The boundaries of innovation are shifting. Companies that used to organize Research & Development (R&D) internally are now relying more and more on corporate partnering and external sources. In other words, companies are opening their doors and reaching out for new ideas and knowledge that complement their own. There is much to be gained; agreements with other firms and universities, as well as investments in new and small companies, can bear prized fruit.
When two R&D partners team up, it is usually for a specific project. In the paper "Organizing for Innovation: R&D Projects, Activities and Partners," IESE General Management Professor Bruno Cassiman, University of Cagliari professor Chiara DiGuardo and Bocconi University Professor Giovanni Valentini look at which characteristics of an R&D project influence its organization and how. The authors gain valuable insights by studying all the R&D projects at one research site of STMicroelectronics (ST), the world's fourth largest producer of microelectronic components.
Based in Geneva, ST is a global company with more than 45,000 employees and 16 advanced R&D units, in 31 countries. Its diversity makes it an ideal setting in which to study innovation. Also, the high-tech semiconductor industry is dynamic and competitive and R&D plays a key role in deciding which companies will come out on top. ST has found success through its "open" innovation process. It forms strategic and technology development alliances with key customers as well as competitors. It also partners with multinational R&D organizations, universities and research institutes.
The ST example demonstrates the important choices that managers face in today's globally competitive environment. Typically, firms have to decide whether to develop a specific technology internally, through contracting or through cooperation with a partner, whether another firm, a university or a research institute. Authors Cassiman, DiGuardo and Valentini examine seven different lines of innovation at ST, from technological and design platforms to nanotechnologies and bioelectronics.
Their discoveries shed light on what drives a company to select a partner for innovation. "Partnering or contracting with universities for innovation is common practice for developing new ? original ? knowledge, as opposed to applying existing knowledge to a problem. But firms are more reluctant to partner, especially with other firms, when that knowledge directly enhances their competitiveness," they write.
In other words, if a project is strategically important for a company, the company is likely to act on its own. If a project is more experimental, the company will be more likely to consider a partnership with a party on the outside.
The optimal organization of an R&D project largely depends on the knowledge surrounding the project. The specific organizational form should align the project's characteristics and the capabilities within the firm's portfolio and that of its potential partners. "We found robust evidence suggesting that the more basic a project (i.e., it develops new knowledge as opposed to applying existing knowledge), the more likely it is that external capabilities will be sought," write the authors. Although opportunistic behavior and uncertainty are always threats, "basic" projects are primarily carried out through cooperation, rather than contracting, in order to capitalize on important learning opportunities.
As for universities, they are more likely to collaborate in the early phases of a project and in activities aimed at developing new knowledge. Conversely, partner firms tend to lead activities in later phases of a project, at the stage in which the knowledge is applied.
This enlightening paper shows that, in a dynamic business environment, building knowledge might be more important than protecting it. Different companies have different resources and by developing knowledge together, partners can provide productive and complementary resources, as well as valuable opportunities for learning.