1. Centralizing Research and Development Activities
1.1 Advantages of centralization of Research and Development Activities
1.2.1 Knowledge sharing and transfer
Vaisala with its long history of success in weather technology is aware that the growth is achieved through innovation. R&D is the tool which makes the innovation reality rather than just a brilliant idea which can go with no foresaw. Managing and maintaining a complex environment that can hinder innovation is critical for Vaisala future business growth. For the innovation to take place the company has to manage the knowledge extracted from the global information that flows into the company. We do not deny that the decision of centralization is wise move for the reason that Vaisala has an aligned platform with software development, product modularization based on Decision support systems. We learned in Business Intelligence course that Knowledge management and globalization efforts are being enhanced by new sophisticated information systems. In other hand we learned that Vaisala has started an ERP system implementation on 2010 which will be completed in the end of 2012 . So the knowledge sharing will not be an issue with highly new advanced IT tools. When discontinuing other R & D centers in six regions, most of employees will have to be laid off. We see that will not have any effect on the way the company processes its knowledge. If the knowledge is to be tacit maybe the company will think to keep few employees and shift them to other R&D centers. But this cannot be a problem since the company did deal with this situation when people get retired for sure they have experiences how to transfer knowledge from expert soon retired employees to new hired ones. The closing of other R & D is caused by the wave of reducing work forces adapted by many firms due to the nowadays financial crises which change the behavior of the market. Every firm is uncertain about the behavior of its customers, suppliers, even its competitors. In the article of Kogut Zander 2003 “, what determines what a firm does is not the failure of a market, but the firm’s efficiency in this process of transformation relative to other firms “. We hear every now and then that many firms from different business sectors are adapting the reduction of their employees.
1.2.2 Cost saving
Closing six R & D is a Vaisala´s current strategy for R&D taking in count the idea of generating and identifying of new business opportunities as well as cost saving. The company can sell or rent its premises overseas. Many employees will not necessary move and work in the kept R & D centers which can be seen as reduction in Vaisala´s working force. Beside that the company will save the travelling costs between the six closed centers and between the other centers as well. Many MNCs did close its R & D due to the weak market demand that will push almost all international firms to behave in same way, this reminded us with Di Maggio and Powell, 1983 article in term of mimetic isomorphism when companies responses to situations of uncertainty. Vaisala did embrace the decline of its customers´ purchasing power (due to the financial crises), the company has to find ways of improving its financial figures not only to satisfy its investors but also to make sure that the money will not be wasted in unnecessary projects in the six R & D centers.
1.2.3 Information and knowledge control
Since Vaisala is an MNC the most valuable assets consist on the information they generate and the knowledge they produce. By reducing R & D centers in different locations far from the head quarter the company will trim down the risk of the flow of information and knowledge outside of the company special to its rivals. In other hand when the company will have only few R & D it will be easy to control its technological knowledge. The information flow will increase between few R & D centers as well as between the head quarter and all its few R & R centers. Few R & D will help the head quarter to make decisions easily and fast. The researches usually will require a great deal of documentations, if we think of having many R & D centers the documentation will increase. Sometimes the documents are sent back and forth either to the head quarter or between R & D centers. Decreasing the number of R & D centers will save the company time and lessen the documentation.
1.2.4 Power control
R & D centers may work in projects that are not suitable for the company’s strategy this is because the work process may differ from one R & D center to the other specially if there is some competition that will come up with good invention that prosper or shine their position front of the host company. We believe there is a competition among R & D for the reason that the R & D managers will need funds to run their projects. They will work hard to convince the parent company to reimburse them in order to concoct new product or services which will add considerable value to
the customers. We believe that the best R & D in any company will have a great influence on the whole company´s decisions, therefore having few R & D will enable Vaisala to gain a grand control over few R & D better than if there will be many R & D centers. In our course we went mostly about how firms expend and became MNC, but in this case we sense that Vaisala is shrinking its size by reducing R & D centers. The company has to be aware of its products development as one way of leading in weather technology. In the article Strategic Management Journal 21: 1107 (2000) it stated that:” product development routines by which managers combine their varied skills and functional backgrounds to create revenue producing products and services”. The company has to make correct filtering of its employees in its R & D centers and keep the most skilled and talented ones and combine them in other R & D centers. From the legislative prospect the company will deal with few laws. The burden of the external bureaucracy will be less heavy in getting permissions to run specific projects that need a local governmental approval. The company will unquestionably be released to deal with few laws rather than many complicated laws that might affect the shape of the end products or services and their time of release to the market. Effective management of knowledge and the ability to adapt to locale changes are two critical issues for Vaisala´s future success of innovation and competitiveness in leading weather technology. Vaisala board will strive to maximize the return on its R&D investments and cautiously shield the company´s intellectual property including patents and knowledge in its databases. The company must carefully control R&D costs and find ways of how to do more with fewer resources as one way to cuddle sustainability and manage its current and future growth.
1. Disadvantage of centralization of Research and Development Activities
Vaisala: Board of Directors Report February 1, 2011 Kogut and Zander: Knowledge of the firm and the evolutionary theory of the multinational corporation, 2003: 519 Di Maggio and Powell (1983): Institutional Isomorphism
Strategic Management Journal 21: 1107 (2000)