The place of R&D in company strategy depends, first, on the business sector, the nature of the markets and the company’s competitive positioning and, second, on its degree of globalization. Therefore, the high-technology companies belonging to the “innovation-driven” sectors (as well as pharmacy, aeronautics, energy, electronic, etc.) [GIR 96] make huge investments in R&D, whereas the businesses in mass distribution invest little or no funds in R&D. The nature of the markets also affects the position of R&D in company strategy. For consumer products manufacturers, the R&D strategy will consist of manufacturing better and cheaper than the competitors, by offering either innovative products that better meet consumer expectations or products with new and highly attractive features (e.g. the new digital applications via smartphones or social networks) or by adding a service to the product (such as integrated remote maintenance with the purchase of a printer). For these companies, R&D activity has long been closely linked to decision-making. When dealing with the B2B sector, that is, those geared toward the sale of products to industry, a large part of R&D is performed close to industrial entities, where the industry is located [LEN 02], in order to respond to the needs of cost reduction and to support innovation efforts. This is done by providing “solutions”, on the one hand, and by creating innovative concepts capable of introducing breakthroughs in industrial performance on the other. This is the case, for example, with R&D centers of the cement industry being located near production plants.
Box 1.1. Design differentiation approach in the R&D of Usinor (source: Lenfle and Midler [LEN 12])
Usinor (ArcelorMittal, from 2006) is a company producing raw material (steel), involved in the upstream of industrial clusters, particularly the automobile industry. The innovation strategy, which operates in the automotive market, is also reflected within this upstream company, which is forced to find innovative technical solutions, which are at odds with its dominant position on the market.
Here, the proximity, not only geographical but also organizational and institutional, between the R&D of the upstream company and car manufacturers is a prerequisite to its success. Organizational proximity involves putting in place coordination and cooperation arrangements between R&D players of the iron and steel group and those of the car manufacturers such as shared research projects allowing the exchange of information and knowledge. In contrast, institutional proximity involves creation of common areas of co-exploration for interactive learning required for innovation.
Besides the traditional strategic aspects like the domination by the costs and benefits of global “solutions” for the client, this company’s R&D strategy has always been about developing and proposing innovative product proposal (IPP) projects in the field of hydroforming, in which:
- – the result of the design project is not linked to a specific object designed directly for the customer;
- – the project is likely to shake up the mainstream R&D representation of the company and its customer;
- – uncertainty about the customer accepting the innovation is the norm.
These innovative product proposal projects lead to a situation of new cooperation with customers referred to as “co-exploration”, in which the two partners explore together, without certainty as to outcome, the concepts likely or unlikely to lead to the creation of added value.
The place of R&D in company strategy also depends on the globalization of the business activity. In order to compete, some companies had no other choice but to globalize. The analysis of globalization provided by the economist Pierre-Noel Giraud [GIR 12] serves as essential reading that helps us understand its effects on the breakdown of the value chain and, in particular, on R&D’s place in globalized enterprises. The Giraud model is based on the division of the world economy into territories separated by borders. It is based on a distinction between “nomadic firms” and “sedentary firms” and on a differentiation between the jobs of a territory that produce goods and services subject to international competition and those producing goods and services protected from this international competition.
Within each territory, protected by borders, people, capital and goods circulate freely, but not always between territories. This concerns human resources in particular. The nomad firms produce and circulate economic objects between territories. They make territories compete in their comparative advantages to make profit, and their decisions on FDI (foreign direct investment) destabilize or stimulate the territory’s economic activities. This is particularly the case with R&D investments. The sedentary enterprises only produce or trade at the national level. Employees competing for the nomadic firms will also be described as nomads. They only compete on a territory if they are competitive, otherwise they are transferred elsewhere. Sedentary or protected employees only compete with one another for the production of goods and services for local use. Thus, the global firm “locates sedentary activities where they must be”, and the nomadic activities “in the territories that offer the best conditions”: low labor costs with high labor intensity and availability of highly qualified scientific staff for research laboratories.
By repeating Giraud’s paradigm, it is clear that R&D’s position is of crucial importance for companies from overseas or nomads, that is, those exposed to global competition, that are on the front line of innovation and product renewal; it is less crucial for “domestic” companies or those on the protected market like mass distribution.
