Academic journal article Research-Technology Management

Strategies for Global R&D: A Study of 31 Companies Reveals Different Models and Approaches to the Conduct of Low-Cost R&D around the World

Academic journal article Research-Technology Management

Strategies for Global R&D: A Study of 31 Companies Reveals Different Models and Approaches to the Conduct of Low-Cost R&D around the World

Article excerpt

One of the world's best-managed companies, General Electric, operates four corporate research centers around the globe--in Niskayuna (New York), Bangalore, Shanghai, and Munich. Niskayuna is the largest and oldest lab (1,700 scientists, started 1900) and Munich is the newest (100-plus scientists, started 2003). In 2005, General Electric had more than 2,000 employees in its John F. Welch Technology Center in Bangalore, serving both its corporate research group (approximately 600 of the 2,000-plus employees) and multiple business units, and doing applied as well as fundamental research--all at a fraction of the cost of the Niskayuna research center. And, although GE's Bangalore technology center was officially started in September 2000, it is obvious that the company's India R&D strategy started much earlier, having evolved from its market presence in diverse industries (power, medical, appliances, plastics, and finance).

GE and many other companies are engaging in this new wave of "globalization" for another important reason as well--markets. It has become widely accepted that the BRICs (Brazil, Russia, India, China) now comprise a large and powerful market. With 3 billion people, dramatic GDP growth rates (7-15 percent), and a growing and wealthy middle class of several hundred million people, it is difficult to deny the possibility that the next era of global economic growth will be built on the foundation of the BRICs.

Visionary global corporations can tap into these exploding markets by tapping into unique (indigenous) sources of innovation, re-architect products and services, and become global-local players. At the same time, selling products in these markets is not going to be simple; instead of simply "adapting" current products, companies will need to invent and innovate with these markets in mind. Many researchers and company executives agree that most multinationals have so far generally failed to penetrate these markets (1).

GE's global R&D strategy and its R&D center in India exemplify the kind of shifts in R&D and product strategy that almost every industry is going through. For each of the six industries my colleagues and I studied-semiconductors, automotive, software, high-tech equipment, mobile communications, and pharmaceuticals--it was clear that the "how," "where" and "why" of knowledge work is changing, albeit in varying degrees. Much of this has been largely enabled by recent shifts in digitization, data connectivity and communications, and the availability of high-quality scientific and technical talent in China, India, Israel, Hungary, Philippines, and elsewhere.

Not every company can identify and capitalize on opportunities as well as GE has, but it is clear that globalization of R&D is one of the key strategic decisions that almost every company--domestic or multinational--has to make. Over the past 15 years, I have researched, taught, consulted, and also managed businesses dealing with such issues. It is clear to me that globalization has arrived, again!

Defining R&D

Research and development covers a range of activities and it is important to classify these key activities to provide a basis for discussion. Although there is a range of definitions, the simplest and most commonly accepted one acknowledges six types of R&D activities--basic research, applied research, new product development, product adaptation and extension, product support engineering, and process engineering; the first two are normally classified as "research" and the last four as "development." Companies use a range of organizational, budgetary and SBU (strategic business unit) structures to manage these various R&D activities.

Why Conduct International R&D?

I shall start by reviewing why companies conduct international R&D. Access to markets and customers and to technology, and the notion of "global" products, are well-known and well-exploited dimensions. …

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