Finding the best research and development strategy under different conditions

Abstract

While the most advocated theory on contingency is gradually taking more factors under theoretic consideration, our paper considers such situations under both external and internal contexts. Our study on research and development (R&D) strategy selection presents practical results that may assist firms in making strategic R&D decisions. Our research suggests that for firms with high absorptive capabilities, it is best to use LowOut and HighInn R&D strategies under low competition, and switch to LowInn and HighOut R&D strategies when competition is intense. For firms with low absorptive capability, the choices are reversed, that is to use LowInn and HighOut strategies when competitive intensity is low, and LowOut and HighInn R&D strategies when competitive intensity is high. Moreover, the method used in obtaining results is innovative and helpful in understanding two- and three-way interactions. Overall, the results obtained from this research supports previous studies in the field, and may be helpful to firms.

Keywords:

• absorptive capability
• competitive intensity
• R&D strategy
• contingency
• match-up

Acknowledgements

The authors thank the National Planning Office of Philosophy, Social Science of China, the National Natural Science Foundation of China, and the Zhejiang Provincial Education Department for financial support under Grant Number 08AJY036,07&ZD022, 70910107021 and YK2010021.

Notes

Here in-house R&D, R&D cooperation and technology purchasing are defined following Cho and Yu (2000).

We are grateful for the help from Dr Shukai Cai in data collection.