The Role of Formal and Informal Control Mechanisms in Collaboration Strategies for Fostering Innovation

Abstract

The primary objective of this article is to address the existing gap in the literature on open innovation. The authors are motivated to investigate the role of control mechanisms in facilitating the process of innovation creation. The current epidemic has resulted in substantial changes across various sectors, leading to a notable surge in the utilisation of open innovation among small and medium-sized enterprises (SMEs) and startups. The COVID-19 pandemic has heightened the importance of collaboration and innovation, prompting SMEs and startups to actively seek opportunities for synergy. By means of collaboration, these entities have the ability to combine their resources, knowledge, and expertise to develop innovative solutions that specifically target the challenges presented during a crisis. Furthermore, these synergies not only aid in navigating uncertainties but also contribute to effective market positioning, ensuring success during times of crisis where agility and resilience are crucial. The analysis of the data from 259 Indonesian SMEs was conducted using the Partial Least Squares (PLS) methodology. The study's findings indicate that collaboration between SMEs and startups serves as a catalyst for promoting innovation. The results also highlighted the importance of collaborative exploration in promoting radical innovation through output and behavioural control. Furthermore, it has been recognised that implementing a clear and uncomplicated organisational structure can facilitate the process of adapting to changes and fostering effective collaboration within businesses. The findings of this study are valuable for scholars, entrepreneurs, and small and medium-sized enterprise (SME) owners. They emphasise the importance of collaborative exploration as a significant approach that can potentially result in radical innovation.