The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&DAmerican and European global companies, but the Asian market is growing. The businessidea seems to work for different industries, but some industries are more maturethan others. YourEncore is actively looking for industries that have a large populationof researchers who will retire during the coming years.What are the potential limitations of the new marketplaces for problemsolving and technologies?Some industries are more developed than others in incorporating open innovation intotheir overall corporate culture and innovation strategies. For the marketplaces to grow,more companies have to realize that the open-innovation model works. For P&G, theuse of external R&D partners is a necessary tool to stay competitive and it is part ofP&G’s corporate culture, according to the company.Furthermore, InnoCentive’s and NineSigma’s expansion depends on their capability tofind new problem solvers in new disciplines and new fields of science. The problemsolving marketplaces cannot expand if they do not have the skill set in their networks.This is true also for YourEncore, which is recruiting new retirees in new fields.Companies need help to articulate a problem in a way that potential problem solverswill understand. Until the seekers are skilled at specifying the problems, the marketwill not grow to its potential. In addition, external R&D networks are limited to certainproblems and stages of the development phase.Another possible limitation to market growth may be perceived intellectual propertyissues. For some companies, intellectual property is very important and their internalguidelines may limit the number of persons who can work with specific and perhapssensitive problems. However, according to these organizations, they have the appropriatearrangements for dealing with intellectual property rights agreements and othersecurity issues.Not everybody believes in the idea of trading patents and licenses in these marketplaces.For example, Paul Lerner, Vice President at General Patent Corporation, believesthat buyers and sellers will find each other without such means. According toLerner, neither can websites, which are practically free, stay in business (Lerner). LucVanmaele at Agfa-Gevaert has a different opinion and says that yet2.com has the additionaladvantage of being a great idea generator. Furthermore, Vanmaele believes thatthe need for licensing new technologies will always remain. So far, Agfa-Gevaert hasbeen successful in selling technology (patents), as well as in finding R&D-solutions onyet2.com (Vanmaele).180
THE INTERNATIONALIZATION OF CORPORATE R&DConclusionMany companies still insist they will continue to do most of their critical R&D work inhouse.Ross Armbrecht, former President of the Industrial Research Institute, says thatcompanies realize that “if they want a sustainable competitive advantage, they will notget it from outsourcing.” Companies have to focus on core R&D in-house and outsourcesome parts of the development, according to Ambrecht (Engardio & Einhorn 2005).Larry Huston at P&G also predicts that internal R&D can never be replaced by externalsources. Understanding customers’ needs and defining new problems must always bedone by the companies themselves. According to executives at Motorola, the key is “toguard some sustainable competitive advantages, whether it’s control over the latesttechnologies, the look and feel of new products, or the customer relationship.” Further,the CEO of Motorola has said that a company has to draw a line between core intellectualproperty and commodity technology. The CTO of Nokia has expressed similarthoughts, realizing that “nobody can master it all” and that companies need to focus onthe core and not the context (Engardio & Einhorn 2005). To find a balance betweeninternal and external R&D is a challenge for multinational companies today. To createand use external networks to maximize innovation will be a key competitive advantagefor companies (IFTF 2003). The marketplaces described in this chapter are just a fewresources among many.In conclusion, economic trends and increased competition have been the driving forcesfor the development of new external R&D markets. In addition, in many developedcountries, fewer people are studying science and large numbers of researchers andengineers are soon expected to retire. A network that is accessible based on need, hasaccess to technologies across industries and geographies, and is less of a risk and financialinvestment is appealing to companies looking externally for new innovations. Thefact that these marketplaces are internet-based allows for greater potential for developmentof global networks.The external R&D market is growing and extends to more industries and differenttypes of problems. However, since the organizations discussed in this study are newermarketplaces, it is unclear how large and effective they will become. Access to venturecapital and finding the skill sets for their networks are some of the challenges thesemarketplaces are facing. In addition, intellectual property, management, export controland national issues may be examples of challenges that could limit the market’s growthpotential. According to the Institute for the Future, it is expected that during the nextten years, an experiment with different internal and external R&D forms will takeplace. Some will develop and survive, others will disappear.181
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The Swedish Institute for Growth Po
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