Managing Global Innovation

Strategies for Worldwide Innovation

Multidomestic

Unilever

Transnational

Caterpillar

International

P&G

Global

Intel

Low High

Technological information needs

High

Low

Mar

ket

info

rmat

ion

need

s

Afuah (2003)

Strategies for Worldwide Innovation

Emphasis Description

Multinational (multidomestic)

Local responsiveness and differentiation

Allows foreign subsidiaries to operate nearly autonomously; the firm can quickly sense and respond to local needs

Global Global efficiency Global activities are closely managed through central control from the headquarter. The firm capitalizes on economies from standard product design, global-scale manufacturing, and centralized control of worldwide operations.

International Rapid deployment worldwide

Foreign subsidiaries operate autonomously but are critically dependent on the headquarter for new processes, new products, and know-how.

Transnational Global efficiency, local responsiveness, high innovativeness

Integrate global activities through close interdependence and mutual cooperation between headquarter and foreign subsidiaries.

Factors Driving R&D Internationalization

Boutellier et al. (2000)

Factors Affecting R&D Internationalization

Five Organizational Concepts of international R&D

Organization

a) EthnocentricCentralized

R&D

b) Geocentric Centralized

R&D

c) Polycentric Decentralized

R&D

e) Integrated R&D

Network

d) R&D Hub

Model

Dispersion of internal

competencies & knowledge

bases

Degree of cooperation between R&D sites

Low

Competition Cooperation

Different International R&D Organizations

Configuration Organizational structure

Behavioral orientation

a. Ethnocentric centralized R&D

Centralized R&D National inward orientation

b. Geocentric centralized R&D

Centralized R&D International external orientation

c. Polycentric decentralized R&D

Highly dispersed R&D, weak center

Competition among independent R&D units

d. R&D hub model Dispersed R&D, strong center

Supportive role of foreign R&D units

e. Integrated R&D network

Highly dispersed R&D, several competence centers

Synergetic integration of international R&D units

Different International R&D Organizations

Configuration

Pros Cons

Ethnocentric centralized R&D

• Protected core technologies• High efficiency• Low R&D cost (scale &

specialization effects)• Short cycle times

• Low sensitivity for local markets

• Danger of missing external technology

• Not-Invented-Here syndromes

• Tendency toward rigid organization

Geocentric centralized R&D

• High sensitivity for local market & technological trends

• Efficiency due to centralization

• Cost - efficient R&D internationalization

• Danger to neglect systematic internationalization

• Local content restrictions & local market specifications insufficiently considered

Polycentric decentralized R&D

• Strong sensitivity for local markets

• Adaptation to local environment

• Usage of local resources

• Inefficiency & parallel development

• No technological focus• Problems with critical mass

Different International R&D Organizations

Configuration Pros Cons

R&D hub model

• High efficiency due to coordination of R&D

• Avoidance of redundant R&D• Exploitation of all available

strengths• Realization of synergies (quick

recognition of local demand & the sustaining integration of global R&D input)

• High costs of coordination and time

• Danger of oppressing creativity & flexibility through central directives

Integrated R&D network

• Coupling of specialization & synergy effects

• Global before local efficiency• Organizational learning across

many locations• Exploitation & refining of local

strengths

• High coordination costs• Complexity of

institutional rules and decision processes

Trends in Organizing International R&D

High

a) EthnocentricCentralized

R&D

b) Geocentric Centralized

R&D

c) Polycentric Decentralized

R&D

e) Integrated R&D

Network

d) R&D Hub

Model

Degree of cooperation between R&D sites

Low

Competition

Dispersion of internal

competencies & knowledge

bases

Cooperation

1

2 2

3

4

THE END