The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&DIn summary, it is clear that a number of factors go hand-in-hand when companies makedecisions regarding localization of new R&D laboratories: ensuring an input in theproduct pipeline through internal research excellence and external collaborations, alongwith proximity to organizations that perform good clinical trials. Market alignment is aconsideration, and tax incentives may play a role as long as there is no compromise onquality.The following is a reaction from one of the executives, who is frequently approachedby economic development officers from various countries, trying to attract big pharmaceuticalcompanies to their regions:…the magnet has to be the intellectual capital, rather than the financial capital.And to create that intellectual capital, the government needs to create an atmospherethat biotech companies can thrive in because they will then attract the bigpharma. For that atmosphere you need proximity to academic institutions, all sortsof quality of life – actually a diversity of quality so you can attract different kinds ofpeople (Executive III).6.5 The Pros and Cons of Open InnovationThe open innovation strategy, where companies’ R&D crosses over corporate and nationalborders, is nothing new to the pharmaceutical industry. Rather than relying entirely on internalideas to advance the business, an “open” approach to innovation leverages internal andexternal sources of ideas (Chesbrough 2003). Two of the executives whose companies workto intensify open innovation shared their thoughts on the pros and cons of the strategy. Theyexpressed very similar thoughts, presented in Figure 6-4.Figure 6-4 Pros and cons of an open innovation strategy for pharmaceutical companies.ProsCons 4• Allows companies to capitalize uponthe diversity of scientific excellencearound the world, by providing accessto new research ideas, personnel andcollaborations with academia and companies.• Increased visibility in multiple locationsincreases opportunities for externalcollaborations.• Duplication of facilities and infrastructure atmultiple locations is costly. (Basic infrastructureis needed for every site, whethersupporting 60 or 200 researchers.)• Stresses need for constant communication.• Local interests may override the globalinterests of the company.• If a problem arises at one location,other sites may be able to continue thework.4 There are general threats to the industry in terms of cost-containment, regulatory changes, etc., but here thefocus is on threats to an open innovation strategy.162
THE INTERNATIONALIZATION OF CORPORATE R&DThe benefits that executives experience with the open innovation strategy are supportedby Chacar & Lieberman (2003) who, in a study of 21 pharmaceutical companies, foundgeographic organization to have a significant effect on research productivity. The keyfactor was to have laboratories dispersed across countries in order to access local research.Evidence further indicated that, within the U.S., a relatively centralized organizationwas most beneficial for research productivity. The finding can be related to theissue of cost, which the interviewed executives named as a challenge to the open-innovationstrategy. An explanation as to why a company may have a centralized strategywithin the U.S., but decentralized internationally, is that “international barriers to informationflows are much greater than those that operate regionally within a givencountry” (Chacar & Lieberman 2003, p. 318).A challenge experienced by the two interviewed pharmaceutical companies that arepursuing open-innovation strategies is the coordination of R&D sites. Both companieshave systems where the sites are responsible for a specific disease area. For some largeand prioritized disease areas, there may be several sites involved. For research that isdispersed across several sites, there are coordinating committees consisting of theheads of each involved site. Then, there is coordination at the next level, where theleaders of each area meet frequently as an established group, led by the company directorof research. This group is responsible for ensuring collaboration across the organizationto optimize the utilization of technologies, systems and processes (librariesof substances, informatics, etc.).All research results should be accessible to all researchers in the company and a cultureof sharing openly is encouraged. But as Executive III expressed, keeping a constantflow of information between the sites is easier said than done:Apart from the cultural differences, just the time zone differences really put a stresson communication and make the importance of communication foremost in everybody’sminds. If we don’t work very hard at communication, then things fall betweenthe cracks and problems arise. We try and take advantage of modern communicationdevices such as electronic repositories for information and communication.It just requires constant reinforcement.The problem of communication between R&D sites is acknowledged by scholars.Allen (1977) suggested that communication between researchers falls with the squareof the distance between them. New ways of communicating have become availablesince his study, and although those have better enabled working across disparate sites,there are still big challenges in managing them (Cummings 2004).163
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The Swedish Institute for Growth Po
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