Research And Development Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Research and development (R&D) is defined by the Organisation for Economic Co-operation and Development as “creative work undertaken on a systematic basis in order to increase the stock of knowledge … and the use of this stock of knowledge to devise new applications.” As this definition indicates, R&D is more than just scientific inquiry; it is also the application of new knowledge (scientific or otherwise) for the generation of economically useful products and processes. The “research” part of R&D is often associated with scientific inquiry in one form or another. The “development” part of R&D utilizes engineering skills to apply research results to create new or improved products and processes. Development is also closely linked to commercialization, although these two activities can be, and generally are, distinct.

It is a mistake to conceive of R&D as a linear process; backward linkages typically occur. Often, issues arise in the development and commercialization phases that require kicking the project back to the research team for further study of the fundamentals of the mechanisms involved in hopes of improving the product or process. This type of iterative process has, in fact, proven quite successful in the past, resulting in such landmark innovations as nylon, catalytic cracking, Viagra, compact discs, and a host of other breakthrough technologies. Because these new technologies rapidly destroy the markets for existing products and processes, R&D is the source for the “creative destruction” witnessed throughout the 20th century. The typewriter, slide rule, vinyl record, fax machine, and many other familiar products have become (or are becoming) obsolete in the face of the output of corporate R&D. R&D is not the sole activity of high-technology firms, but is a presence as well in the service industry. Financial corporations under- take R&D to design and develop new financial products and new ways to deliver these products to the market. Over the last few decades, R&D conducted by the U.S. financial industry introduced such innovations into the international economy as ATMs, online banking, and smart credit cards.

Corporate R&D can be traced back to the German chemical industry in late 19th century. The results of these R&D efforts were impressive with Germany achieving leadership in the so-called coal-tar products including dyes, medicines, synthetic resins, and fuels. The United States in the 20th century expanded corporate R&D to an unprecedented scale. Prior to World War II, General Electric and Jersey Standard (Exxon) were early leaders in developing extensive and effective centers of R&D. Jersey Standard’s R&D department, for example, was critical in the research and development of advanced catalytic cracking technologies and, during World War II, played a vital role in the synthetic rubber program. By the 1950s, most of corporate America emulated these earlier models and the R&D department proliferated throughout industry. It is no coincidence that these years also ushered in historic expansion of the American economy.

With the spread of globalization, a process that in fact can be traced to the years immediately following World War II, companies in other countries emulated the U.S. model. Through the second half of the 20^th century, a country’s R&D activity has been viewed as a prime indicator of its ability to compete on the global stage. By the first decade of the 21st century, the developed nations competed for primacy in resources dedicated to R&D activity. By 2006, all industrialized (or developed) countries undertook significant R&D activity at both the public and private levels. The United States leads all other countries in total R&D expenditures (US$343 billion in 2006), followed in order by (2006 figures) the European Union (EU) (US$231 billion), Japan (US$130 billion), and China (US$115 billion). However, in terms of percentage of gross domestic product (GDP), China leads at 4.3 percent, followed by Japan (3.2 percent), the United States (2.6 percent), and the EU (1.8 percent). These figures indicate an Asia aggressively competing with Western countries in their commitment to an aggressive R&D initiative as a key strategy to advanced technologies and the economic growth that results.

Historically, R&D activity of large multinationals within the United States and Europe has been localized within the home country because of the existence and availability of an already large market and abundant technological resources. However, since the 1980s, a number of factors have converged to entice companies—including Hewlett-Packard and Microsoft—to disperse their R&D work globally. Improved information and communication technologies help to monitor and coordinate far-flung R&D operations, economic and technical development in a number of newly developed and developing countries provide critical infrastructural support, increased incentives of foreign governments for multinationals induce the establishment of R&D facilities in host countries, and growing global harmonization of international patent law helps multinationals to better protect the fruits of offshore R&D.

Multinationals have been able to either outsource or carry out—via a subsidiary—certain amounts of their R&D activity. Thus, they optimize their R&D function and gain competitive power by benefitting from the location-specific advantages found in different countries, such as tapping local (and often cheaper) scientific and engineering talent, facilitating a better understanding of how to design products and processes for local markets, and establishing important scientific, technical, and market contacts in host countries.

As a result, in an effort to gain competitive advantage through economies of specialization, multinationals differentiate and specialize their R&D activity across their different subunits. Fundamental research aimed at radically new products may be carried out at some locations, while other R&D sites focus more on development, including improvements to existing products, while still other R&D facilities customize products and processes for local markets. In 2008, the percentage of the R&D that U.S. multinationals undertook outside their home countries ranged widely, from as little as 5 percent to more than 25 percent, with the average being 15 percent. This average figure is expected to rise approximately three-to five-tenths of a percent annually over the next two decades.

As multinationals distribute their R&D activity across their geographically dispersed business units, an increasingly important issue in the area of global R&D is how most effectively and efficiently to coordinate and integrate far-flung R&D operations within the foreign subsidiaries. If a business unit conducts its R&D within a host country, it must transfer its knowledge and hardware to other parts of the organization so that the company as a whole can plan overall strategic expansion. In thus managing its decentralized R&D structure, a primary concern hinges on facilitating the movement of critical information and technology derived from R&D from one unit to the rest of the organization.

A relatively new way to structure R&D activity within the multinational context is through what is termed R&D co-practice, which refers to joint R&D programs carried out between two or more subunits of a company. Recent research suggests that the greater the R&D co-practice activity undertaken between subunits located geographically apart, the greater probability that knowledge and technology created in one subunit will be transferred and utilized by the second subunit. Through such novel organizational mechanisms, global companies are more likely to capture the full benefits of creative multinational R&D programs.

Bibliography:

Christian Le Bas and Christophe Sierra, “Location Versus Home Country Advantages in R&D Activities,” Research Policy (v.31/4, 2002);
Allan Bird et al., Global Leadership: Research, Practice, and Development (Routledge, 2008);
Business Insights and Joerg Gruenwald, Future Functional Ingredients Novel Applications, Emerging R&D and New Product Opportunities (Business Insights Ltd., 2008);
Joseph L. C. Cheng and Douglas S. Bolon, “The Management of Multinational R&D: Neglected Topic in International Business Research,” Journal of International Business Studies (v.24/1, 2005);
Christopher Darby, CREST Report on the Application on the Internationalisation of R&D: Facing the Challenge of Globalisation: Approaches to a Proactive International Policy in S&T (Council of the European Union, 2008);
F. Ehmann, Micromanufacturing: International Assessment of Research and Development (Springer, 2007);
Henry Etzkowitz, The Triple Helix: University-Industry-Government Innovation in Action (Routledge, 2008);
Zheng Han, Managing Foreign Research and Development in the People’s Republic of China: The New Think-Tank of the World (Chandos, 2008);
Jeffrey T. Macher and David C. Mowery, Innovation in Global Industries: U.S. Firms Competing in a New World: Collected Studies (National Academies Press, 2008);
World Economic Forum, Global Competitiveness Report (World Economic Forum, 2007).

This example Research And Development Essay is published for educational and informational purposes only. If you need a custom essay or research paper on this topic please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.