New Industrial Ecology: Rationale for Collaboration, Partnership, Licensing Agreement - Term Paper Example

In the New Industrial Ecology, forging strategic business alliances and promoting networking with other business entities provide the firms with competitive advantage Introduction The fast changing socio economic dynamics have created a fiercely competitive business environment. The advancing technology has narrowed the knowledge boundary amongst the organizations, necessitating innovative approach that would provide their goods and services with differentiating elements to give them cutting edge leverage. Indeed, in such a scenario of emerging new industrial ecology, the strategic leadership initiatives of the firms become the major enabling factors of competitive advantage. Coombe and Georghiou assert that the ‘pressures of competition demand that they use their R&D resources to keep up a steady flow of new or improved’ and that increasingly the ‘model of technological self sufficiency has been replaced by a model of network relationships’ (Coombe and Georghiou, 2002). Forging strategic business alliances and promoting networking with other business entities provide the firms with plethora of informed choices for improving and improvising their performance outcome. Indeed, data, information and knowledge are the three major elements of the informed choices that help exploit new opportunities in the real world and become necessary business tool in the ever expanding and competitive global environment. Rationale for collaboration, partnership, licensing agreement Access to information is vital part of organizational management processes as it not only promotes efficiency and knowledge based discharge of duties by the employees but it a great tool for the management to exploit the available information to improve its performance. Information provides wide ranging knowledge about the existing and emerging paradigms of the business world which may have considerable impact on the organizational performance outcomes. Therefore, knowledge management through effective communication becomes important part of workplace (Raghuram, 1996) and intrinsic part of developing processes within and outside the organizational capabilities. Collaboration, partnership, licensing agreements and any other types of contract business relationship are the linkages that facilitate higher level of efficiency and organizational growth which would offset a competitive advantage over their rivals. According to P.F.Drucker, ‘access to information represents the basic precondition for success of a firm’ (Drucker, 1998). These linkages help provide the firms with wider database of knowledge and facilitate manipulation of strategic business information to improve the overall business prospects. According to Slater and Narver, markets thrive on the processes of the learning organization which ‘continuously acquire, process, and disseminate throughout the organisation knowledge about markets, products, technologies, and business processes’ (Slater and Narver, 1995). Thus new dynamic leadership encourages creativity and innovative practices that give a unique impetus to the development of new products. Significant factors influencing strategic alliances In the contemporary era of competitive environment, the various business compulsions become the motivating factors that promote tactical business coalitions across the globe. The myriad economic units across the globe are inter-connected through the market mechanisms. Barnett elaborates the concept as ‘the enormous changes being brought on by the information revolution, including the emerging financial, technological, and logistical architecture of the global economy (i.e., the movement of money, services accompanied by content, and people and materials)’ (Barnett, 2004). The following are major factors for firms that necessitate fostering of new business relationship with other business entities: Changing preferences of the people In the rapidly evolving societal norms, there is significant paradigm shift in the consumer behaviour. The rapid globalization and advancing technology has provided the people with a wide choice of goods and services. The firms, therefore, are increasingly adopting new ways to meet the challenges of the evolving business compulsions. It is important for the firms to incorporate the changing requirements of the people through the development of new products and services that meet the changing demands of the masses. Therefore, changing preferences become one of the major motivating factors for fostering alliances. This helps them to add value to their existing products and at the same time, helping them to diversify and maintain leverage against their rivals. Time, cost and market expansion Financial considerations are strong motivating factors that promote strategic collaboration and license agreements. Such business alliances help the firms to maintain competitive advantage at great speed and without incurring extra expenditure on expansion of business on stand-alone basis or on the creation of state of the art R&D unit. Establish credibility in international market The strategic partnership with global business entities helps the firms to gain entry in new areas. It is able to establish credibility in the global business and at the same time, it would have international presence under its own brand. Coviello and Munro (1997) have explored the dynamics of ‘internationalization of small firms’ and categorically state that small firms pursuing niche strategies based on high technology and knowledge management are focused on the changing dynamics of the global business. They are able to provide their network partners across the globe with distinct idea and innovative feature which helps them to improve and improvise their products and services to greater advantage. Diverse technology The vast diversity in the technology area is one of the most significant factors for fostering new business tie-ups. Since, it is not possible for any firm, big or small to continue to survive as ‘Technology Island’, building business relationship becomes the sensible option for firms to compete in the global environment (Tidd & Trewhella, 1997). Thus, collaborations, partnerships and licensing agreements between firms are primarily designed to give competitive edge to the firms in the cut-throat business of the current times. Dynamics of managing collaboration Since the need for strategic partnership with global business entities has become essential to remain afloat in the highly competitive global business environment, it is imperative that one looks into the various proposals for partnership and strategic alliances with other firms. Innovation is key issue in technology arena and the decision on business relationship vis-à-vis collaboration, partnership or license agreement becomes highly critical factor for success. The chosen area of business relationship facilitates creative input to the products and services, thereby, providing the firms with competitive advantage. Hence, the dynamics of business relationship can be broadly divided into three areas that have significant impact on the outcome of the relationship: decision for the type of alliances; implementation; and exploitation (Malik, UOM). The presence of small firms that specialize in a chosen area of technology become highly attractive to larger more dominant firms primarily because forging alliances provides each of them with necessary edge to survive in the competitive global environment. While the smaller firms gain financially, the acquisition or merger facilitates the larger business entity with an innovative technology that can be used by them to add value to their existing products and services. Research and development Research is vital academic tool that facilitates knowledge based socio-economic and business decisions that are essential part of the development of the business processes. Indeed, the researchers have shown that for innovation is intrinsically interconnected with novel ideas and the networking of organizations exposes industries to the huge stack of new ideas and creates platform for transfer of knowledge (Powell and Grodal, 2005). The relationship between the industry and the university has become a very essential ingredient of development and highly relevant in the contemporary times primarily because of the fact that the in the ‘knowledge based view of the firm’, creation of knowledge has become more important than value (Grant, 1996; Kogut and Zander, 1996). According to Hausler et al., even the largest and most diversified corporations need to collaborate in R&D in order to gain access to complementary knowledge (Hausler et al, 1994). Research in the scientific and technical areas promotes discovery and invention of new products that provide the firms and individuals with great business and financial advantage through patents and ownership rights, which are crucial measure of success (Darby & Zucker, 2001). The concept of patenting knowledge in the form of new products has added a zing to the research and greatly facilitated the commercialization of knowledge, thus providing The Connect and Develop model of innovation of Proctor and Gamble is an exemplary example of using external agencies for its R&D to create better and cheaper products, faster. Huston and Sakkab from P&G assert that ‘35% of our new products in market have elements that originated from outside P&G, up from about 15% in 2000. And 45% of the initiatives in our product development portfolio have key elements that were discovered externally (Huston & Sakkab, 2006). Indeed, the strategic business alliances have great scope of success, provided they areas and strategies of collaborations are well studied, identified and business partners are judiciously chosen so as to enhance the aims and objectives of the firms. Acquisitions and Mergers Acquisition and mergers are vital inputs of fostering constructive relationship. The key objective that drives the industries to forge alliances with the academia is the ever expanding knowledge base that is intrinsically linked to the academia or universities. The increasing use of knowledge made huge impact on the lives of the people, facilitating interchange of information while at the same time, using it as one of the most powerful tool to influence paradigms of socio-political relationship across the globe. The implicit and explicit use of knowledge thus, became strong motivators for change and huge impetus for the acquisition and merger of smaller firms with larger high technology firms. The networking of different organizations significantly influence innovation and learning processes (March, 1991; McEvily and Zaheer 1999). Indeed, in the cut throat business, the acquisitions of Hotmail by the Microsoft; and Facebook and others by the Yahoo Inc. are cases in point where the A&M have given distinct edge to them. The Blue Gene Project of IBM is exemplary example of using and exploiting the knowledge of smaller firms for its long term vision of developing new supercomputers for drug discovery and nanotechnology (Howard-Spink, 2001). The ‘joint production of knowledge’ has become the vital link to the new age mantra of success (Gibbons et al., 1994). Hence, the industries across the world are looking for firms that can provide them with complementary knowledge to enhance their core competency. Venture Capital Hanna and Walsh explicitly affirm that while the smaller firms thrive on innovation but the lack of resources becomes the major hindrance in their expansion and development. In the contemporary times, the concept of venture capital has acquired a new meaning for the smaller firms who are into innovation and possess distinct knowledge. The venture capitalist provides the smaller firms with the necessary capital to the small firms so that they can continue expansion of their innovation and new product development processes. Coombe and Georghiou argue that larger firms like Phillips and 3M which have diversified interests are able to maintain competitive edge because of their networking with smaller firms who ‘are sustained by venture capital’ (Coombe & Georghiou, 2002). Hanna and Walsh (2002) insist that presence of smaller firms are vital paradigms of the contemporary times and provide larger business entities with creative input at lower cost and save precious time that gives them huge leverage against their rivals. Indeed, the recent times are witness to the new dynamic business strategy where the development of new product has moved away from the in-house R&D to outsourced smaller firms that have prompted the industry giants to forge business relationship which goes beyond the goals and objectives of the individual firms and industries. Implementation processes The written agreements and the implementation processes are very important part of business relationship. The success of the new products considerably depends on the three major factors: timeliness, pricing and quality. Looking at the fast changing requirements of the customers, it becomes important that business partnership goals must ensure the product is not only introduced at the right time but its success would also depend on its quality and the pricing. It is also critical that new product management must include exigencies so that the three factors can collectively be approached to make the product appealing for the people while at the same time, encourage creativity and innovative practices that give a unique perspective to participatory approach of new business relationship. Factors that can be successfully exploited The business relationship thrives on the modules of exploitation of knowledge gained through the strategic alliances. Hence, it is extremely important that the partners identify their core competencies and forge alliances on areas that either complements or supplements their competencies and market efficiency. Elements of product differentiation become the vital aspects for exploiting business relationships. Conclusion One can therefore, conclude that in the era of rapidly advancing technology and globalization, the traditional approach to development of new products has undergone dramatic transformation. Speed and flexibility have become extremely important ingredients for the products so that the organizations can timely and efficiently meet the fast changing preferences of the customers. The new product development requires an integrated approach to creative learning that may result in the development of new products. The various compulsions of the emerging new times call for motivated business strategies which are able to meet the challenges of the time with innovation, efficiency and timeliness. Forging strategic business relationship with others greatly facilitates the changing dynamics of global business paradigms. (2188) Reference Barnett, Thomas P M.(2004). The Pentagon’s New Map. War and Peace in the Twenty-First Century. New York: Putnam. Coombe, Rod and Georghiou, Luke. (2002). A new Industrial Ecology. Science; vol 296, 471. Coviello, Nicole and Munro, Hugh. (1997). Network Relationships and the Internationalization Process of Small Software firms. International Business Rview; vol 6, 4, 361-386. Elsevier Science Ltd. Darby, M. R., L. G. Zucker. (2001). Change or die: The adoption of biotechnology in the Japanese and U.S. pharmaceutical industries. Res. Tech. Innovation, Management, Policy 7 85–125. Drucker, P.F. Next information revolution. Forbes, 24 August, 1998. Database: Academic Search Elite. Grant, R.M. (1996). Toward a knowledge-based theory of the firm. Strategic Management Journal 17, 109–122 (Winter special issue). Gibbons, M et al.(1994). The New Production of Knowledge. (Sage, London, 1994). Hanna, Victoria and Walsh, Kathryn. (2002). Small firm Networks: a successful approach to innovation? R & D Management: 32, 3. Blackwell publishers. UK. Hausler, Jurgen, Hohn, Hans-Willy and Lutz Suzanne. (1994). Contingencies of innovative networks: a case study of successful interfirm R & D collaboration. Research Policy, 23, 47-66. Elsevier Science Publication. Huston, Larry and Sakkab, Nabil. (March 2006). Connect and Develop: Inside Procter & Gamble’s New Model for Innovation. Harvard Business Review. Kogut, B., Zander, U. (1996). What firms do? Coordination, identity and learning. Organization Science 7 (5), 502–518. Malik. Khaleel. Manchester Business School. UOM. March, James G. (1991). Exploration and Exploitation in Organizational Learning. Organization Science 2: 71-87. McEvily, William J. and Akbar Zaheer. (1999). Bridging Ties: A Source of Firm Heterogeneity in Competitive Capabilities. Strategic Management Journal 20: 1133-56. Powell,W. and Grodal, S. (2005). Networks of innovators. in: The Oxford Handbook of Innovation; Fagerberg, J.,Mowery, D., Nelson, R. (Eds.), Oxford University Press, Oxford. Raghuram, S. (1996).  Knowledge creation in the telework context.  International Journal of Technology Management, 11, 859-870. Tidd, j & Trewhella, Martin J. (1997). Organizational and technological antecedents for knowledge acquisition and learning. R&D Management 27, 4, 1997.Blackwell Publishers Ltd, 1997. Slater, S. and Narver, J.C. (1995). Market orientation and the learning organization. Journal of Marketing, Vol. 5, No. 3, pp.63–74. S. Howard-Spink. (2001). The power of proteins. available at www.research.ibm.com/thinkresearch/pages/ 2001/20011105_protein.shtml and taken from A new industrial Ecology by Coombe and Georgiou, 1997. Read More