Amongst the important dynamic capabilities of the firm, the most critical are the processes that ensure effective integration and learning. Integration has long been recognized as a major task of management especially in R&D departments with scientists n engineers from specialized disciplines and in large firms with specialized functions and divisions. And as we have seen many times already continuous learning is central to the survival and success of firms operating in changing and complex environments.
The trick in innovation strategy is to be able to do both together. Effective learning in innovation requires strong feedback between decisions and their implementation (in other words between the analysis and action) and this often requires the effective integration of information and knowledge across functional and divisional boundaries. In the literature on innovation management, probably the best known and the most studied of these interfaces is between the R&D and marketing functions. This and others closely related to the implementation of innovations will be discussed.
Here we shall concentrate on three areas where integration and learning are essential for the success of innovation strategy: the location of R&D (and other technological activities) within the corporation; the role of the R&D and related functions in determining the allocation of corporate financial resources and the links between innovation strategy and corporate strategy. Through this articles we will use the term R&D, but in many organizations there is no such group or function. For example, in the service sector the locus of such activities is often in groups called business development or technology or in the marketing function. Similarly in smaller firms such activities often occur in design or technical support. Whatever the term used the issues are similar. We shall emphasize the nature and the importance of the tasks to be addressed , rather than the specific procedures designed to implement them. At the very least, these will probably require the exchange of information across organizational boundaries within the firm. Given the importance of transferring accumulated tacit knowledge they will be all the more effective if they involve the mobility of practitioners across organizational boundaries. This is consistent with more recent notions of open innovation rather than closed innovation which relies on internal development. For a study of Japanese practices in this respect see Kenney and Florida.
Locating R&D activities, building organizations that are responsive to change, i.e. are capable of continuous learning is one of the major tasks of innovation strategy. The R&D and related technical functions within the firm are central features of this capacity to learn. However, as can be seen, the nature and purposes of a large firms’ technological activities vary greatly. Contrast R&D activities of interest of different parts of the firm;
1) Corporate level: time horizons are long, learning feedback loops slow, internal linkages weak, linkages to external knowledge sources strong, and projects relatively cheap.
2) Business unit level time horizons are short, learning feedback loops fast, internal linkages (with production and marketing) strong, and projects expensive.
Balancing these various activities is a demanding activity choices between (1) R&D (and other technological activities) performed in the operating divisions and in the corporate laboratory , (2) R&D and other technological activities) performed in the home country and in foreign countries.
Until recently a useful rule of thumb for deciding where R&D should be performed waste following:
1) R&D supporting existing businesses (i.e. products, processes , divisions) should be located in established divisions.
2) R&D supporting new businesses (i.e. products, processes, divisions) should initially be located in central laboratories then transferred to divisions (established or newly created) for exploitation.
3) R&D supporting foreign production should be located close to that foreign production and concerned mainly with adapting products and processes to local conditions.