Lecture 8 The Importance of R&D
Transcript of Lecture 8 The Importance of R&D
Chapter 8:
The Importance of Research andThe Importance of Research and
Development (R&D)Development (R&D)
Introduction
In the past, technology was absent in strategic management thinking and practice
“Technological innovation traditionally had been potrayed largely as a subject separate from other management practices, including strategy”
“A strategy when related to technology was considered as belonging to the realm of R&D”
“Technology was treated as implementation issue: a firm determines its strategy and this drives how technology will be used”
However, since early 1980s there has been a real acceptance of technology’s strategic importance in decision making.
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What is Research?• Research
– Discover new knowledge – Seek answers to questions
• Basic research– Goal: Expand man’s knowledge (e.g., which genes control social
behavior of honey bees? )– Often driven by curiosity (but not always)– High impact examples: relativity theory, DNA, …
• Applied research– Goal: Improve human condition (i.e., improve the wolrd) (e.g., how to
cure cancers?)– Driven by practical needs– High impact examples: computers, transistors, vaccinations, …
• The boundary is vague; distinction isn’t important
Why Research?
Amount of knowledge
Advancement of Technology
Utility of Applications
Quality of Life
Basic ResearchApplied Research
ApplicationDevelopment
Curiosity
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5 Elements of a Research Proposal
• Problem statement– Motivation: Raise the research question– Define the question – Benefit of solving the problem
• Previous/Related work– What do we already know about the problem? – How would the proposed research increase our knowledge?
• Research plan– How do you plan to solve the problem? – Justify your plan (analytical, preliminary results)– Evaluation plan
• Research management– Schedule, milestones, fallback plans
• Resource needs
R&D Strategy
“ Definition of the set of R&D projects required to achieve the fixed objectives in terms of technology acquisition defined within the overall strategic framework of the firm”
Key terms:•A set of R&D projects is the actual output of the R&D strategy •Technology acquisition refers to acquisition of technology, either internally developed or externally acquired (including the variety of collaborative forms that are needed)•The technology is not good per se, but has to be useful to achieve the firm’s overall objectives and therefore there needs to be consistent between the decision of technology acquisition (and ultimately the set of R&D projects planned) and the firms’ overall strategy.
Note: Take note, that the ultimate objective of R&D management inthe context of firms is to create sustainable financial profit for the firm – profit oriented.
R&D Strategy
Organisation e.g: a firm
External environment
Internal environment
R&D Strategy
Formulation of the firm’s technology strategy
Fixes the overall framework and objectives of the process of technology acquisition, and therefore identifies the technologies to be developed/acquired.
R&D project portfolio definition
Structure such strategy into “projects” and allocate the resources available among these projects.
Stages of technology development
• Basic research– Generic knowledge– Exploration of curiosity
• Applied research– Specific knowledge for mission purposes or
breakthrough• Development
– Proprietary knowledge of novel application systems, or products
• Technological enhancement– Continuous innovation for market value
Technology portfolio• Diversity of technology investments
Basic/applied Research Emerging technology
New generation technology Product/process innovation
Technology transfer
Maintenance of competitive advantage (product/process/market)
Emerging stage
Growing stage
Mature stage
Justification of R&D expenditure
Commitment
Uncertainty
Low Middle Large
High Overhead expense
Middle Options of Strategic R&D
Low Return of investment
Commercialization oriented R&D
Exploration oriented R&D
Conservative approach
for shareholders’ interests
Risky approach for
seizing potential
opportunity
The government and military role in R&D
• Mission-oriented R&D– Meeting the exploration task & functionality
requirement regardless of cost• Diffusion-oriented R&D
– Commercialization purpose– Employment consideration– GDP growth – Industry reformation & transformation– Competitive advantage for global exports/market entry – Cost sensitivity
Global management of R&D• Consideration of technology acquisition
– Technology-push innovation• Coping with the variation of local customer preference
– Market-pull innovation• Meeting the transformation of regulation (host & guest
countries)• Outsourcing the manufacturing partners• Japanese style global R&D: establish the information
division for product differentiation • European style global R&D: acquiring the entire sources
of startups• American style global R&D: hunting the oversee talents
through global R&D laboratories
The R&D continuum
Europe’s R&D expenditure league (2010)
R&D expenditure across industry sectorsSource: www.innovation.gov.uk/rd_scoreboard (2010).
Comparison of share price performance of R&D-intensive firms and the FTSE 100 firms
Classification of areas of research emphasis in industry and university
Strategic role of R&D as viewed by the businessSource: EIRMA (1985) ‘Evaluation of R&D output: working group report, 29’, European Industrial research Management Association, Paris; P.A. Roussel, K.N. Saad and T.S. Erickson (1991) Third Generation R&D, Harvard Business School Press, Boston, MA.
Description of five generations of the R&D processSource: Nobelius, D. (2004) Towards the sixth generation of R&D management, International Journal of Project Management, Vol. 22, 369 –75.
Strategic pressures on R&DSource: Adapted from G.R. Mitchell (1988) ‘Options for the strategic management of technology’, UNESCO Technology Management, Interscience Enterprises Ltd, Geneva.
The R&D strategic decision-making process
Classifying the level of research using technology leverage
Comparison of R&D expenditure within the European pharmaceutical industrySource: www.innovation.gov.uk/projects/rdrscoreboard (2006).
The Basic R&D Process
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreation
The Basic R&D ProcessRecording
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreation
CRIS (“a CurrentResearch Information System, commonly known as "CRIS", is any information tool dedicated to provide access to and disseminateresearch information”)
The Basic R&D Process+ Feedbacks
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreation
CRIS
The Basic R&D ProcessReview
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreationreview review review review
The WorkProgrammeWorkProgramme Process
Workprogramme
Economic factors
Societal factors
Technology Foresight
CRIS
World / Country State DBWorld / Country Models DBTechnology Prediction DB
Solicited Advice
The Proposal Process
ProposalProposal
IdeaIdea
Review Previous WorkReview Previous Work
ObjectivesObjectives
MethodMethod
Resources andResources anddependenciesdependencies
CRIS
Previous Results DBPrevious Projects DB
Human Resources DB Finance DB
The Project Process
Project
CRIS
Previous Results DBPrevious Projects DB
Human Resources DB Finance DB
Project ManagementSystem
The Results Process
Results
CRIS
Previous Results DBInitial Results
Internal Review
Peer Review
Publication orRegistration
The Exploitation Process
Exploitation
Marketing Information DBEconomic Information DB
CRIS
Results
Business Plan
Finance
Production
Marketing
Selling
The Wealth Creation Process
Exploitation
WealthCreation
Marketing Information DBEconomic Information DB
CRIS
marketing
production
employment
The Basic R&D ProcessRecording WorkProgrammeWorkProgramme
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreation
ProgrammeName
Funding
OrgUnit
Person responsible
Contact
The Basic R&D ProcessRecording Proposal
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreation
Title
Abstract
Person(s)
OrgUnit(s)
The Basic R&D ProcessRecording Project
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreation
Title
Abstract
Person(s)
OrgUnit(s)
Funding
The Basic R&D ProcessRecording Results-Product
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreation
Title
Abstract
Person(s)
OrgUnit(s)
Project(s)
The Basic R&D ProcessRecording Results-Patent
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreation
Title
Abstract
Person(s)
OrgUnit(s)
Project(s)
The Basic R&D ProcessRecording Results-Publication
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreation
Title
Abstract
Person(s)
OrgUnit(s)
Project(s)
Bibliographic Information
The Basic R&D ProcessRecording Results-Publication
• Bibligraphic Information• Have already
– Person: [author|editor], OrgUnit: publisher, Title, Date• Need
– Persistent URL / DOI (for e-repository)– Full bibliographic reference in components
• journal | conference proceedings | book | monograph• Series (if any), volume, issue number, pages…
The Basic R&D ProcessRecording Exploitation
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreation
Business planFinance
MarketingProduction
Sales
The Basic R&D ProcessRecording Wealth Creation
Workprogramme
Proposal
Project
Results
Exploitation
WealthCreation
Annual Reports/AccountsEmployment
Dividends
Firms’ R&D Firms’ R&D cooperation cooperation strategies:strategies:
Partner SelectionPartner Selection
CooperationCooperationo Extend technological capabilitieso Integrate into firm production processes technological
knowledge coming from different sources;o R&D alliances strategies followed starting from the late '80s
2 aspects inherent to the R&D cooperation
process: the needthe need to share costs and risks with partnersto share costs and risks with partners
to access to complementary knowledge to access to complementary knowledge
Aim of Firms’ cooperation Aim of Firms’ cooperation strategies strategieso Introduce a new product (or process) in a brief time span; o Have a rapid and privileged access to new knowledge increasing
the firms' understanding of scientific developments (Belderbos)
The main research interest resides in four broad areas:
1. The motives which induce firms to form these alliances; 2. the selection of partners; 3. the management of the alliances,4. the measurement of alliance performance (Bayona et al.,
2001)
PROCEED
PartnerPartner selectionselection• The partner selection is one of the most critical
decision for a firm when forming an alliance as the simultaneous management with multiple partners cause a rise in complexity and coordination costs
• use of a multinomial logit model
Three different cooperation strategies:
market cooperation
mixed cooperation
science cooperation
R&D cooperation with market partners (suppliers, clients or competitors)
The choice among The choice among three main strategiesthree main strategies
R&D cooperation with science partners (public research institutes and universities)
with both market and science partners.
Theoretical Approaches Theoretical Approaches in the Analysisin the Analysis
1. The industrial organization literature (IO)has focused on incoming and outgoing spillover incoming and outgoing spillover as the major determinants of R&D cooperation strategies.
2. The second theoretical approach followed is grounded in the management literature. It applies transaction transaction cost approachcost approach that may favour the sharing of costs and risks among partnership participants (e.g. Das and Tend, what determines how firms choose different partners)
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Firms cooperating with…Firms cooperating with…o
PublicPublic institutions institutions
Universities Universities
Foreign and Foreign and Domestic Domestic
partners partners
Lhuillery and Pfister (2009) collaboration with competitors may induce failures differentiating among vertical partners.
CompetitorsCompetitors
Face less cost constrains while it is not the case for firms cooperating with rivals.
Cincera et al., (2003) found negative result on firms' productivity collaborating with foreign partners and may be affected even by international R&D cooperation
are targeted in order to pool complementary resources together.
Determinants of R&D cooperationDeterminants of R&D cooperationo Incoming spilloverso Approprialityo Firm sizeo Cost of innovationo Subsidieso Participation in a multinational groupo International statuso R&D expenditures
MAJOR FACTORSMAJOR FACTORS
INCOMING SPILLOVER: external flows of knowledge that a firm may be able to grasp directly from partners or from other sources of technology such as patents, publications, meetings and so on….
COST OF INNOVATIONS: high costs for innovation induce firms to search for a partner to alleviate financial problems and reduce costs
Incoming spillovers Incoming spillovers If they are high: may induce firms to collaborate and it may result more profitable than non cooperating strategy. Firms in high-tech sectors prefer horizontal cooperations especially when the costs of innovation are high .
oOn the other hand, the possibility of knowledge leakages may increase firms' willingness to take advantage of partners R&D investments. ocollaborating with research organizations = higher incoming spilloversoFirms attempt to minimize outgoing spillovers and maximize incoming spillovers.
EU GUIDELINES FOR R&D EU GUIDELINES FOR R&D COOPERATIONCOOPERATION
“Collaboration in the field of research and development as well as knowledge transfer activities between the
Community and third countries should be based on clear and uniform recommendations and practices that ensure
equitable and fair access to intellectual property generated through international research collaborations, to the mutual
benefit of all partners involved.”
o Identification of the respective interests of the parties
o Participant’s knowledge transfer policy
o IP* strategy and exploitation model of the partner
o Identification of background IPo Identification of personnelo Identification of the partnerso Due diligence evaluation of new
partners o Freedom-to-operateo Analysis of the legal system,
particularly the IP framework, of a o partner's countryo Cultural issues relating to contract
negotiation and execution of o contracts o Drafting R & I collab.agreement
*intellectual property
STAGES TO CHOOSE A PARTNERSTAGES TO CHOOSE A PARTNER
Science CooperationScience Cooperation
UCB and Harvard University UCB and Harvard University announce new research allianceannounce new research alliance
The new alliance creates a unique drug discovery bridge between industry and academia. It pairs Harvard’s long-standing excellence in medical research with UCB’s expertise in drug development
-It’s about collaboration-It’s about collaboration-it’s about innovation -it’s about innovation -it’s about sharing ideas. -it’s about sharing ideas.
Harvard will benefit from UCB’s strengths and industry experience in drug discovery and development; while Harvard’s exceptional research will complement UCB’s internal expertise.’’
Case StudiesCase Studies
MarketMarket cooperationcooperation
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Matheson Tri-Gas, Inc., a global manufacturer and supplier of industrial, medical, electronics and specialty gases and welding supplies headquartered in Basking Ridge, N.J., has announced the completion of the acquisition of Continental Carbonic Products Inc., an Illinois-based manufacturer and supplier of dry ice and liquid carbon dioxide.
Going forward, CCPI presents a tremendous opportunity for MATHESON by providing a new platform for growth and extension of our product offering.
Mixed cooperationMixed cooperation
+ Prompt, Québec’s premier ICT R&D consortia, altogether with McGill University and the California Institute for Telecommunications and Information Technology has announced another key milestone towards the development and application of environmentally sound ICT-based infrastructure and networks
Benefits•increase energy efficiency •reduce carbon emissions across university campuses, companies and government departments.
Continue…
• Focus on maximizing the positive environmental benefits of ICT
• Building on the results of an initial strategic planning meeting hosted in October in San Diego, California, the workshop brought together more than 35 participants from industry, academia and government. This included representatives from emerging companies across Quebec to multinational industry leaders such as Ericsson, IBM and DMR-Fujitsu that maintain a strong R&D presence in the province.
Delegates identified three key priorities for the proposed consortium:
• green telecommunications, • wireless access, • intelligent transportation systems.
Partnerships create Partnerships create new opportunitiesnew opportunities
• "This workshop enabled us to develop specific tactics that will help translate our vision into action, while making important progress on the implementation of our Green ICT Strategy,” Together with our partners, we will focus on technological collaboration, governance and intellectual property management support the launch this new Canada-California Consortium, and provide entrepreneurs with new opportunities to capitalize on growing market for Green ICT.”
• said Dr, Charles Despins, President and CEO of Prompt.
• “The University of California recently hosted the Third Governors’ Global Climate Change Summit, which called for collaborative action that enables the development of a green economy; technology will play an important role in this equation,” said Jerry Sheehan, Chief of Staff at Calit2. “This workshop reinforced how Canada-California R&D cooperation in green ICT could help to achieve this goal and influence others around the world.”
• “This bilateral consortium promotes the development of a sustainable environment and global ICT industry,” said Pierre Coderre, Sr. Director of Technology with DMR-Fujitsu, which has three offices in Quebec. “It will enable multinational companies such as Fujitsu to leverage a network of Green ICT partners, optimize the development of new technology-based, climate change solutions, and demonstrate Fujitsu leadership in green ICT.”
ContinueContinue…
References
• Reading on «Firms’ R&D cooperation strategies:Partner Selection, written by Gussoni and Franco
• http://promptinc.org/documents/pressrelease_033110_eng.pdf• http://knowledge.essec.edu/research-highlights/research-and-development-
do-alliances-always-help.html• http://ec.europa.eu/research/innovation-union/pdf/
international_cooperation_guidelines_erac_kt_group.pdf• http://win-health.org/ucb-and-harvard-university-announce-new-research-
alliance-demonstrating-how-academia-and-industry-team-up-with-the-interest-of-the-patient-in-mind/
• www.rdmag.com• http://www23.statcan.gc.ca/imdb/p3Instr.pl?
Function=getInstrumentList&Item_Id=137294&UL=1V&
• http://www23.statcan.gc.ca/imdb-bmdi/instrument/5171_Q1_V2-eng.pdf
• http://www.youtube.com/watch?v=fMnhEfvF3og