The Internationalization of Corporate R&D

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