McDonough School of Business
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What’s the Best Way for Firms to Collaborate on R&D? Depends Where They Want to End Up, Researchers Say

How innovative is collaborative research? A new paper published in the journal Research Policy shows that the type of collaborative research conducted can determine how far a firm is going to end up from the emerging innovative focus of its field years later.

In “The direction of firm innovation: The contrasting roles of strategic alliances and individual scientific collaborations,” coauthors Paul Almeida of Georgetown University’s McDonough School of Business, Pedro Parada of ESADE Business School, and Jan Hohberger of the University of Technology Sydney compare formal research and development (R&D) alliances between firms with informal collaborations between their firms’ individual scientists. Biotechnology served as the sample industry in the study because of the complexity of R&D and the long time horizons from concept to market.

The study concludes that firms predominantly engaging in formal R&D alliances will find themselves further from the future focus of innovation in that technological area. By contrast, firms whose research activities consist primarily of individual scientists co-publishing with other scientists outside of their organization will end up aligned with the emerging technological focus of their wider industry.

So what accounts for the difference? Formal alliances involve organizational and legal processes that are expensive, time consuming, and unwieldy. And firms can only maintain a few alliances at a time. The result, say the authors, is that these alliances focus on the application of existing knowledge, not the exploration of new knowledge, so they “reinforce the trajectories of existing innovation.”

By contrast, informal collaboration by scientists across organizations removes scientists from their firms’ specific focus and mindset, exposing them to new insights, techniques, knowledge, lines of inquiry, and thought processes. Knowledge shared this way “can push innovation singly and collectively in certain directions that help define the focus of innovation in the field,” the authors write.

“What this paper shows is that the method I choose to access outside knowledge dictates how close to the future field or how far from the future field I’ll end up,” says Almeida, who is a professor of strategy and senior associate dean for Executive Education. “To some extent our collaborative actions today set us on a path that we don’t fully understand. If I choose more formal alliances I will tend to not move into new technological areas as the field evolves. If I choose more informal individual collaborations, then I will end up close (innovatively and technologically) to the core of the field—no matter where the field ends up.”

The lesson for senior managers is that, no matter what their strategic plan is, how they deploy their researchers to acquire knowledge determines their future innovation trajectories.

Where a firm ends up relative to the rest of the field has its own benefits and drawbacks. Informal collaborations will lead to the cutting edge of activity, but firms may face more competition there. Conversely, “if you end up far from the locus of innovation in the industry, you may have a unique space to operate in,” Almeida says. “But if most of the innovation is taking place in one area, do you really want to end up elsewhere?”