In this article we will discuss about the classification of Research and Development (R & D) strategies into offensive, defensive and absorptive categories as classified by Pavitt.
For sustained research and development effort and strategy, one of the main requirements is a measure of stability in budget allocations. This is an area where corporate planning can be of considerable assistance. By tying in R & D effort to total corporate strategy, a company is able to both identify and provide for its needs.
If the strategic plan throws doubt on the company’s ability to finance the required measure of R & D, the best solution is to opt for a lower measure where there is more stability. Having set cost and time frame, only top management can decide whether to continue or to cut off once the limits are reached. Similarly, judgment is required in the selection of an R & D strategy—its likely success and the cost effectiveness.
In this regard, Pavitt has summed up the management implications of R & D strategy into three categories: offensive, defensive, and absorptive. And, for management implications, Pavitt has considered the importance of resource and managerial requirements to explore the possibilities of penetrating new or foreign markets by means of any of R & D strategy category.
According to Pavitt, the terms:
(i) Offensive indicates the intention to be first in the field with a major innovation;
(ii) Defensive indicates the intention to avoid mistakes by following the leaders never being first but reacting quickly enough to be second; and
(iii) Absorptive means obtaining developments on licence and carrying out minimum R&D work to further develop them.
Thus, the strategic approaches to R & D can be tabulated below in a summary fashion:
Specific problems and opportunities for Indian firms against each of the R & D strategies may be as follows:
1. Offensive:
Most difficult for ‘Mega group’ type of Indian firms as they have strong technology/market advantages. Other advanced technologies do exist, however, and can be exploited.
2. Defensive:
Best strategy when consolidating past mistakes or when dealing with competitors with strong technology/market positions. ‘Big group’ and ‘Medium group’ types of Indian firms can avail of this strategy to expand quickly the scales of operations in their core business area to national and international levels.
3. Absorptive:
More difficult as ‘Mega group’ and ‘Big group’ types of Indian firms would prefer to invest rather than licence. An ‘Emerging group’ type of Indian firms can avail of this strategy provided they have their own technology and cost advantages and are quick in market exploitation.
Overall R&D Strategy and Directions:
The overall R&D strategic plan should provide answers to such questions as how much of the R & D effort should be directed towards protecting present product lines, and how much towards exploring new product areas, the fields of R & D concentration, etc.
If a company decides to engage in more than one type of R & D, the company’s R&D strategy should spell out the balance which will be maintained among the different types. A company’s R&D strategy should also spell out whether a company will follow a ‘first to market’ or ‘follow the leader’ strategy.
A ‘first to market’ strategy requires heavy R&D expenditure while a ‘follow the leader’ strategy requires a smaller investment, since it places heavy emphasis on development instead of basic or applied research. The ‘first to market’ strategy is best suited for industries with high rates of change.
The ‘follow the leader’ strategy emphasises product and process development, carries the lowest costs, gives the quickest delivery, often requires no other R&D efforts, and is well suited for industries where the rates of change are low.
For most Indian firms, the ‘follow the leader’ R&D strategy is found to be suitable.