Network Development Phase 1: Initiation

The initiation phase focused deeply on understanding each other’s mutual needs as well as how to leverage capabilities and resources that each partner could bring to the table. For the university, this meant devoting diverse expertise, drawing external partners, and negotiating fair IP rights. For the business, this meant ensuring that academic goals were still capable of being achieved and bringing unique challenges to the table. This stage of the relationship was built purposefully; yet, it grew organically and was responsive to dynamic changes that required a shift in strategic focus. Once the project initiated, the processes which governed the relationship were adaptive, as there were not a formal planning procedures drafted at this this stage.

The story initiated with informal interactions between three key individuals. They met at a Government sponsored event that was designed to inform universities and business how to interact engage with one another.

4.4.1.1 Finding a Common Language for Knowledge Exchange

The external environment for both parties indicates a sense that each are undergoing a period of strategic renewal and their credentials provide evidence of their potential to provide opportunities to partners, however they have also indicated that a selection of prior relationships have not developed in a fashion that provide equivalent benefits and that “one size does not fit all.”

142 There was a common dissatisfaction between both partners in defining a business model that produced sustained results, and this provided the common language necessary to initiate discussion with key actors at the forefront. However, the initiation process was much more complex. The group needed to define the tools that were necessary to communicate the ‘how’ and the ‘why’ effort should be expended on development to a wider audience. Several factors contributed to this stage. Durham was identified as working on interesting science and things that were relevant to P&G. There are varying degrees of research objectives that exists between academia and industry, and Durham’s interest in the practical application of fundamental research and ‘real’ world applicability was attractive to P&G.

During a meeting with some of the participants, it was stated that “P&G was trying to change direction – the objective being to turn intent into reality – to turn investments into project proposals and looking to establish major programmes to invest.” Each partner has a wide variety of partner to select from, yet where other relationships have failed to meet the ‘scale’ of the vision each had, yet this relationship continues to grow.

An interview participant from P&G indicated that, “When we scouted the whole academic eco-system in the UK, Durham quickly rose to the top. Both as having lots of things that we were interested in, but also upon the very first interactions, an entity that we could really work with. And to be very blunt, some of the universities don’t want to be bothered.”

Another element of common ground between organisations lied within the geographic proximity of sites and the ability to engage in deeper resource sharing. This offered advantages for the relationship in terms of the ease to increase the depth and degree of interaction, allowing for higher frequency of interaction important for social capital to form. This ease and frequency of early interaction enabled a more comprehensive understanding of each other’s resources and capabilities to be learned. For example, an early interaction lead P&G to learn of the potential to access DU’s microscopy expertise, which has since enabled more efficient analytical processing for P&G’s regional Innovation Centre. Also, a brief conversation among technical experts from DU and P&G staff led to an immediate financial saving and resolution to a technical challenge faced by P&G. These events created powerful insight into the hidden value that could be unlocked through a formal relationship, if challenges surrounding its efficient management and coordination could be overcome. Several interviewees attributed the geographical proximity as a primary contributing factor to the development of the relationship. P&G’s Newcastle Innovation Centre is 22 miles from Durham University’s Science Site. One

143 of the stories about how the relationship began involves the UK formulation centre, which ran at Durham. P&G’s Newcastle Innovation Centre was sending data back to the Cincinnati location to be analysed. During an early meeting, Durham’s capability for this type of analysis was discussed. P&G began to think “if we have been missing this trick, then we must be missing others.”

These features fostered the dialogue necessary to establish the next stage in the network evolution. Fostering a common language has been associated with the act of forming in group membership (Taijfel, 1977). From this point, three levels of networks emerged within the relationship. These formed in fragmented and self-organising ways initially and became increasingly cohesive in time as transactional relationships grew, supporting the literature of the network form of inter-organizational relationship (Barringer & Harrsion, 2005). The next three sub-sections detail each of these network levels and discuss the important mechanisms at each stage.

4.4.1.2 Master Agreement: Deterrence -Based Trust

The core challenge identified by the partners lied within the potential for conflicts about knowledge ownership and commercialization of developed technologies. Within that challenge, a further complication stemmed from the tendency among university and business relationships to have idiosyncratic contracts for each new project. The implication of this being that within any one relationship there may be many different legal contracts in place each accounting for a specific project. The need for contractual negotiations, mechanical governance, and project management complexity is inefficient and unattractive to grow an overall university-business relationship. To minimize the negotiation process, they simplified the governance of the overarching relationship and speed up project development and approval. The P&G and DU relationship established a ‘master agreement’ to govern the nature of knowledge ownership, intellectual property and technology commercialization on a scale that covers the university rather than any one individual. This governance approach is unusual and non-standard practice, but this allowed the relationship to grow and scale very quickly. For example, in the first year of the relationship alone, 7 number of projects were set up and over the course for the next 4 years, a further 55 projects were established.

Cited by many interview participants the IP arrangements have been commended as being unique and allows for an ease of coordination. However, another participant stated a different perspective:

144 I think the IP terms are a more practical issue. But, I think that a bigger one is the more heart of it is the cultural difference. It’s where the academics place the importance of industrial science. It’s very different in the UK than it is here. It’s hugely different. American universities a long time ago now, got a bug in their bonnet about monetizing their intellectual property and they do a horrible job of monetizing their developments.

The master agreement reduced uncertainty between partners and provided a layer of deterrence based trust (Gulati, 1995). Apart from the transaction cost advantages (Williamson, 1973), there are institutional advantages to this form of coordination mechanism. This provided an explicit knowledge stock (Polyanni, 1966) that communicated the overarching objectives of the partnership and set the precedence for norms of behaviour. Specifically, the master agreement contract creates a simplified mechanism for new project development, allowing the focus to shift squarely to more strategic issues rather than diverting attention to a lengthy process of contract negotiation and the general expectation of the behaviour in the projects thereafter. This is a further component of the ‘rules of the game’ established within the early stages of the relationship that enabled far greater scope for value creation for both parties. It also lent credibility and prestige to the relationship in its early years, which encouraged more individuals across P&G and DU to become involved in the relationship. This allowed for accelerated access to resources and project formation, but also allowed both partners to respond to new opportunities to drive growth and to recruit new members (i.e. hitherto unconnected employees for both organisations) into the relationship.

4.4.1.3 Institutional Engagement: Building External Legitimacy

The early activities of the relationship were focused on collecting evidence of legitimacy to garner the external support for initiation and growth. This meant that there was a considerable effort to validate the potential. The relationship between DU and P&G began with early discussions between three individuals dating back to 2010. (There) was a dialogue with P&G a long time before the relationship actually took shape. He was meeting and having conversation with how we saw the world. How P&G saw the world and just testing out to see if there was an opportunity for a partnership there.

For instance, P&G provided Durham with the Transformative Platform Technologies (TPTs). The TPTs brought new budget and were really, we were chartered to do a lot of the work with external partners and that provided the impetus to be able to work with Durham. And then as we started to develop the TPT and what we wanted to accomplish for the company, we saw in Durham that there were lots of partnerships, lots of people that could do things that could be of value to us. In August of 2010, P&G requested a full and formal document from

145 Durham with regards to evidence of their capabilities and the resources that will be available should the relationship continue.

Of P&G’s nine key technologies proposed, Durham revealed their broad expertise in six areas and provided nineteen pieces of evidence to support this claim. One piece of work was that they shared these technology needs and they were given under headings. One of the things that we were able to do was to spend some time mapping where our expertise lie within each one of those themes. And then to align the right people to talk to them about those things. That is an example of what we did upfront to identify where the fit was.

During the early phases of the relationship, the network needed to enhance its legitimacy to the overarching external institutions. This phase was focused on providing legitimacy to the wider P&G audience. There were also reporting responsibilities. This required the partners to share operational knowledge to ensure that the projects achieved their goals. From the P&G side, this required sharing operational knowledge between and amongst Durham academics and students. This meant greater time commitment to source the internal and external knowledge sources for challenge resolution. Although the relationship was protected under the master agreement, relational trust between and amongst actors began to emerge within the network. The relationship gained momentum as frequency in the interactions gave light to the abilities, intentions, and behaviours.

4.4.1.4 Defining Expectations and Finding Shared Value

Although the master agreement outlined the contractual obligations, specifically the need for specific governance and confidentiality, there was a need for members of the network to focus on the anticipated benefits of the projects. The first project was supervised by a senior member of staff and delivered through a post-doctoral study. The initial assessment by the principle investigator indicated that the project might require a six-month timeline. However, the results were achieved very rapidly, and to the satisfaction of the partner. This initial success served as a jumping off point, in which many other projects emerged.

From there, it was determined that projects would be structured with a combination of academic and industrial supervision. The projects were managed through joint problem solving and greater knowledge sharing as the project continued. Because of this, undergraduate industrial challenges began. These projects are not big enough for grant money but they solve real problems for the company and gives the student business experience. There was considerable studentship support granted by P&G studentship funding and Durham informally

146 provided scientific consultancy on an ad hoc nature. Already, the evidence reveals a deeper integration than what is implied in the literature regarding the nature of open innovation activities by firms.

This evidence supports the notion that social capital and the development of norms began within the early stages of the network development. Both organizations were offering their resources that extended beyond the contract (Powell, 1990; Zaheer et al., 1998). However, the master agreement and the capability to establish legitimacy to the wider institutions provided the basis for this interaction to emerge.

4.4.1.5 Tipping Point – Early Project Success

These early elements of relational development revealed signed trust building, both partners agreed to start work on applying for a Northeast Regional Growth Fund (RGF) grant. This opportunity would not only require greater opportunities for continued collaboration, but also signalled a desire for greater commitment by both parties. The decision to pursue this opportunity was quick decision. The proposal needed significant attention in a very short time window. They had to move very quickly, and submitted within a couple of months. Once they were awarded the grant, the PhD recruitment took two years to fill. Much of the early relationship building was in response to the requirements stipulated by the RGF.

The successful alignment and coordination during this phase provided the network with the opportunity to grow beyond the contractual elements that often delayed the progress of their other partnerships. The ease at which this was completed provided both sides of the partnership with satisfaction, and leant the relationship prestige. This provided them with the momentum to facilitate greater collaboration.