Our attitudes toward research and development have become more open. Because product life cycles have shrunk and technological evolutions have become so much more rapid, we often look outside our own corporation for R&D partners. However, three business school professors warn that we should be careful when selecting collaboration partners.
C. Annique Un and Alvar Cuervo-Cazurra, assistant business professors at the University of South Carolina, and Kazuhiro Asakawa, business professor at Keio University, looked at four types of potential collaborators: suppliers, universities, customers and competitors. Given that managers always have constraints on time, money and resources, the authors wanted to help managers think about how to choose the best supplier.
They found that when it comes to providing the biggest boost to product innovation, companies do best when collaborating with suppliers. They also discovered, surprisingly, that collaborating with customers didn’t affect product innovation. And, what’s more, their research suggests that working with competitors could actually slow the innovation process.
The authors looked at a survey the SEPI Foundation conducted of 781 manufacturing companies operating in Spain from 1998 to 2002. During this time, just over one-quarter of the companies reported at least one product innovation, and about one-third reported at least one R&D collaboration.
Companies most often collaborated with suppliers and universities -- with about one-quarter reporting each type. Only 3% collaborated with competitors.
Companies, of course, seek R&D partners because they need knowledge. The authors theorize that successful partnerships depend on two dimensions: the collaborators’ breadth of knowledge and their ease of access to that knowledge. Thus, regarding the first criterion, one could argue that universities and customers should make good partners, since they have a broad knowledge base -- combining ideas from a wealth of different disciplines and diverse perspectives.
This knowledge needs to be accessible as well. So, in respect to the second criterion, the authors hypothesized that suppliers and universities would make for the best partners. Why? Companies and suppliers have a working relationship, so suppliers should be amenable to sharing knowledge. And because research labs are often open about sharing information, universities should also be likely to share knowledge.
Companies, it turns out, should prioritize easy access to information over wide breadth of information -- ease of access being the strongest driver of success. This means that suppliers, despite having narrow knowledge bases, were the partners to most strongly impact production innovation. Think of automobile companies: They collaborate with suppliers for everything from seats to brake systems. Each supplier may know only its own product niche, but it could significantly help companies innovate nonetheless.
Universities came in second. These institutions have both wide breadth of knowledge and allow easy access to that information. Why didn’t these collaborations impact product innovation as strongly as partnerships with suppliers? “We were surprised that universities did not come out first, ahead of suppliers,” says Un. “Universities produce all kinds of knowledge, and they make it available for free.”
“It’s still a positive to collaborate with universities,” Un continues. “But it’s better to collaborate with suppliers because they know what you’re doing, and you already have mechanisms to transfer knowledge with your suppliers.”
Customers, who have a wide breadth of knowledge but are difficult to access, had no influence on innovation in this study. “Even though customers potentially have lots of knowledge that could be useful for product innovation,” explains Un, “it’s very hard to get knowledge from them. If you can establish mechanisms to draw out their knowledge and ideas -- what they want -- that could be very useful for product innovation.” But the research findings suggest many companies aren’t doing a good job putting those mechanisms in place.
And, finally, there are competitors. They offer narrow knowledge bases and don’t share information easily. Thus, it’s not surprising that the researchers found that they negatively impacted product innovation. “One of the requirements [for R&D collaboration] is that your partner has to give you the knowledge that you lack,” says Un. “Since competitors are serving similar customers, even though their production processes and the way they serve customers may be different, ultimately the kinds of products they make are not so different. On top of that, it’s very difficult to get knowledge out of your competitors; they will do things to block the sharing of that knowledge. So first of all, the knowledge they could provide is not that useful. And second, it’s difficult to get it.”
This article is adapted from “Collaborating With the Right Partners,” by Larry Yu, which appeared in the Fall 2008 issue of MIT Sloan Management Review. The complete article is available at http://sloanreview.mit.edu/smr/.