Balancing knowledge sharing with protecting: The efficacy of formal control in open innovation projects

Abstract A key challenge in open innovation (OI) projects relates to the tension of facilitating open knowledge exchange processes while ensuring sufficient protection to avoid knowledge leakage. Although prior research has discussed several solutions to balance sharing with protecting, these practices either tend to lay too much or not enough emphasis on knowledge protection. In this article, we complement current research by examining whether the formal control mechanisms, prespecified behaviors and prespecified outcomes, may serve as more efficacious project management solutions. We investigate their effect on OI project performance and knowledge leakage and compare their influence with that of contracts, using a data set of 106 new product OI projects in high-technology industries. We find that prespecified behaviors influence project performance in the form of an inverted U-shape, while prespecified outcome increases project performance in a linear fashion. Contracts decrease knowledge leakage while having no influence on project performance. Our study contributes to a more elevated understanding of the role of project management in coping better with the inherent sharing-protecting tension in OI.