The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&DA survey of over 200 large companies world-wide showed that an increasing share ofcompanies relied heavily on external sources of technology. The share was about85 percent in 2001, up from 30 percent in 1995 for North American companies, and upfrom 47 percent for Japanese and European companies (Roberts 2001).2.1.4 From Traditional to Distributed InnovationThe growth of external R&D indicates a shift away from the traditional in-house R&Dmodel and the big corporate labs, such as Palo Alto Research Center (PARC) by Xeroxand Bell Labs by AT&T.Large companies have realized that it is costly and risky to research and develop alltechnologies in-house. Increased competitive pressure requires companies to find waysto get more R&D for less money. These strategies include, consolidating current efforts,refocusing on core competencies, aligning R&D more closely with business plans(less long-term research), moving R&D costs to suppliers and using new advancedresearch and design tools, as well as looking outside the company for knowledge, technologiesand innovations.The result of these efforts is increased external investment, trade and collaboration withsuppliers, competitors, customers, research institutes and universities to pool resourcesand reduce risks. Companies such as IBM, Intel, Nokia, Merck and GlaxoSmithKlinehave to various degrees adopted this model of distributed or “open” innovation (see forexample Chesbrough 2003, Hauser 2005, BusinessWeek 2006).At the same time, a whole host of smaller high-tech companies are increasing theirshare of R&D (see above), with support from a growing venture capital industry, extendingand strengthening innovative capabilities and front-line R&D outside largecompanies. This environment or external “innovation market” is supported by universitiesengaged in commercialization and licensing of research results, large companiesspinning out non-core projects and technologies, and individual researchers and engineersoffering their services through problem-solving companies such as InnoCentiveand NineSigma, thereby reaching talent worldwide.In the new model of distributed innovation, the internal R&D effort by the company issupplemented by an inflow of external research projects, venture investing, technology inlicensingand technology acquisition. At the same time, knowledge and innovations areflowing out in the form of R&D and technology spin-outs, licensing and sales, thus generatingincome for the company. The challenge for companies is to manage and integratethese internal and external flows into a coordinated innovation process, sometimes reachingacross national borders creating international or even global corporate innovation networks(Kuemmerle 1997, NRC 2002, Chesbrough 2003, Karlsson 2004).62