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Managing Global R&D Networks

Today’s multinational companies (MNCs) expand into international locations for more than access to new markets. They recognize that in order to have breakthrough innovations they must access and leverage the range of knowledge that is developed internationally. One of the best ways to tap into this knowledge is with local R&D facilities in international centers of technical excellence. However, leveraging international regional knowledge and incorporating it into the MNCs existing knowledge networks is exceptionally difficult. With the guidance and participation of Industrial Research Institute (IRI) member companies, this Research-on-Research (ROR) project hopes to expand on our understanding of how MNCs can successfully connect their global subunits to create an international open, innovative knowledge network.

This ROR was stated during the 2011 IRI Networks/ROR meeting after the topic was highlighted as being exceptionally important by multiple member companies. During that meeting a mindmap was created around the topic of “Managing Global Innovation Networks” and after several conversations this evolved into “Managing Global R&D Networks” in order to differentiate it from other open innovation ROR projects that are ongoing. During the 2011 Annual Meeting in Philadelphia we had our first official meeting and also invited subject matter experts (Ram Mudambi & MB Sarkar, Temple University; Michelle Snyder, Pepsi Co.) in to present on the topic during a break-out session. Portions of these talks are currently being converted into a submission for RTM which we hope will be published in the coming months. In the update we have provided a little more background that has informed our initial conversations around these topics as well as some of the questions that we hope to focus on as a part of this ROR.

Evolutionary Perspective of MNCs

Early MNCs recognized that they could take advantage of lower costs for resources and labor if they invested in production activities overseas. In these traditional MNCs, R&D was usually conducted in the home country headquarters (HQ), and innovations were introduced to subunits abroad which, if they did any R&D at all, focused on exploiting these technologies for the specific need of the local market. In this type of MNC, knowledge & innovation typically moves within the MNC in a specific direction—from headquarter to global subunits / subsidiaries—and subunits work on technology that is only incrementally different than that developed in the headquarters.

Today, the globalization of MNCs is no longer limited to areas like production and marketing – leveraging knowledge and innovation developed internationally becomes increasingly important for business. For more than a century, global centers of technical and scientific excellence have developed creating geographic clusters with relatively dense concentrations of specialized expertise. For at least the last few decades, developments in education and professional training in emerging economies has provided a new force of educated, skilled workers. This has created a whole new set of emerging knowledge clusters—the top talent in many technical and scientific domains can now often be found in emerging economies. In this modern knowledge ecosystem, subunits are often tasked with developing groundbreaking innovation themselves or with tapping into the local knowledge being developed and advanced in the host country location they are embedded in. In order to leverage innovation developed throughout the MNC, knowledge must flow in multiple directions—from HQ to subunit, host country to subunit, subunit to HQ, and from subunit to subunit. In addition, subunits are often working on radically different technologies that may be complimentary to other research efforts throughout the MNC, or may be entirely new technologies or products with the potential to reinvent the MNC if successful.

Managing this global network of R&D resources can be challenging in several ways. Obviously there are coordination challenges related to geographic distance and/or time differences. In addition, cross-cultural differences can add a whole other level of complexity to this management challenge. In this ROR we focus on a third type of challenges—the strategic and tactical challenges to systemically managing a global R&D network among multiple subunits or subsidiaries.

As an outcome of this ROR, we hope to put together roadmaps to help organizations think through:

Their overall objectives for going global
How and why they choose different global locations to locate subunits in
The types of innovation activities that they want each global subunit to focus on
Appropriate structures and tactics for coordinating knowledge and technology flows among HQ, regional HQs, and subunits