Internationalization of R&D

3.3.1 Challenges and dilemmas

It has been established within academia that there is an increasing tendency towards internationalization of R&D (Gugler, 2010). Therefore, it makes sense to discuss the challenges and dilemmas of pursuing this.. This has been described and analyzed by a wide range of scholars (Von Zedtwitz et al., 2004; Gammeltoft, 2006;

Hinloopen et al., 2016).

One of the most concrete academic papers on the challenges and dilemmas of organizing global R&D comes from Von Zedtwitz et al. (2004). The authors describe ten challenges and six dilemmas of managing global R&D.

Instead of looking at R&D as a function taking place in one location which works as a silo for generating knowledge and innovation. A central challenge lies in conducting it as something, which is integrated throughout the organization. Thus, utilizing the spread of divisions and potential innovative ideas. Von Zedtwitz et al. (2004) recognize the hunt for talent, information, facilitating for improved decision making in network or mobile resource allocation to divisions, just to name a few of the benefits that companies can utilize in a globalized world. These potential benefits have led to an interest among an increasing number of companies to seek these benefits.

The 10 challenges identified by Von Zedtwitz et al. (2004) are described in table 3 below:

1. From function to integration R&D has developed throughout time. Today managers have a more coordinative role of making different knowledge bases meet and integrate into new solution. Furthermore, the riskier the project and higher expenditures have led to tighter control with certain projects.

Page 41 of 124 2. Close to centers of technology Most industries have seen the development of

clusters such as the famous Silicon Valley. Areas that become hubs of knowledge and innovation within an industry. Many companies are starting to consider this as it can access new resources through these hubs.

3. Integration of R&D units into global networks Many companies have started their international aspiration through merger or acquisition, while there also exist the option to expand from the home base. This gives a disperse in the knowledge base and the ‘not invented here’ syndrome must be dealt with as it diminish the utility of new ideas

4. Establishing overlaying structures Effective R&D is build upon communication and knowledge sharing, thus it is important to facilitate these aspects, through overlaying structures as transnational and network structures.

5. Decentralized R&D processes and virtual innovation teams

The type of R&D effort is determinant for how to approach decentralized and virtual teams. E.g. the type of innovation meaning incremental vs. radical innovation, type of knowledge, systematic or autonomous development and the degree of resource bundling.

6. Market and customer orientation A classic push vs. pull challenge, as it is important to consider the strategy for development and serving customers. As a company must consider the serving of current customers and the exploration of potential new markets and customers. This will for instance impact the R&D budget accordingly.

Page 42 of 124 7. Managing interfaces in R&D R&D must have interfaces that considers aspects as

cultural gap, time horizon, geographical distance and controlling. These are some of the separators between international research and development.

8. Processes in transnational R&D Managers will have a temptation to introduce standards and regulations to control the processes.

However, these will have to adapted to both industry and local cultures as managers are expected to be managing different cultures.

9. ICT as an enabler of dispersed R&D Since the 1990’s a great increase in communication tools has seen the light. These cannot substitute with traditional management. These have to be used in the most efficient way to spread knowledge, which is a challenge.

10. Managing knowledge and human resources Ideas are generated from individuals who are working together with other individuals in a context, which makes it important to manage these to enhance creativity and output.

Besides the ten challenges, Von Zedtwitz et al, (2004) also depict six dilemmas of global R&D (see table 4).

These dilemmas arises from the fact that global R&D problems are not well-structured and therefore unique solutions for global innovation does not exist. The dilemmas mean managers have to make a choice and measure the cost-benefit, speed and quality. Managers have a bounded rationality when designing the solutions but have to make important decision such as being close to the locals or having a higher a degree of efficiency when dealing with the global R&D. The manager's task is to find the right degree of creative tension and development.

Von Zedtwitz et al, (2004) introduce six dilemmas and argue that they are inherent in global R&D thus not possible to eliminate. The following dilemmas are relevant for the challenges and the managers must understand these when designing the R&D structure in an international environment.

Table 3: The ten challenges described by Von Zedtwitz et al. (2004)

Page 43 of 124 1. Local versus global This dilemma deals with the question of how

much autonomy the local R&D unit should have.

Too much autonomy could potentially result in a waste of both subsidiary and head quarter resources, while too little freedom could result in a loss of creativity.

2. Processes vs. Hierarchy Building a structure of R&D with process orientation gives a more specialized team, but can conflict with the general structure of the company, but innovation cannot achieved through repeating the same processes and routines.

3. Creativity vs. Discipline Creativity is needed to see new solutions, but what is the right degree of discipline, as creativity needs a frame to be transformed into value and solutions.

4. Control vs. open source Any company is limited by their own resources, which is where the use of open source arises from, as it is a new source of resources. It can also jeopardize opening the organization open and thus revealing ideas or loss IP rights.

5. Face to face vs. ICT ICT is great for distance communication, however it is not as efficient as face to face (FTF) communication in dealing with cultural differences or reaching the same level of communication.

Page 44 of 124 6. Long term vs. short term The focus on current customers and their needs is

in opposition to allocating resources for the longer term and emerging technologies, which will benefit future clients. E.g. investing in developing new machines or investing in the developing modular improvements.

3.3.2 Relevance for the case

The most relevant theoretical aspects of suq-question 3 are highlighted in figure 9. The internationalization builds upon some of the initial analysis of the current resources as it gives an understanding of the business model that Inspari is expanding into new countries. It should be related to the challenges and dilemmas presented by Von Zedtwitz et al, (2004). Their contribution are relevant for especially companies that are just beginning to venture into the international environment, as the case is with Inspari. They

introduce several aspects that should be considered to optimize the R&D effort on an international basis. The theory goes through ten challenges that must be considered. This is for instance how the international division should be involved in R&D, and is thus a question of decentralized and virtual innovation team. Inspari has to find the right balance between face to face and ICT communication among many other questions. These ten challenges will provide the basis for the analysis of the internationalization aspects for Inspari. Additionally, the dilemmas introduced by Von Zedtwitz et al, (2004) will be included in the consideration of these challenges.

Furthermore, it will explain some of the opportunities that Inspari can exploit from their internationalization efforts. The analysis will have a mixture of both a focus on the everyday perspective and on some of the long-term perspectives as both is deemed relevant. They can have different impacts on the for instance integration, overlaying structures and communicational tools.

The theory will further provide a basis for the discussion and can be seen in addition to human resources and the structure of R&D that exists in Inspari. Other key aspects in the internationalization are found in the Table 4: The six dilemmas described by Von Zedtwitz et al. (2004)

Figure 9: Relevant theoretical aspects of sub-question 3

Page 45 of 124 mobility of resources, outsourcing R&D and hunt for talent. These can shape the dynamic capabilities of the Inspari and thus affect their future profitability and the appropriate way to structure the R&D in an international setting.