Corporate R&D Outsourcing: The Current Status and the Surrounding Issues

ABSTRACT

In response to the rapidly shifting environment of corporate management, companies are beginning to put a greater emphasis upon R&D. What characterizes today's corporate R&D, however, is that funds are increasingly moving outward as companies are now focusing them into external resources.

The main purpose for increasing the utilization of external resources is to acquire technology and to speed up the development of new products. This change is occurring in the context of a larger shift in the means for corporations to secure profits. The traditional tactics of owning and managing production equipment, know-how, sales and service networks are giving way to a competitive race to patent protect and commercialize products and technologies. It is important, meanwhile, to recognize that while the means for securing profits has been changing in this way, for the past five years and going forward, in industries like electronics and precision machinery, there are also industries like automobiles and pharmaceuticals that have not changed very much at all.

An important change in the electronics and precision machinery industries is the vast reduction in the time period between product models. This fast pace is being fueled by the large amounts of funds that both industries are pouring into communication electronics R&D. In fact, this area receives the most R&D capital in Japan. Thus, as technology development in communications electronics advances rapidly ahead of that in other fields, the time period between model changes becomes shorter and the utilization of external resources becomes more active.

As the productivity of utilizing external resources has more or less met expectations, this trend can be expected to build into the future. The main obstacle right now, however, is that many Japanese corporations have still not sufficiently converted from the traditional attitude and infrastructure of self-sustenance. Much is lacking in their approach to external technologies including the organization needed to identify and acquire them, the knowledge to evaluate them, and the ability to assimilate them. On the other hand, there are industries like chemicals and machinery that have little if any experience at all in utilizing external resources. Many of the companies from these industries say 'they got a sense that this was important but just didn't do it.'