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Sharing the idea: The emergence of global innovation networks, 2007

Sharing the idea: The emergence of global innovation networks, 2007

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Published by: i-people on Mar 31, 2008
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Sharing the idea
The emergence of global innovationnetworks
A report from the Economist Intelligence Unit 
sponsored by
 
© The Economist Intelligence Unit 2007 1
Sharing the idea
The emergence of global innovation networks
 Sharing the idea: the emergence of global innovationnetworks
is an Economist Intelligence Unit report that examines a new approach to managing global research and development programmes. It issponsored by the Investment Development Agency of Ireland (IDA Ireland).The Economist Intelligence Unit bears soleresponsibility for the content of this report. Oureditorial team executed the online survey, conductedthe interviews and wrote the report. The findingsand views expressed in this report do not necessarilyreflect the views of the sponsor.Our research drew on two main initiatives:
We conducted a survey of senior executives inNovember 2006. Respondents represented a widerange of industries, including aerospace anddefence, automotive, information technology (IT)and technology and manufacturing;
To supplement the survey results, we alsoconducted a series of in-depth interviews withinnovation experts from a range of companies andinstitutions.Paul Tyrrell was the author of the report and RobMitchell was the editor. We would like to thank themany people who helped with this research for theirco-operation and assistance.
About the research
 
2 © The Economist Intelligence Unit 2007
Sharing the idea
The emergence of global innovation networks
he traditional process of innovation, wherebya company maintains and funds a centralisedresearch and development (R&D) department,is gradually being superseded. In its place, companiesfrom a variety of sectors are seeking ways todisaggregate their R&D departments and distributethe innovation process across a network of external partners and offshore sites. This enables them toallocate activities according to the strengths of particular countries and external organisations, andthereby make their R&D processes more effective andefficient.The reasons for this approach—which can betermed a global innovation network—are many andvaried. The increased cost and complexity of theinnovation process is certainly a factor, as are regional talent shortages and the demand for localisedproducts and services in emerging markets. The rapiddevelopment of skills and expertise in China, Indiaand elsewhere are also important considerations, andare encouraging more and more companies to tap intothese deep talent pools.However, while global innovation networksundoubtedly have their advantages, there are alsoimportant risks to consider. Unlike many otherbusiness processes, R&D is often considered core tothe company’s identity and exposing it to outsideorganisations may require a loss of control that coulderode competitive advantage. Global innovationnetworks are also subject to the same management challenges that affect all outsourced operations—forexample, the objectives of partners can diverge,conflict can arise and there can be cultural clashes.This survey and white paper, conducted by theEconomist Intelligence Unit on behalf of IDA Ireland,examines current attitudes towards the global innovation network model and its implicationsfor management. Based on a survey of over 300executives worldwide, as well as a series of in-depthinterviews with executives and innovation experts,the study identifies the following key attitudes andtrends:
 
 The drivers of the global innovation networkmodel are many and varied
. Innovation is becomingmore expensive and complex because of a confluenceof disruptive forces. Meanwhile, customers are callingfor higher rates of innovation and lower prices.Among respondents questioned for this survey, 77%say that the cost of innovation has increased over thepast three years and 82% think that the complexityhas increased. To extract more value from their R&D,companies must become more “customer-centric” andmore efficient. The natural solution is to disaggregatethe R&D function worldwide and share the burden of innovation with external organisations;
 
R&D is increasingly being offshored
. The past three years have seen a marked increase in theoffshoring of R&D units. The US remains the most popular destination, thanks to its high-qualityworkforce and robust enforcement of intellectual property (IP) rights, but respondents consider that India offers the best combination of cost and quality,while Asia-Pacific is set to become the most populardestination over the next three years;
 
Innovation is increasingly “open”
. Companies arenot only offshoring R&D functions, but outsourcingthem, too. Over the next three years, respondentspredict a marked increase in the proportion of R&Dbeing carried out by external partners. In order
Executive summary 

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