Internationalization of Research and Development

Koji Nishio
Research Fellow

April 17, 2009 (Friday)

Japanese companies are globalizing research and development by increasing R&D centers in Europe as well as Southeast Asia, China, and India. Meanwhile, European and US multinational corporations are conducting R&D activity in developing countries targeting the local poor class. Such activity is not found in Japanese companies.

A look at income distribution shows that a majority of the world’s population are poor people living on less than two dollars a day. This demographic, known as the bottom of the pyramid (BoP) in terms of income distribution, represents a huge market of over four billion people. While lifestyle infrastructure has been established in developed country markets, it remains nearly nonexistent in the BoP market. Simply improving products in developed country markets is therefore insufficient.

In “The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits,” C.K. Prahalad advocates the BoP market and identifies necessary areas for BoP innovation: (1) dramatically improving cost performance; (2) utilizing new technology; (3) expanding scale as a prerequisite; (4) eliminating environmental waste; (5) reconsidering necessary functions; (6) innovating the provision process; (7) simplifying business operations; (8) educating customers; (9) adapting to poor conditions; (10) discarding preconceived notions.

Hewlett-Packard’s “i-community” initiative has created local jobs and improved living standards with a new IT experiment using digital cameras and solar batteries. Intel has launched a project for eye disease examination using wireless technology, and is introducing this business model in Cambodia and Ghana.

In collaboration with local businesses and NGOs(*), these companies are conducting IT experiments to improve basic infrastructure. The developed business models are then implemented in other countries. The strategy is to convert the BoP socio-economic group into customers, and in doing so achieve balance between business and social responsibility while establishing company brand early in regions with significant market potential. Japanese companies should also consider globalizing R&D from this perspective.