The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&Dmented with external innovation sourcing and different forms of external cooperation.“Open innovation” (Chesbrough 2003) is a term used to describe the new model inwhich the company’s R&D process is integrated with an external flow of new ideas,knowledge and technologies (Karlsson 2004).The open innovation model drives the development of a global innovation marketwhere the trade of research projects, patents, licenses, technologies, knowledge andproblem solving is carried out. Change to an open innovation model requires a changein corporate culture – a new thinking that will have to be enforced from the top to makean impact (Teresko 2004). Using global innovation networks resourcefully and findinga balance between internal and external R&D activities are challenges for multinationalcompanies (see the discussion in Chapter 2).Procter & Gamble is one multinational company that has developed the open innovationmodel, by utilizing external R&D networks and new marketplaces for problemsolving and technologies.7.2.1 Procter & GambleThe consumer product company Procter & Gamble (P&G) has been a leading user ofexternal R&D networks for some time and is among the first to use the new marketplacesfor problem solving and technologies. P&G, founded in 1837 and headquarteredin Cincinnati, Ohio, is a multinational company with 98,000 employees in over 80countries worldwide. P&G has three product categories: global beauty care, globalhousehold care and global health, baby and family care. With brands like Pampers,Ariel, Tide, Pantene, Olay and Pringles, P&G had a net sale of over 51 billion dollarsin 2005. The company’s competitors include Unilever and Johnson & Johnson. P&Ghas a large, global R&D presence with twenty R&D facilities in nine countries on fourcontinents. P&G is granted, on average, one U.S. patent per day, and has more than28,000 active patents worldwide (P&G 2006).P&G spent 1.8 billion dollars on R&D in fiscal year 2004–05. In comparison, Ericssonspent 2.5 billion dollars on R&D in 2004 (see Chapter 2). The CEO of P&G, Alan G.Lafley, decided in 2003 that the goal should be to have 50 percent of the company’sideas and innovations come from external sources – a significant increase from the2000 goal set at 10 percent (Greene 2003). Today, P&G retrieves more than 35 percentof its innovations from outside the organization (Huston & Sakkab 2006). The companyhas 7,500 researchers employed in-house all over the world. According to LarryHuston, Vice President for Innovation and Knowledge at P&G, there are an additional1.5 million researchers in the world with the same skill sets. P&G’s strategy is to includethem in its organization and expand their knowledge network.171