The Effect of Business Interdependencies on Product R&D-Intensive Business Performance

Mel Horwitch and Raymond A. Thietart
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Mel Horwitch: Massachusetts Institute of Technology, Sloan School of Management, 50 Memorial Drive, Cambridge, Massachusetts 02139
Raymond A. Thietart: University of Paris and ESSEC, Ecole Superieure des Sciences Economiques et Commerciales, Avenue de la Grande Ecole, B.P. 105, 95021 Cergy Pontoise Cedex, France

Management Science, 1987, vol. 33, issue 2, 178-197

Abstract: One of the major decisions that firms face regarding R&D-intensive businesses is a structural one: establishing the appropriate level of internal strategic interdependency within and among business units. The current discussion over the effectiveness of creating small, independent, and entrepreneurial venture units in multi-business corporations is part of this larger structural concern. The aim of the present research is to study the efficacy of different structural linkages for achieving market share and ROI objectives in product R&D-intensive businesses. The study focuses on interdependencies between business units in product R&D-intensive businesses that produce consumer products or industrial products. A sample of 641 businesses (221 consumer products and 420 industrial goods) is drawn from the PIMS data base. A cluster analysis is run to identify natural groups of homogeneous businesses. For each of the seven identified groups (established suppliers, fast movers, high-tech job shops, stalled giants, established diversifiers, dominant specialists, and laggers) a multi-way analysis of variance is performed to study the influence of various interdependencies measured in term of vertical integration, shared facilities, and shared marketing on two criteria of performance: market share and ROI. The findings indicate, first, that the interdependencies required to achieve high performance are contingent upon the nature of the product R&D-intensive business and its environmental characteristics. Second, for a given business configuration, high performance interdependencies are influenced by the type of performance objectives selected by the business, such as market share or profitability. Finally, the results imply that a multi-business corporation which possesses a portfolio of product R&D-intensive businesses probably requires a more diverse set of interdependencies than, for example, simply mainstream centralized industrial R&D organization, on the one hand, and independent entrepreneurial units on the other hand. Effective competition for a firm with diverse R&D-intensive businesses may often call for a capability to support concurrently multiple levels of internal interdependencies and to reject, create, or modify this set of interdependencies as the situation warrants.

Keywords: research and development; technological innovation; technology strategy; innovation (search for similar items in EconPapers)
Date: 1987
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