Academic journal article European Journal of Sustainable Development

Open and Closed R&D Processes: Internal versus External Knowledge

Academic journal article European Journal of Sustainable Development

Open and Closed R&D Processes: Internal versus External Knowledge

Article excerpt

1. Introduction:

Throughout history, chemical engineering firms have relied on knowledge that was pulled from external sources in regards to R&D processes, enabling them to develop and profit from their innovations (Calantone and Stanko, 2007). The conventional approach of keeping the core of organizational R&D activities in- house is starting to become less critical, recent innovation models suggest that firms should open up the R&D boarders within their organizations, enabling tapping into external knowledgeable sources to occur (Chesbrough,2003). By tapping into these external technology sources, a large quantity of the challenges that firms face in regards to short product life cycles, product renewal periods, and increases in R&D costs will subside (Rigby and Zook, 2002). However, on the adverse side of tapping into these external sources, having to search for new collaborators, do require out of pocket investments in both money and time. Because of this, the higher costs of transactions may cause firms to lose sight of the benefits that engaging in external R&D processes has. As firms are beginning to open up the R&D boarders, they will eventually be able to fine-tune and adapt their R&D configurations, external and internal processes, and build new relationships or reinforce existing relations with a diverse group of partners. Because R&D processes are crucial in chemical engineering firms and the way that R&D processes work, managers have a difficult job of finding the perfect balance amongst external and internal R&D processes that allow them to fully capture the benefits of outsourced technology sources.

The primary focus of this paper is to investigate how tradeoffs that occur amongst external and internal R&D processes can influence a firms R&D processes and innovative performance. In particular, a great deal of focus is geared towards a chemical engineering firms internal R&D capacities-internal R&D investments that are made in building knowledge of stocks-moderating the relationships between the R&D structure of a firm and the firms innovative performance. Research has revealed that a firm can efficiently tap into external knowledge sources by investing in R&D. Firms that choose to invest in internal R&D stock building activities will be able to evaluate and recognize external sources that they can integrate and use with their corresponding knowledge that they encompass (Cohen and Levin thai, 1990). Firms engaging in this practice will rely on fewer linkages that possess value, to help achieve increased innovative output (Arora and Gambardella, 1994). Because assimilation and selection of external knowledge sources depends on the amount of knowledge that a firm possesses, (Cohen and Levinthal, 1990), it is important to know how internal R&D capacities can influence the relationships between the degrees of R&D outsourcing and innovative performance.

Through investigating the moderating roles of R&D capacities, in regards to balancing external and internal R&D processes, this paper evaluates conditions that open innovation paradigm agreements for increased innovative performance should be attended to. By doing this, contributions to literature can occur in two different ways. The initial way is to build on studies that were performed by Cassiman and Veugelers (2006), in regards to testing the extent that external and internal R&D processes substitute or complement increased innovative performance. Cassiman and Veugelers (2006) investigate how every distinctive R&D structure will influence innovative performance, focusing on the varying degrees of R&D outsourcing. Through the typology approach established by Cassiman and Veugelers, this paper is intended to provide an increased understanding of the drawbacks and benefits that coincide with opening a firms R&D boarders and performing tradeoffs through external and internal R&D processes. …

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