Relative importance of external R&D: trends and motivations

This paper reports the findings of our survey study of the methods firms use to generate new basic and applied research and development (R&D). By far, the most important source of new R&D are the firms' in-house programs. This finding holds for firms of all sizes. External R&D arrangements are most common for basic research, although most firms indicated that in the future they expect to increase their reliance on external sources for applied R&D. Small firms tend to acquire technology from the provider, whereas larger firms seem to utilize licensing agreements for gaining access to the results of R&D. Large firms may also be using more of a portfolio approach to external R&D in that they often use several different sources. They also appear to form their outside R&D ventures not only for traditional cost/risk-sharing reasons but also for strategic and competitive reasons. Their attempts to diversify their sources of technology are just as important as the traditional cost- and risk-sharing motivation. Finally, although some collaborative R&D ventures are in response to foreign competition this appears to be of more concern to mid-sized firms than small or large ones.