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Global R&D’s Performance Payoff There are many benefits to offshoring innovation, and research suggests that firms

ESSENTIAL READING

financial performance. Of the 184 top R&D spenders studied by Booz & Company,

“21st Century R&D: New Rules and Roles

that are more aggressive in globalizing their R&D activities enjoy stronger sustained those that deployed more than 60% of their R&D outside the countries in which

they are headquartered had greater success in responding to local market needs and performed better in terms of operating margin, total shareholder return, market

capitalization growth and return on assets (see chart below).7 It is, therefore, not

surprising that 91% of the world’s 1,000 largest R&D spenders conduct innovation activities outside the countries in which they are headquartered. 8

for the R&D ‘Lab’ of the Future.” Mariann Jelinek, et al. 2012. Research Technology Management. 55 (1): 16-26. “Balancing Internal and External Knowledge Acquisition: The Gains and Pains from R&D Outsourcing.” Christoph Grimpe and Ulrich Kaiser. 2010. Journal of Management Studies. 47 (8): 1483-1509. “Managing the Business Risks of Open Innovation.” Oliver Alexy and Markus Reitzig. 2012. McKinsey Quarterly. (1):17-21. “Managing Global Innovation: Uncovering the Secrets of Future Competitiveness.” Roman Boutellier, et al. 2008. Berlin: Springer-Verlag.

GLOBAL-DRIVEN FOOTPRINT

9

“Managing Global R&D Operations—Les-

COMPANIES THAT DEPLOY 60% OR MORE OF THEIR R&D OUTSIDE THEIR HOME COUNTRIES TEND TO OUTPERFORM THEIR LESS-GLOBAL PEERS

sons from the Trenches.” Surajit Kar, et al. 2009. Research Technology Management. 52 (2): 14-21. “Managing Internal R&D Networks in Global Firms: What Sort of Knowledge Is

LOCAL DRIVEN = 100

Involved?” Julian Birkinshaw. 2002. Long TOTAL STAKEHOLDER RETURN

Range Planning. 35 (3): 245-267.

OPERATING MARGIN MARKET CAP RETURN ON ASSETS

co p y r i g h t i n fo r m at i o n

0

50

100

150

BATTEN BRIEFINGS, February, 2012. Special Edition, published by the Batten Institute at the Darden School of Business, 100 Darden Boulevard,

note : 100 is a normalized figure. The average performance of companies in each instance = 100.

The bars show relative performance in each area by companies with a global-driven footprint.

Charlottesville, VA 22903. email: batten@darden.virginia.edu www.batteninstitute.org POSTMASTER: Send address changes to Batten Briefings, P.O. Box 6550, Charlottesville, VA 22906-6550. ©2012 The Darden School Foundation. All rights reserved.

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[From the Innovators' Roundtable Series] Corporate innovation does not take place only within the vacuum of a company’s R&D unit. New produc...

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