Saturday, August 22, 2009

End of corporate R&D?

The age of wikipedia, open-source platforms, and crowd-sourcing appears to be catching up with corporate Research and Development (R&D). And the squeeze on corporate profits, and by implication the resources available for exclusive pursuit of R&D, is only adding to the challenge. Are we witnessing a paradigm shift from "proprietary innovation to populist innovation"?

An interesting article in the NYT points to a trend towards a "federated" model of corporate R&D that "leverages all the innovative work by outsiders in universities, start-ups, business partners and government labs". The corporate lab becomes "more of a coordinator and integrator of innovation, from both outside and inside the company walls".

Open-innovation leaders like HP and IBM have been placing larger bets on fewer projects, besides expanding their nets wider to seek ideas on specific reserach projects/subjects from outside through yearly online contests, soliciting grant proposals from universities worldwide, and so on. The objective is to tap "the collective intelligence, selectively, of leading academics around the world".

With corporate profits under tremendous pressure, the economic case for in-house R&D may appear to be clear. However, closer scrutiny reveals that more collaborative approaches may conflict with many of the fundamental tenets and ethos of capitalism itself. The transactions costs associated with such R&D work, in terms of searching partners, concluding agreements, enforcing contractual provisions, maintaining confidentiality requirements, avoiding collaboration by the same partners with competing firms, and co-ordinating between various departments or teams etc, may be too large to be ignored. Further, as the article itself points out, tight-knit teams inside corporate labs, can outshine the open model when working on multi-disciplinary challenges in projects soon heading to market.

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