Within the framework there are no simple rules that tell managers how to strike the right balance between corporate and divisional initiatives in R&D – a situation that is further complicated by the growth of so called strategic alliances in R&D with organizations external to the firm. The histories of major firms in science based industries reveals a cyclical pattern suggesting there is no right answer and that finding, maintaining the proper balance is not easy (see, for example the long history and experience of DU Pont). Nonetheless we can identify four sets of factors that will influence the proper balance:
The firms main technological trajectory: This gives strong guidance on the appropriate balance At one extreme the corporate initiatives are very important in the chemically based – and particularly the pharmaceutical industry where fundamental discoveries at the molecular level are often directly applicable in technological development. At the other extreme corporate, level laboratories are less important in sectors like aircraft automobiles that are based on complex products and production systems where the benefits of basic advances are more indirect (e.g. The use of simulation technologies) and the critical interface is between R&D and design on the one hand and production on the other.
The degree of maturity of the technology examples of optoelectronics and biotechnology show that after the emergence of a fundamental technological breakthrough extended periods of trail, error and learning are necessary before specific technological opportunities begin to emerge. During the early incubation stage there are advantages in isolating such learning processes from immediate commercial pressure by locating them in the corporate laboratory before transfer to a more market oriented framework in an established division or internal venture group.
Corporate strategic style:
The corporate R&D laboratory will have low importance in firms whose strategies are entirely driven by short term financial performance in existing products. Such market led strategies will concentrate on the bottom row of division level funding in table and miss the opportunities emerging from the development and exploitation of radical new technologies. Such financially driven strategies became increasingly apparent in US and UK firms in the 1980s.
Links to now science based technologies. New forms of corporate linkages with basic an academic research are emerging in the new sciences that have grown out of recent advances in molecular biology, nanotechnology and IT. Advances in these fields are the basis of growth of firms spun off from universities since they have reduced the costs of technical experimental to a level where university type laboratories in research methods can make significant technical advances. This has also had the effect of increasing both the range of technological opportunities that large firms can exploit and the uncertainties surrounding their eventual usefulness. Large firms therefore prefer to explore these opportunities through collaborations until the uncertainties are reduced.
Locating R&D Activities — Global versus local
Since the 1980s, some analysts and practitioners have argued that following the globalization of product markets, financial transactions and direct investment large firms R&D activities should be globalized –not only in their traditional role of supported local production — but also in order to create interfaces with specialized skills and innovative opportunities at the world level. However, although striking examples of the internationalization of R&D can be found (e.g. the large Dutch firms particularly Philips), more comprehensive evidence case doubts on the strength of such trend. This evidence is based on the countries’ origin of the inventors cited on front pages of patents granted for the USA to nearly 359 of the world’s largest technologically active firms and which account for about half to all patenting in the USA . The information turns out to be an accurate guide to the international spread of large firms’ R&D activities.
Source: Managing Innovation