This chapter examines Kuemmerle's idea that many MNEs, particularly international projectors, are wisely decentralizing their R&D by building worldwide networks of R&D labs. He examines R&D labs in host countries, dividing them into two types: (1) home-base-exploiting sites, which primarily receive information from the central lab in the home country and adapt products to local demand, and (2) home-base-augmenting sites, which primarily access local knowledge and send information back to the central lab. Kuemmerle gives practical advice about how those two different roles imply different needs and requirements, including different location and management requirements. Kuemmerle strongly recommends that both types of labs should interact regularly with the firm's other R&D units. These ideas will be examined and then criticized using the framework presented in Chapter 1.

Significance

In his HBR article ‘Building effective R&D capabilities abroad’ Walter Kuemmerle shows that many MNEs are changing their strategic approach to R&D. In particular, international projectors are decentralizing their R&D: instead of keeping all their R&D activities in their home country, they are building international networks in which foreign R&D laboratories fulfil specific roles within the firm.

There are two main reasons for this trend. First, many MNEs feel they need to be present in various knowledge and innovation clusters scattered around the world. Often, a host country presence is essential in order to monitor and absorb new developments – typically, complementary resources from foreign input providers such as competitors, host country universities and scientific communities.