The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&DThe present attitude expressed by the interviewees was summarized by Industry Expert II:All things being equal, yes, cost will be a key determinant. However, the most importantaspect is the quality of the clinical trials infrastructure and the competencyof those administering the trials. You don’t want to spend your money and find thatyou spent 600 million instead of 800 million, but the 600 million will not go anywhere,whereas the 800 may. It is that risk analysis that is conducted.The three objectives ranked most important to the company executives interviewed,regarding localization of R&D, were access to new technology and competence, speedto-marketand R&D alignment with market needs.6.4.1 Access to New Technology and CompetenceA centralized R&D strategy has benefits 3 , but as mentioned initially, there is a trendtoward dispersing R&D – and the issue of human capital is an important reason. If acompany is expanding within a certain area of research and needs to add more competence,setting up a laboratory in close proximity to a critical mass of front-line researchersin that field is a common strategy. This is expressed by Executive III:The one thing that we have very consciously decided, other than the recent consciousdecision to place [research facilities] close to universities, is to have dispersedsites in different locations around the world. The primary reason is to takeadvantage of international diversity; we are able to attract the best scientists even ifthey want to stay close to home.The benefits of locating close to university research have been highlighted by scholarsfor some time (Jaffe 1989, Zucker et al. 1998), and in a study of the pharmaceuticalindustry, Kyle (2004) acknowledges the trend of companies relocating to areas withstrong research universities and hospitals. In order to benefit from publicly fundedresearch at various centers of competence, one would indeed expect companies to setup R&D laboratories at a number of locations – but that strategy is also very costlysince there are productivity benefits to the co-location of research, as pointed out byscholars in organizational theory (Chacar & Lieberman 2003).6.4.2 Speed-to-MarketIt is not only the critical mass of basic researchers that attracts companies to locate newR&D facilities in certain areas. There is also the aspect of being close to other factorsthat may speed up the whole R&D process. Since the development of pharmaceuticalsis a costly, long-term process, companies aim to decrease development time and getmore patent-protected years of sales.3 Chacar & Lieberman 2003 provides a good overview of the benefits and costs of R&D centralization.159