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Managing R&D in SMEs: Taking Advantage of the Giants' Shoulders

Mathew J. ManimalaIndian Institute of Management Bangalore

Ab stract:It is a paradox of entrepreneurship that entrepreneurs often have to develop new products and/or modifyexisting ones for their entry into the market and for their survival, but find it difficult to attract thenecessary expertise or afford the costs of setting up formal R&D facilities. This paper examines theingenious methods employed by entrepreneurs to accomplish this apparently impossible task. Based on areview of the literature and an examination of anecdotes and case studies on new product launches, it isinferred that the principal strategy of entrepreneurs for developing and commercializing new ideas is toidentify and leverage network resources. The most commonly used of these resources are:

(a) Large corporations with a need to externalize some of their activities

(b) Small companies with similar or complementary interests but which are unable or unwilling to bear thefull risk and therefore are interested in sharing the risk and returns

(c) Research institutions that periodically come up with potentially useful ideas but are not in a position tocommercialize them

(d) Funding agencies that are interested in high returns and therefore are prepared to take high risks; and(e) government and public agencies interested in the development of their domains for which theyconsider the innovative entrepreneur to be one of the most effective instruments.

All these organizations are motivated by self-interest and thus can provide opportunities for meaningfuland productive partnerships for the entrepreneur. In this context, new product development inentrepreneurial small firms should be seen more as a social than a technological process.

INTRODUCTION:

Small and Medium Enterprises (SMEs) play an important role to promote economic development. Theinternationalization of R&D network is recent phenomenon[1]. Responding to the increasing de-centralization and globalization of work processes, manyorganizations have responded to their dynamic environments by introducing virtual teams. Virtual teamsare growing in popularity[2]. Additionally, the rapid development of new communication technologies such as the Internet

has accelerated this trend so that today, most of the larger organization employs virtual teams to somedegree[3]. Internet will become in the future an important source of competitive advantage [4].Information

technology is providing the infrastructure necessary to support the development of new organizationforms. Virtual teams represent one such organizational form, one that could revolutionize the workplaceand provide organizations with unprecedented level of flexibility and responsiveness The employed WebServices technology, although very popular nowadays but it is still not mature enough, so dealing with itcan bring new findings

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[5]. Considering that R&D teams need to access and retrieve information from as many sources aspossible , virtual teams are important mechanisms for organizations seeking to leverage scarce resourcesacross geographic and other boundaries[6]. Faced with the challenges of increased globalization of markets and of technological change, SMEs

need reinforced support through transnational research cooperation to enhance their innovation andresearch investment. SMEs¶ survival depended on their capability to improve their performance andproduce goods that could meet international standards[7]. In other words, a certain level of competitiveness may be a prerequisite for an SME¶s survival when

dealing with dynamic conditions in the business environment. To compete with global competition and,overcome rapid technology change and product variety proliferation in the new manufacturingenvironment, SMEs must be able to sustain product innovation[8]. Internationalization holds much potential for the growth of SMEs[9]. One very important trend to enable new knowledge creation and transfer in and to SME's is thedevelopment of collaborative environments and networks to increase their innovation capabilities as a single unit but also the capabilities of the network as a whole throughcollective learning.