How do rumours shape the innovation of a product?

Rumours are essentially bits of provisional knowledge which are not validated, but to the ears of managers developing new products, rumours can be collectively used as a form of open innovation.

The idea that rumours can be useful information to a firm prompted business researcher and assistant professor Timothy Hannigan to delve into the different forms that knowledge can take in practice. Prior work on the sociology of rumours has long shown that people do not pass rumours on for the sake of entertainment, but in some contexts they use this information to help them make sense of ambiguity. One such context is open innovation.

A major issue with open innovation is referred to as the paradox of openness; if a company is too open, they risk other organizations appropriating their intellectual property, and yet being too closed prevents companies from accelerating internal innovation or finding markets for their intermediate innovations. A notable case illustrating this challenge is Xerox PARC in the 1970s, who were not able to directly commercialize many innovations such as their computer graphic user interface or Internet technology that are now commonplace. This paradox of openness is what intrigued Hannigan and his colleagues to explore how organizations can find ways to overcome this challenge.

The paradox of openness is at its core a problem of information flow as managers choose what information to disclose to other firms and what information to focus on as insights. In the firm studied by Hannigan, product innovation rumours based in technology blogs were regularly used across the organization and in concert with other information from more legitimate sources. They found that knowledge flows were not always based on formal partnerships. Prior research shows that individuals embracing knowledge flows face barriers for approval in their organizations as well as integration costs. One solution to these challenges has been selective revealing, where some intellectual property, or computer code as an example, is shown to demonstrate the knowledge on hand.

"While product innovation rumours can provide insight without explicit open innovation arrangements, it also helps managers to weigh the potential strategic use of leaks from their organization-the surreptitious form of selective revealing," says Hannigan.

Open innovation can take the form of purposive knowledge flows, both inbound and outbound. Examples of inbound knowledge flows include acquiring new knowledge through awards through online innovation contests or sourcing knowledge from external collaborators via ongoing relationships. Examples of outbound flows include selling intellectual property as patents.

"Obviously information exchanges during product development is essential," states Hannigan, "but it is not always immediately clear who to share this with. Product rumours viewed and used as 'soft' openness can draw information from external constituents without entering into legally binding agreements or formal collaborations. Managing this type of information clearly has implications for the firm's ability to recognize the value of new information and how to incorporate it into their development and market release strategy."

In recent years, open innovation has been further developed by business scholars as a means of studying how firms can create value, even when they face the challenge of not being able to directly commercialize R&D and their innovations. Provisional knowledge can be used in ways that may be informing rather than validating, such as justifying a decision to stakeholders.

"Even in an environment where a firm's policy states that their employees are not to individually interact with social media when it concerns the firm's intellectual property," says Hannigan, "we noted that the firm's engineers and other employees were referencing product rumours in presentations and making use of this type of provisional knowledge."

This research reveals that rumours have a seat at the table when it comes to product innovation and business leaders may wish to have policy discussions with their employees regarding how rumours are used as part of a portfolio of other information-rather than just allowing this process to unfold without concerted direction.

The article, "Product innovation rumors as forms of open innovation" by co-author Timothy R. Hannigan is published in the journal Research Policy.

Timothy Hannigan Timothy Hannigan's research and teaching interests at the Alberta School of Business surround innovation, entrepreneurship and the dynamics of organizational discontinuities. His primary stream focuses on the pragmatic use of provisional knowledge (rumours and propositions) in sensemaking within contexts characterized by uncertainty such as open innovation, market pre-history, scandal, and early-stage entrepreneurial ecosystems. His secondary stream focuses on the interplay between facts and interpretation in determining organizational and reputational outcomes in organizations and social media. Dr. Hannigan employs a combination of big data/ machine learning computational text analysis techniques and qualitative research methods. Before joining the University of Alberta, Tim attended the Queen's University (BA Hons), London School of Economics and Political Science (MSc) and University of Oxford (PhD). He is currently an Assistant Professor of Organization Theory and Entrepreneurship at the Alberta School of Business.