R&D or Acquire Innovators?

by Vincent S
For this week’s blog I found an article from the Journal of Management Information Systems.  The article presented an interesting question in research and development.  When working in a dynamic environment like in the Information Technology industry, new technologies are vital to the survival of your company.  The problem is new technology involves expensive research and risk-taking.  So the article listed some pros and cons of research and development versus hiring outside innovative research companies to develop new products for them.

Immediately one must think that the obvious thing to do is just to have in-house researchers accompanied by a strongly funded R&D department.  The problem with that plan is what kind of budget do you give to such a department?  It is not practical to fund a department year round when your not sure what the desired results are.  However, on the flip end, when hiring an outside agency, when does a company determine when to bring in an outside agency and how much should be spent?

The title was slightly misleading as the real solution is to have a strong CIO whose responsibility it is to understand the curve of innovation and predict when is a good time for innovation.  At that point, it is up to the individual company to assess their particular situation and determine to what best fits their circumstances.  Personally I believe that there is no one right answer.  It really depends on what company you are evaluating.  Apple for example does everything in-house while Microsoft, although have exclusive patents with outside research, sometimes outsources R&D.

 

Citation

Sunnil, Wattal. (09/2011)  R&D Versus Acquisitions: Role of Diversification in the Choice of Innovation Strategy by Information Technology Firms.  Retrieved on 2/19/11 from http://www.jmis-web.org/articles/v28_n2_p109/index.html