Types of Innovation within Corporate Incubators

Günther Schuh

, and Florian Vogt

Laboratory for Machine Tools and Production Engineering, (WZL), RWTH Aachen University

Department of Technology Management, Fraunhofer Institue for Production Technology IPT Aachen, Germany

Keywords: corporate incubator; innovation; typing; innovation transfer.

Abstract: To maintain market advantages many established companies facing the challenge that focusing on existing

products is not enough. Companies are therefore forced to identify innovation outside their core business. A

common approach to meet these requirements is the setup of a separated innovation path outside the corporate

structures, a so called corporate incubator. Although there are some success stories, many of these corporate

incubators fail. One major challenge corporate incubators are facing in their daily work is the innovation

transfer within the corporate structures. To address this problem, the author develops a model to design the

transfer process between corporate incubators and its parent company. This research paper states a

contribution to the transfer model. So far, the transfer object as the main influencing factor within a transfer

process from corporate incubators is only insufficient examined in science. The authors therefore aim to

provide a practical classification of innovations which are transferred from corporate incubators to its parent

company. Based on an intensive literature study characteristics to describe innovations from corporate

incubators are identified and discussed. The identified characteristics are then used to define and describe 6

types of innovation which are common within a transfer process from corporate incubators.

1 INTRODUCTION

Increasing product lifecycle and changing market

requirements are forcing established companies to

rethink their product portfolio (Schuh et al, 2010).

Focusing on incremental innovation is not enough to

remain existing market advantages. Established

companies are therefore aiming to expand their

innovation focus from incremental innovation to

radical innovation outside their current core business

(Chang et al, 2012).

An approach to pursue radical as well as

incremental innovation is the setup of a corporate

incubator, a separate innovation unit (Schuh et al,

2017). Outside the corporate structures, corporate

incubators focus on the development of radical

innovations. In literature the organizational

separation of explore and exploit activities is known

as organizational ambidexterity (March,1991).

Within the innovation process, corporate

incubators have to decide how to exploit the

innovation. Due to its strategic alignment to the

parent company, many of the developed innovation

from corporate incubators are transferred within the

corporate structures (Schuh et al, 2017). Especially

for the series development and the market entry many

resources are required, which often are not available

at the corporate incubator.

However companies are facing major challenges

within the transfer of innovation from corporate

incubators into the parent company. Different

innovation cultures or expectations, a lack of

acceptance within the organization and a lack of

resources are only some reasons why transfer process

into corporate incubators fail (Schuh et al, 2019). To

solve the described problem, the author develops a

model of a transfer process from corporate incubators

(Schuh et al, 2017).

The most influencing aspect of a transfer process

is the transfer object. However so far, there is no

definition of what kind of innovation are developed

within corporate incubators. Although in the literature

there are some approaches to characterize and

describe transfer objects or innovation in general the

specific aspect of a transfer between corporate

incubators and parent companies is so far not yet

discussed. Especially regarding the important

characteristics of a transfer object from corporate

incubators there is a lack of knowledge within the

common literature. This paper therefore addresses the

following research question:

316

Schuh, G. and Vogt, F.

Types of Innovation within Corporate Incubators.

DOI: 10.5220/0010308300003051

In Proceedings of the International Conference on Culture Her itage, Education, Sustainable Tourism, and Innovation Technologies (CESIT 2020), pages 316-324

ISBN: 978-989-758-501-2

Which types of innovation are transferred from

corporate incubators to the parent company and how

can they be characterized?

The goal of this paper is therefore to identify

transfer relevant characteristics of innovations and to

derive different types of innovation from corporate

incubators that can be found in practice. These

innovation types will be used in future research to

design a situation specific transfer process from

corporate incubators to their parent company.

2 LITERATURE REVIEW

So far this specific research question has not been

answered within the literature. Therefore a literature

overview of close scientific areas is given and a

discussion how to adopt these approaches for the

specific problem will be done. At first common

definitions of corporate incubators will be presented,

followed by a definition of the term typing and a

discussion of general types of innovation within the

literature.

2.1 Corporate Incubator

There is no general definition for corporate incubators

in literature. BECKER defines corporate incubators

as independent units that operate outside of existing

corporate structures. These are specialized in

strengthening the technological basis of the company

as well as pursuing new business opportunities. They

act in the strategic sense of the company and their

origin can be inside (internal startups) or outside the

company (external startup) (Becker, 2003).

VON ZEDTWITZ defines five different types of

incubators. As separated innovation units incubators

pursue company internal projects which do not fit to

the corporate strategy (Zedtwitz, 2003).

GRIMALDI AND GRANDI perceive corporate

incubators as part of a diversification strategy and

HANSEN ET AL. complements the known forms

through introducing a network incubator which

focusses on building an internal and external network

for startups (Grimaldi and Grandi, 2005; Hansen,

2000). In the context of corporate incubators, other

terms are also added, such as the term "corporate

think tank", "entrepreneurial think tank" or the

common name “Innovation Laboratories”, which

focus on the creation of a creative innovation

environment (Poguntke et al,2016;Lewis and

Moultrie, 2005; Magadley and Birdi, 2009).

Various approaches of corporate incubators vary

in their characteristics. All approaches have in

common that corporate incubators offer additional

services to internal and external startups in order to

provide them with premises and financial support,

such as coaching or access to resources or support

from corporate departments (Grimaldi and Grandi,

2005; Hansen et al, 2000; Gassmann and Becker,

2006; Wagner and Wosch,2015; Lau, 2019).

2.2 Typing

The term typing describes an analytical research

method consisting of a static or result-oriented and a

dynamic or process-oriented perspective. The

dynamic point of view represents the thinking process

of type formation and the static point of view shows

the result, the formed types and the typology

(Rühmann, 2008; Welter, 2006). Typing supports the

derivation of a defined numbers of types from of a

large number of objects (Rühmann, 2008).

Type forming is the process to identify different

types. Its primary goal is not just to group the field of

investigation, the focus is instead on understanding

and explaining complex realities and connections

(Kluge, 1999).

A single type is defined by an amount of objects

which have one or more common characteristics [22].

These characteristics vary from type to type in order

to illustrate typical characteristic of a group. By

combining different characteristics, the complex

reality can be simplified and a better overview of the

selected object area can be created (Hadeler, 2000).

The totality of all types is represented as result of

the type formation. Only those cases are relevant

which are practically usable and empirically

verifiable in relation to the objective of the

investigation without logical contradiction (Welter,

2006).

2.3 Typinging of Innovation

A general definition is that an innovation is an

invention that has been successfully established on

the market. An invention is thus the first realization

of a technical solution described below. Incremental

innovations are evolutionary further developments of

already existing products. They are characterized by

low risk, have a limited time horizon and mainly

serve to maintain or expand existing market shares

(Klappert, 2011; Störmer, 2010). Radical

innovations, on the other hand, are based on new

scientific principles and enable to address new

markets (Henderson and Clark, 1997; Ili, 2010). They

therefore entail high risks, but also great potential for

success (Perl, 2007). Both, radical and incremental

Types of Innovation within Corporate Incubators

317

innovations are necessary for long-term market

success (Schuh et al, 2011).

HAUSCHILDT describes innovations in 6

different dimensions: content, subjective, procedural,

normative, stakeholder and intensity (Hauschildt,

2016). According to HAUSCHILDT it can be

differentiated between product innovation, process

innovation and services innovation (Hauschildt et al,

2016). Service innovation are also referred to as

business model innovations (Bessant and Tidd,

2015).

All of the described approaches are focusing on a

general typing of innovation and not on the specific

case within corporate incubators. Although some of

the characteristic can be transferred on to innovation

from corporate incubators some important aspects are

missing. In the following chapters the described

characteristics will be evaluated and relevant

characteristics for the typing of innovation from

corporate incubators will be added.

3 RESEARCH METHODOLOGY

This work is part of a thesis the author is developing

for the design of type-based transfer processes of

innovations from corporate incubators. The research

design is based on the research methodology of

applied science according to ULRICH (Ulrich, 1984).

Following a structural approach, a practical problem

with its theoretical deficit is identified and existing

approaches in the literature are analyzed in order to

derive possible solutions. The typing of innovation

will mainly be based on intensive studies of existing

literature and personal experiences. In the order of the

process of applied sciences according to ULRICH,

Chapter I of this paper identifies and structures a

relevant practical problem as well as the underlying

theoretical problem. Simultaneously, the need for

research in this field is pointed out. In Chapter II, a

literature search is carried out and existing relevant

approaches are identified, which corresponds to steps

B and C of the process according to ULRICH.

Chapter IV will display the results and will be

followed by the conclusion and an outlook for future

research. This covers step D and E within the process

of applied science (Ulrich, 1984).

To a problem and the preliminary stage of an

innovation (Pleschak and Sabisch, 1998).

In literature, there are many different types of

innovations. A common differentiation is made

between incremental and radical innovations, which

are briefly.

Figure. 1: Structure of this paper according to ULRICH [7].

4 TYPES OF INNOVATION

WITHIN CORPORATE

INCUBATOR

The goal of this paper is to identify different types of

innovation within corporate incubators. Based on the

types, a type-based transfer process can be designed

in future research. For the identification of the

innovation types relevant characteristics to describe

an innovation are identified. Due to the context of an

innovation transfer we are focusing on transfer

relevant description factors. Based on the identified

characteristics different types of innovation within

corporate incubators will be derived and described.

4.1 Description of Transfer Relevant

Characteristics

There is no general definition for corporate Transfer

relevant characteristics of an innovation within

corporate incubators are identified in this section. The

analysis is based on a progressive analysis. At first

different types of existing incubators were analyzed

and characteristics of the innovation outcome were

identified. Based on that, an analysis of the literature

was done in addition, to identify general description

factors for innovation. The identified characteristics

were then examined for their transfer relevance. In

total ten characteristics with relevance for the transfer

process were identified: content of the innovation,

innovation source, personal bond, dependence to the

core business, documentability, complexity,

innovation level, market potential, degree of maturity

and risk.

VON ZEDTWITZ defines five different types of

incubators. As separated innovation units incubators

pursue company internal projects which do not fit to

the corporate strategy (Zedtwitz, 2003).

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4.1.1 Content of the Innovation

The content of the innovation refers to the innovation

object. There are many different definitions of the

content of innovation within the literature. In this

paper, the content is divided into three characteristics:

product innovation, business model innovation and

technological process innovation. Product

innovations occur when there are significant changes

in product or service characteristics, whereas business

model innovations refer to fundamental changes in

value generation (Bessan and Tidd, 2015).

Technological process innovations lead to new

approaches to improve production processes

(Barbero et al, 2014).

4.1.2 Innovation Source

The innovation source is understood as a

characteristic for describing innovations (Lau, 2019).

Innovations from corporate incubators originate from

different sources. With regard to the relevance of the

transfer process between internal incubators and

parent companies, the innovation source can be

described by two characteristics. Innovation can

originate from internal or external of the corporate

structures. Internal innovation are created by the

employees of the parent organization. The

development of an innovation without the

involvement of the parent organization, e.g. by the

incubator employees or external startups, is referred

to an external source of innovation. (Schuh et al,

2017).

4.1.3 Personal Bond

Another characteristic of innovation from corporate

incubators is the binding of knowledge to individuals.

A categorization can be made between personal-

related and non-person-related innovation. If the

developed innovation is independent from a group or

specific persons, it is described as non-personal

innovation. Innovations that do not exist and cannot

be transferred without the founder of the idea are

described as personal innovations. Personal

innovations are often based on patent protection or

belong to a specific group which do not want to cut

loose their innovation (e.g. startups).

4.1.4 Dependence on the Core Business

A relevant characteristic for the transfer process is the

assignability of innovations to existing competences.

The effort required to integrate innovation in existing

structures increases with the distance between the

innovation and the core business. Within the

innovation management the 70-20-10 rule is used.

Accordingly, companies should carry out 70% of

their development projects in the core business, 20%

in relation to the core business and 10% outside the

existing core business (Drescher and Zeller, 2017).

The strategic focus of a corporate incubator does not

include the development of innovations within the

core business of the company. The typing of

innovations from corporate incubators is therefore

based on the innovation characteristics with reference

to the core business and outside the core business.

4.1.5 Documentability

The documentation of the innovations is essential for

a transfer process. Therefore all relevant knowledge

need to be transferred. The Literature states two

different kinds of knowledge, explicit and tacit

knowledge (Polanyi, 1966). Explicit knowledge, also

known as non-personal knowledge, can be easily

documented, stored and transferred to a third party

(Nonaka, 1998; Zeppin, 2013). In contrast to that,

implicit knowledge, known as personal knowledge, is

based on personal experiences and hard to document

(Zeppin, 2013).

4.1.6 Complexity

Transfer processes are decisively influenced by the

complexity of a transfer object. Both the duration and

the extent of the transfer vary depending on the

degree of complexity. As the complexity of a transfer

object rises, the recipient's adjustment efforts increase

(Pleschak, 2003). Furthermore complex transfer

objects need to be documented intensively (Meißner,

2001). However the complexity does not interlink

with the documentability. There are complex objects

that are based on explicit knowledge and easily can

be documented (Petersen, 2012).

4.1.7 Innovation Level

The innovation level enables the measurement of the

novelty of an innovation and represents another

common descriptive feature for innovations (Kundt,

2014). The scope of a transfer process is related to the

novelty of an innovation. The most common forms of

differentiation are incremental and radical

innovations (for details see section II.C.). However

corporate incubators focus mainly on the

development of radical innovations and incremental

developments occur only occasionally. For this

reason, the innovation level states a fixed

Types of Innovation within Corporate Incubators

319

characteristic and is not suitable for the typing of

innovations.

4.1.8 Market Potential

The market potential of innovations has a major

influence on the transfer of innovation. Increased

market potential can promote the acceptance of

externally developed innovations within a company.

The goal of corporate incubators is the development

of innovations with a great leverage effect on the

organization. The focus on radical innovations

enables a high market potential in the long term.

Projects with a low market potential are therefore

outside the incubators scope.

4.1.9 Degree of Maturity

The degree of maturity plays an important role in the

transfer process. If it is too high, the meaningful use

of synergy potential is lost in the development

process and acceptance problems are increased in

addition. If the degree of maturity is too low, the

economic and technical factors areoften not

sufficiently developed yet. This can result in

significantly higher transfer effort (Meißner, 2001). A

study on the transfer process from corporate

incubators done by the authors show, that most of the

incubators use the proof of concept as the degree

maturity to transfer the innovation into the parent

company (schuh et al, 2019).

4.1.10 Risk

The risk of the transfer object is of great importance

for the transfer process. Recipient and supporter must

be identified within the structures of the parent

organization to drive the innovation and bring it to

market maturity. Corporate managers are intent on

achieving financial goals and avoid high risks.

Finding an internal buyer becomes more difficult as

the level of risk increases. Even if the risk of an

innovation may exist in various forms, innovation

projects within corporate incubators are rather risk-

loaded due to the radical degree of innovation.

Due to the strategic orientation of a corporate

incubator the influencing factors innovation level,

market potential, degree of maturity and risk can

already be allocated to one defined characteristic as

show in Fig. 2 and therefore are not suitable to be used

for the following typing of innovations.

Figure 2: Fixed characteristics of a corporate incubator.

4.2 Identification of Type-forming

Characteristics

For the typing of innovation within corporate

incubators, the type formation process according to

WELTER is used. Therefore the goal is to identify

type-forming and type-describing influencing factors

(Welter, 2006). To do so, the six identified

characteristics were analyzed based on a consistency

matrix to identify these characteristics which are not

or less influenced by the others (see. Fig. 3). These

factors can be excluded to be type-forming

characteristics.

VON ZEDTWITZ defines five different types of

incubators. As separated innovation units incubators

pursue company internal projects which do not fit to

the corporate strategy [9].

Figure 3: Consitency matrix.

The result of the analysis show that the factors

documetability and personal bond are only influenced

in a short amount and therefore can be excluded as

type-forming characteristics. Regarding the four

remaining factors it can be stated that the complexity

is influenced from the dependence of the core

business and the content of innovation, however does

not influence these factors. Type-forming factors

however have an influence on other characteristics,

therefore the complexity can be excluded as type-

forming factor as well.

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4.3 Innovation Types within Corporate

Incubator

Based in the identified three type-forming and three

type-describing characteristics, innovation types

within a corporate incubator can be derived. Even if

not all the theoretically possible combinations of the

characteristics are covered, six types of transfer

objects from corporate incubators were identified

which are common in industrial practice. The six

types are described in the following.

4.3.1 Internal Product Innovation

The internal product innovation is characterized by

being a new or changed physical product developed

through the corporate incubator and close to the

corporate core business. The source of the idea is a

company internal employee. Internal product

innovations tend to be associated with low

complexity and are mainly based on explicit

knowhow. The internal product innovation is a

common innovation within a corporate incubators

especially if the incubator focusses on a strong

cooperation with its parent company.

Figure 4: Characteristics of internal product innovation

4.3.2 Incubator Product Innovation

The incubator product innovation is characterized by

the origin of the idea within the incubator. Corporate

stakeholders are not involved in the idea generation

process. The resulting knowledge is predominantly

available in explicit form and the innovation is

referenced to the core business of the parent

company. Therefore the complexity of the product

innovation can be regarded as low and there is no

personal bond. The development of incubator product

innovations is a common approach within corporate

incubators. The incubator employees are empowered

to think outside the day-to-day business and generate

own ideas.

Figure 5: Characteristics of incubator product innovation

4.3.3 Incubator Business Model Innovation

Business model innovations which come from

employees outside the organization are called

incubator business model innovation. The source are

primarily employees of the incubator, but can also be

external incubator stakeholders such as customers.

Incubator business model are predominantly in the

core business and thus relate to existing competences.

In addition, business model innovations are based on

tacit knowledge, rather less complex and non-

personal bonded.

Figure 6: Characteristics of incubator business model

innovation

4.3.4 External Process Innovation

External process innovations are characterized by

their technological focus. As mainly technology

developments they lead to improvements or changes

in process flows within the organization. The origin

of the innovations can be found externally, especially

university cooperation play a decisive role for

external process innovations. The innovation is not

personal and can be integrated without restrictions

within the organization, although the ideas are

contributed by external experts. Technological

knowledge is available in both explicit and tacit form

(Gopalakrishnan et al, 1999). On the other hand, the

complexity of such innovations is to be regarded as

high.

Types of Innovation within Corporate Incubators

321

Figure 7: Characteristics of external process innovation

4.3.5 External Product Innovation

The external product innovation is characterized by

the external origin of the idea. Especially startups can

be seen as a major source for external product

innovations. The focus of this innovation type is

therefore a business area outside the core business.

External product innovations thus define new fields

of activity for the organization, which means that the

transfer process involves a large amount of explicit

and tacit knowledge. The complexity of external

product innovations is therefore high. External

product innovation are often bond to the founders of

the idea, so that they need to be integrated into the

parent company as well.

Figure 8: Characteristics of external product innovation

4.3.6 External Business Model Innovation

An external business model innovation is an

innovation developed within the incubator which lies

outside the core business. The innovation is not about

a product, but about the way value is generated (a new

business model). Like an external product innovation,

the source is mainly an external startup and like an

internal business model innovations, the complexity

is rather low. Due to the external source of

innovation, these types of innovations are often

person bonded, with a high amount of tacit

knowledge.

Figure 9: Characteristics of external business model

innovation

5 CONCLUSION & FUTURE

RESEARCH

Organizational ambidexterity helps companies to

pursue incremental and radical innovation at the same

time. Corporate incubators are one possibility to drive

radical innovation outside existing corporate

structures. Due to the strategic alignment and needed

resources, many of the innovation from a corporate

incubator are transferred into the parent company.

However this innovation transfer is a major challenge

for established companies. One important aspect

within a transfer process is the transfer object. So far

characteristics of innovations from corporate

incubators were not sufficiently examined in

literature.

In this research paper, we presented an approach to

characterize different types of innovation from corporate

incubators. In total ten characteristics that influence the

transfer process were identified. These influencing

factors were used to derive six types of innovation from

corporate incubators. The different types were described

based on their specific type-forming and type-describing

characteristics.

The research paper states a contribution to a

model of innovation transfer from corporate

incubators which the author develops in his research.

Based on the different innovation types, type specific

requirements on the transfer process will be derived

in future studies. The full model will finally be able

to take all relevant influencing factor of a transfer

process into account and give an instrument for a

situation and context specific design of a transfer

process from corporate incubator.

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