The Effects Of Business Strategy On The Internationalization Of R&D Within MNCs

This paper discussed the effects of business strategy on the internationalization of R&D. Porter's generic strategic types are employed to examine to effects on MNCs' establishment of foreign R&D facilities. Each strategic type is proposed to be related with different type of R&D facilities based on sources of competitive advantage: economics of scale, standardized products, marketing differentiation, and product innovation. MNCs with cost leadership strategy are expected to establish their overseas R&D laboratories in the form of Transfer Technology Unit since the pursuit of economics of scale in their operation and the production of standardized products for cost reduction require centralization of their R&D efforts and little modification of their products in foreign markets. MNCs with differentiation strategy are expected to establish their overseas R&D facilities in the form of Global Technology Unit since marketing differentiation or product innovation, which are used as sources of differentiation, requires MNCs to establish an autonomous overseas R&D to collect direct local information on customer's need and to integrate those information on the corporate level to provide unique value to the customers. MNCs with focus strategy are expected to establish overseas R&D laboratories in the form of Indigenous Technology Unit since a great degree of autonomy of subsidiaries is required in the use of resources to meet the unfulfilled need of a particular segment.