Choosing between internal and non-internal R&D activities: some technological and economic factors

This paper evaluates some of the technological and economic factors that underlie the choice between in-house R&D, R&D alliances and outsourcing. We recount the reasons for the growth in non-internal activities, and explain why these are not as prevalent for R&D as other value-adding activities, and highlight that outsourcing is most often undertaken where multiple, substitutable sources are available. We then develop two frameworks. First, a static framework is developed, which evaluates the choice of mode based on a firm''s distribution of competencies, and their strategic importance. Second, a dynamic framework is developed that demonstrates how the static framework differs depending on whether the firm is engaged in pre-paradigmatic, paradigmatic or post-paradigmatic sectors. We also consider the effect of new technologies being introduced to a firm''s portfolio of competencies.