they have not always defined dynamic capabilities in the same manner. This diversity of approaches leads both to theoretical difficulties and problems of implementation that provide a challenge for researchers. The first challenge is to clarify what is meant in concrete terms by dynamic capabilities. Mainly defined by its consequences (the resilience of the organisation), this approach requires that its determinants be identified (Pavlou & El Sawy, 2011). The second challenge concerns the materialisation and formulation of methodologies for evaluating these capabilities.

This chapter makes progress on both of these fronts, on the one hand through the link between organisational memory and dynamic capabilities, and on the other hand between these capabilities and one of their concrete expressions: open innovation. Studies of open innovation underline the need to understand strategies in high-technology industries (Chiaroni et al., 2011; Lichtenthaler, 2011; Loilier & Tellier, 2011) as well as in ‘high-velocity environments’ (Eisenhardt & Martin, 2000). Our hypothesis is as follows: in the field of R&D, open innovation strategies are an expression of a particular category of dynamic capabilities: dynamic relational capabilities. These are taken to be the ability of an organisation to seek the resources necessary for the enrichment and development of its own competences from outside its own boundaries.

Key Terms in this Chapter

Organisational Memory: The memory of the organisation is the crystallisation of the firm’s history. It is a repertoire including all the knowledge necessary for the firm to develop within its environment. This capitalized knowledge will help the firm to adapt to environmental changes. However, in ‘high-velocity environments’, the firm has to enrich its organisational memory through organisational learning and the expression of dynamic capabilities to face uncertainty.

Dynamic Capabilities: Cognitive and conative organisational and strategic systems through which firms solve problems and create new configurations of resources and skills as their environment evolves. Dynamic capabilities help the firm improve its resource base to deal more efficiently with environmental changes. When these changes involve a high degree of uncertainty, as is the case in ‘high-velocity environments’, the firm’s dynamic capabilities will enable it to find an appropriate solution to the environmental changes and thus preserve its competitive advantage.

Competitive advantage: A specific type of advantage possessed by a firm over its competitors. Its durability determines the firm’s resilience.

High-Velocity Environment: A type of environment characterised by rapid and discontinuous changes involving multiple parameters (technology, demand, regulations...). These changes render imprecise, unavailable or obsolete the information at the disposal of firms to formulate their strategy, thus generating a high degree of uncertainty to be dealt with. They are also defined as turbulent environments or hypercompetitive environments. Science-based sectors, such as the pharmaceutical industry, are usually considered to be high-velocity environments.

Dynamic Relational Capabilities: A specific type of dynamic capability defined as the ability to enter into business relationships in order to obtain access to resources and skills, in particular those which are complementary to the firm’s activity. These dynamic relational capabilities are crucial to the formation of relationships with other actors in the firm’s environment in order to seek resources that will enable it to reconfigure its own resource base. They include the strategic interactions of a firm in the context of the acquisition of assets, cooperation or partnerships/alliances.

Open Innovation Strategies: Strategies through which an organisation mobilises resources and competences in order to reconfigure its internal and external systems. They equate to the deliberate use of external knowledge or innovation to innovate or obtain access to a market. The implementation of open innovation strategies is viewed as an expression of dynamic relational capabilities.

Organisational Learning: A collective process of knowledge creation inside the firm considered as the product of the interaction between individual actors whose results are included in the organisational memory through shared representations. This process allows the firm to enrich its repertoires of action and to improve its capabilities.

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