The strategic management of R & D. Part II—Organizing for integration

The possibility of the R & D activity integrating with the ‘physiology’ of the industrial enterprise depends on the model management adopts for structures, roles and human resources. Such a model should allow integration between R & D and the enterprise and encourage innovation. Two main roads lead to the attainment of the integration process. The author outlines them by observing the experience of research laboratories in the United States and in Europe. The two roads are the ‘managerial integration’ model and the ‘technological integration’ model, analytically described in the article.     

Who should plan technological innovation?

Over the last 10 years there has been a growing need to improve integration between business planning and R & D activities. One reason for this has been a decrease in the returns on R & D investments. An understanding of the relationship between demand and technological innovation is needed to achieve this integration. The planning approach will be very different depending on whether the company's business is based on ‘technology-push’ or ‘demand-pull’, and whether planning is controlled by the R & D or the marketing function.     

Linear programming techniques in R & D project planning

In a multi-project industrial R & D organization the selection of projects with potentially good payoffs has to be fitted in with the planning of on-going projects as they compete for the same expert staff, laboratory equipment, pilot plant rigs and other facilities and resources. A linear programming approach to this planning problem takes account of any flexibility possible in allocating resources to projects, and in their timing in finding the ‘best’ plan. This is the one which maximises the potential payoff for the whole ‘portfolio’ of projects and makes the most efficient use of the available resources. The principles of the formulation of such LP models and the interpretation of the results produced in terms of practical planning are discussed.     

A framework for the strategic management of future tyre technology

Strategically managing technology faces one major problem: technology planners and managers who mistake ‘R & D management’ for ‘strategic technology management’. In globally competitive markets, survival and growth of tyre companies will increasingly depend upon the ability to manage technological resources strategically. This article proposes a process model which views the strategic management of technology as ‘techno-business management’, where technology and business strategy, planning and implementation can be facilitated by the use of portfolio frameworks and technology forecasting techniques in analysing and addressing the key strategic management areas of techno-business strategy development and strategy implementation.     

Strategic planning and research and development—Can we integrate them?

The main problem affecting the R & D function has always been caused by its lack of integration with the enterprise. Such a problem makes it difficult to pass from invention to innovation—that is, to turn the invention into processes and products to be exchanged on the market. The author points out the main social and organizational problems which prevent R & D from entering the ‘circulatory system’ of the enterprise. The identification of such problems is important in order to set up and to implement innovative strategies. This is the first of two articles by Professor Petroni on this subject. The second article will appear in April 1983.     

Innovation in the Spanish food & drink industry

This article examines the innovative performance of the Spanish Food & Drink Industry (F&DI). Results highlight the ‘evolutionary’ rather than ‘revolutionary’ nature of innovation activities in the Spanish F&DI. However, the adoption of ‘defensive/imitative’ strategies by Spanish F&D manufacturers raises important questions given the current manufacturer-retailer relationship with an increasing emphasis on innovation by food retailers when accepting/rejecting new products. The paper stresses the importance of in-house technological capabilities in innovation performance with a higher probability for Spanish F&D firms to be ‘truly’ innovative the higher their technological autonomy level.     

Financial planning for new products: Part I—Basis for model formulation

In a previous paper the author presented a staged approach methodology for the evaluation and selection of R & D projects. The present paper is intended to serve as its complement.The aim is the formulation of a matching overall long range budget planning policy which will attempt to answer the questions of “how many projects to prove” and “how much to fund” on the basis of satisfying the company growth objective.To achieve the above purpose, a staged budget planning model has been developed which recognizes and utilizes the specific attributes of the various R & D stages. Tje project stage survival rate and project stage cost ratio concepts are discussed. A steady flow of projects through the various R & D stage is maintained. The aim of the program is to produce periodically a planned number of new products fro commercial investment.This methodology may apply to R & D program with a sufficient number of moderately sized projects that justify the use of survival rate and cost ratio values. It should be constructed as a tentative effort for possible use within the staged limitations.     

A short term forecasting model for R & D expenditures

Whenever budget requests for individual R & D projects contain a built-in contingency then this will result in inefficient use of scarce resources. At the end of the year the annual budget may have been fully allocated but not necessarily fully utilized. This can result in delays or even complete cancellation of other proposed R & D projects because of an apparent lack of funding.The objective of the study was to forecast monthly R & D expenditures with a better accuracy than available from the subjective estimates of individual project leaders. The method described in this paper proved to be successful in practice.     

The role of political ties and political uncertainty in corporate innovation

We examine the relationship between firms' political connections and corporate innovation in a European context. We also consider the moderating effect of political connections on the relationship between political uncertainty and firms' innovation. We use two different metrics of innovation: R&D (an input measure), and patent counts (an output measure). We find that firms with former politicians on their board of directors invest less in R&D than their counterpart firms. However, the presence of this type of director on the board is positively associated with the number of a firm's patent applications. It seems that, although political ties reduce the amount of resources devoted to R&D activities, they increase the effectiveness of intellectual rights protection. Results also show that political uncertainty decreases R&D investment but exacerbates the need for legal protection of innovation through patents. According to our results, political connections attenuate the effect of political uncertainty on firm innovation such that the negative (positive) effect of uncertainty on R&D intensity (patents) weakens when the firm is politically connected.     

The innovation dynamics and technology cycles in the computer industry

This paper presents certain novel composite measures of technology. There are several important uses of the proposed measures in R & D management: to gauge the rate of innovation within any given field, to determine the relative contribution of chosen variables to technical progress, to isolate critical factors in the innovative activity, and to predict whether a technology is ahead or behind its time. This is illustrated here by means of a case study of technical progress in the computer industry. The theoretical framework of the case study is based on the earlier works of the author pointing to the existence of what may be called technology cycles that transcend both product life cycle and organization product cycle and have the same significance to innovative activity as have business cycles to economic activity. The results of our investigation reveal a ‘butterfly pattern’ of interaction between product and process innovations: The loss in the relevance of process innovations is almost exactly compensated by the gain in the relevance of product innovations to technical progress over the course of time. The results also indicate that although the pace of technical progress in the computer industry has been exceptionally rapid in the past, it shows signs of slowing down in the future. The policy implications of these findings are discussed.     

The antecedents of new R&D collaborations with different partner types: On the dynamics of past R&D collaboration and innovative performance

We examine firms' propensity to adapt their R&D collaboration portfolio by establishing new types of R&D collaboration with different kinds of partners (suppliers, customers, competitors and universities & public research institutions). We argue that existing R&D collaboration with one of the two value chain partners (suppliers or customers) is associated with the formation of new R&D collaboration with the other value chain partner to ensure temporal alignment in innovation within the value chain. In contrast, issues related to governance and unintended knowledge spillovers suggest that ‘horizontal’ R&D collaboration with competitors only spurs R&D collaboration with other partner types if such competitor R&D collaboration has been discontinued earlier (‘delayed temporal alignment’). We posit that persistent prior R&D collaboration with institutional partners is an antecedent to the establishment of new R&D collaboration with industrial partners, and that discontinuation of a particular type of R&D collaboration is likely to lead to a restart of such R&D collaborative effort. Strong prior innovative performance is expected to increase the probability that firms establish R&D collaborations with new partner types, except for R&D collaboration with competitors, since the most innovative firms may fear leakage of proprietary knowledge to rivals. We find broad support for these predictions in a large panel of Spanish innovating firms (2004–2011). Our findings highlight that it is not just the configuration of R&D collaborations with existing partner types that predicts tie formation with new partner types, but also the intertemporal pattern of prior R&D collaboration and managerial discretion provided by past innovation success.     

A specific accounting approach for public universities

Many universities in Germany and other countries have introduced financial (or commercial) accounting to manage effectively their finances. It aligns with so-called new public sector management reforms worldwide. In this paper we analyze whether the components of this type of financial accounting reform suit the nature and objectives of German public universities. While the analysis mainly relates to the German situation, there are likely to be implications for public universities universally. Drawing on an analysis of the reports of two well known German-speaking universities, Heidelberg and Vienna, we analyze whether the components of the new financial accounting reforms suit the nature and objectives of those public universities. While we argue that cash-flow statements and balance sheets remain important, it is shown that it is necessary for state-run educational institutions to change several key elements of traditional commercial accounting. Because the success goals of such universities are non-profit-oriented, their financial accounting should be augmented by a ‘change in value statement’, replacing the traditional income statement. As their valuation cannot be correlated with the definition of profit in (German) public universities this term is suggested. By change in value we mean specifically that assets may experience a total loss or a decrease in value. In management accounting output measures and performance indicators should substitute revenues as the counterpart of costs. Furthermore, long-term financial decisions play a crucial role in universities. Therefore, a form of investment accounting is very important for them. The conventional form has to be modified by ‘investment statements’ and ‘knowledge balances’ of their intellectual capital. In this paper we also show how the concept of a balanced scorecard can be applied to public universities and how specific accounting instruments can be integrated into it.     

The use of advanced management techniques in R & D

The paper discusses information collected in a study carried out by Bradford University Management Centre in 1985/86 to establish the state-of-the-art in the use of advanced management techniques in R & D departments of UK organisations. Data from two questionnaires were supplemented by more detailed discussions with selected respondents and a survey of the relevant literature was carried out. Indications are that both project management in R & D and managerial development of R & D staff are receiving attention, particularly from senior management. As yet, however, the potential of recent advances in computer technology and of existing MS techniques has not been fully realised. In this context, the effectiveness of present training courses in project management techniques is questioned.     

Expert knowledge,expert systems and commercial interests

Experience to date in building expert systems has brought a general realization of the complexity of the effort required for producing systems capable of operating on ‘real-world’ problems. The most successful knowledge-based/expert systems built to date, e.g. DENDRAL, MYCIN, PROSPECTOR and R1 have demonstrated that a considerable investment in time and dedication on the part of systems designers and experts is required to create a fully operational system. The great majority of development projects attempting to harness this new programming technology do not extend beyond creation of a prototype system largely due to lack of necessary resources, i.e. time, money and know-how. The purpose of this paper is to discuss some of the more important issues associated with development of expert systems and to provide an overview of the commercial and industrial efforts of putting expert systems to work. This paper should be of interest to those who have gained their knowledge of expert systems from the reading of non-specialist publications and thus may have been exposed to somewhat over enthusiastic accounts of the subject.     

How can MNEs benefit from internationalizing their R&D across countries with both weak and strong IPR protection?

Although MNEs internationalize their R&D not only in developed countries but also in emerging economies that typically feature weak protection of intellectual property rights (IPR), it remains unclear how this strategic decision affects their productivity performance. This limitation has resulted in a rather incomplete understanding of why some MNEs become more productive through R&D internationalization while others do not. This study develops a new explanation, suggesting that R&D internationalization does not affect the productivity of all MNEs equally because of differences in the idiosyncratic way in which MNEs geographically distribute their R&D units across weak and strong IPR protection countries. In advancing this explanation, the study challenges the view that weak IPR protection is disadvantageous for MNEs by showing that (and specifying how) it: 1) increases the efficacy of MNEs' internal R&D, 2) strengthens the advantages of accessing globally dispersed knowledge, and (3) improves MNEs' ability to exploit cross-country differences in IPR protection. The study enhances understanding of the complex role of IPR protection, shifts scholarly attention from the degree of R&D internationalization to how MNEs should internationalize their R&D, and clarifies how the IPR context of their location choices matters.     

Dynamic capabilities,entrepreneurial rent-seeking and the investment development path: The case of Samsung

As noted by Narula and Dunning [Narula, R., Dunning. J.H., 2000. Industrial Development, Globalization and Multinational Enterprise: New Realities for Developing Countries. Oxford Development Studies, 28, 141–167.], it has been observed that some of the more advanced developing countries, those rapidly ‘catching-up’, outpaced the postulated Investment Development Path (IDP), in which the strategic asset-seeking type of outward foreign direct investment is supposed to occur in later stages, i.e., when countries reach the higher “developed” levels of economic progress. Firms who led the outpacing in those countries did so through their entrepreneurial commitment to upgrade technological capabilities to maintain and augment their O-advantages rather than because of the overall economic development of their home country. Samsung Electronics' recent success in the semiconductor industry allows us to identify and analyse the factors whereby it not only utilised status-quo resources but also developed dynamic capabilities as it rose to the top. Aggressive and risk-taking investment behaviour in search of entrepreneurial rent and the effective policy of managing technology development contributed to the extraordinary achievement of Samsung Electronics. The company's remarkable transformation over the last decade or so can shed light on how a firm's dynamic capabilities, the ability to improve its O-advantages by reconfiguration, transformation and learning, contribute to its home country's idiosyncratic development path.     

Innovation in Small,Project‐Based Construction Firms*

Relevant literature is synthesized to provide a holistic picture of our current knowledge of innovation in small, project‐based firms, highlighting significant gaps in the broad areas of ‘focus and outcome’, ‘organizational capabilities’, ‘context’ and ‘process’. Research findings from fieldwork focused on the construction industry are offered to address these gaps. In particular, a consensus model is given of the organizational factors dynamically at play. It is shown that typically the innovations of small, project‐based firms are closely tied to their operational activities and are pushed forward by owners who utilize very scarce resources to make progress in the interstices of normal business. This leads to an emphasis on taking up established technologies through ‘learning on the job’. Growth per se is not an important target. The motivation to act is generally to get past a survival mode of operating and to achieve stability by satisfying clients. These characteristics contrast with large organizations, especially in terms of the role of the owner, the close focus on niche markets and the lack of slack resources to innovate in parallel with normal business. It is hoped that these results will be of interest to other sectors where small, project‐based firms operate.     

Marketing the telephone in a de-regulated environment

The author responds to the injunction ‘Get up and grow’, believing that British companies should be discovering profitable marketing opportunities to build on. In recent years improved profitability has come through financially led contraction and rationalization, not through marketing-inspired expansion; and the consequent lack of investment in growing marketplaces increasingly puts U.K. companies at a disadvantage against overseas competitors. He illustrates British Telecom's response to this challenge.     

‘Management Standards’ work-related stress in the UK: practical development

Research commissioned for the UK's Health & Safety Executive (HSE) supports the view that a preventative, risk-assessment based approach would be more effective than case-based methods in achieving a nationwide reduction in work-related stress. The background to this approach is described and discussed in a companion paper in this issue (Mackay, Cousins, Kelly, Lee, & McCaig, ). The present paper describes the development of HSE's new stress Management Standards—which offer organizations continuous improvement through a three-phase stress preventative process—and the development of a supporting ‘Indicator Tool’ (a two-phase questionnaire to assess employee perceptions of working conditions). The Management Standards comprise a series of ‘states to be achieved’, which are statements of good practice in six key stressor areas: demands, control, support, relationships, role and organizational change. For each stressor area there is also a ‘platform statement’ that outlines the main aims to be achieved by the organization. This statement may include a target percentage of employees finding that the organization meets the standard: this matter will be settled after the standards have been assessed in a public consultation campaign. To use the new process, an organization's state can first be assessed using the Indicator Tool; liaising with workers in focus groups enables a further exploration of issues raised; finally, there may be formulation of interventions and subsequent review. It is not intended that the standards will be legally enforceable. HSE's aim is that they and the associated methodology will enable organizations to effectively tackle work-related stress, and subsequently reduce both its incidence and prevalence.