Outsourcing of R&D: Chances and Risks

Since 1970s, the function of the internal research and development (R&D) has been changing. Organizations have increasingly recognized that specialized R&D service providers can not only provide short term benefits, but also supplement the existing in-house functions and provide learning opportunities. Thus, an increasing number of firms have been contracting out parts of their R&D. In Japan for example, industrial R&D outsourcing expenditures have more than doubled between 1986 and 1998. Similar trends were observed in Germany and the USA. Yet the changes, at least to the extent of R&D outsourcing, have not been uniform across industries. Different surveys show a tendency to bipolarization. While in some industries R&D outsourcing has become widely accepted among established companies, other industries have only begun to think about this issue. Based on five international case studies this paper aims to contribute to a rather scarce pool of research into this topic by providing some insights how the outsourcing of R&D has been implemented in practice, and by exposing some of its chances and risks through the analysis of critical success factors. Because further case analyses will be integrated during the following months it is still work in progress.