Why do firms outsource R.doc - 1.0 Introduction A recently popular channel of technology flows R&D outsourcing has become increasingly important as a

Why do firms outsource R.doc - 1.0 Introduction A recently...

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1.0 Introduction: A recently popular channel of technology flows, R&D outsourcing has become increasingly important as a source of obtaining new knowledge (European Commission, 2016; M. García-Vega and E. Huergo, 2018). There may be a lot of reasons and also challenges underlying these R&D outsourcings. This essay will try to fix out why firms outsource R&D and what challenges are in doing so. Before that, it is prerequisite to figure out what is R&D and also what is R&D outsourcing. According to Wikipedia, Research and development (R&D, R+D, or R'n'D), also known as research and technological development (RTD), refers to innovative activities undertaken by corporations or governments to develop new services or products or to improve existing ones. In commerce, "research and development" usually refers to future-oriented, long-term activities in science or technology(ChartsBin, 2019). According to many scholars, "R&D" capability may illustrate the competitiveness of an organization, of an industry or even of a country. Without constantly absorbing external knowledge, the scope of a firm's knowledge can be quite limited (Foss and Pedersen, 2002; Grant, 1996; Kyläheiko et al., 2011; Mudambi, 2002). So even not having an internal R&D program, a firm must also depend on strategic alliances , acquisitions and networks to acquire external knowledge. What’s more, among so many options, R&D outsourcing can be taken as one of the most effective channels in terms of making use of external knowledge(S.Y. Han and S.J. Bae,2014). To be more specific, Ian McCarthy and Angela Anagnostou (2014) argued that outsourcing means an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally, and sometimes involves transferring employees and assets from one firm to another. How do firms outsource R&D? Why do firms outsource R&D? There exist many plausible reasons behind R&D outsourcing activities. Based on a general literature review, this essay concluded these factors from the following perspectives: Reducing operating costs, especially the device, real estate and human cost. Cost advantages may be achieved by specialization of the contractor or by cost sharing in a joint commissioning of more than one client. Moreover, fixed costs may be reduced and R&D time and budgets better controlled(Tapon and Thong, 1999; Grimpe and Kaiser, 2010). The payment to the skillful but
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