The organization and performance evaluation of R&D projects in a dynamic environment

Faster technological development, shorter product life-cycles, and more intense global competition have transformed the current competitive environment for most firms. This new competitive landscape forces organizations to actively acquire knowledge, as a firm's competitive advantage is now more dependent on continuous knowledge development and enhancement. Therefore, knowledge has become a central theme in strategic management. Against this background, we argue that the knowledge characteristics of R&D projects are fundamental variables to explain governance decisions. Drawing upon the case of STMicroelectronics, we provide evidence that partnering or contracting with universities for innovation is common practice for developing new -original- knowledge, as opposed to applying existing knowledge, for solving a problem. However, the firm is more reluctant to partner, especially with another firm, when this knowledge directly enhances its competitiveness. Moreover, we find that R&D project performance is a bi-dimensional construct. One dimension picks up project efficacy and immediate benefits, while the other includes learning and long-term benefits. Though spanning firm boundaries for innovation does not seem to have appreciable effects on perceived project efficiency, it nonetheless brings about intertemporal benefits related to learning and capabilities development. In a dynamic environment, building knowledge may be more important than protecting it. Thus, an open innovation process may be an exceptionally effective way to build and develop the firm's technological future.