The research questions are the following:
What are the main resources and dynamic capabilities identified that can influence firm performance?
Why firms establish R&D collaborative projects?
What effects and impacts result from R&D collaborative projects?
The project in which Bosch Thermo has participated was an Eureka projet (I have indicated the link connected). Afterwards I will complement with data resulting from interviews.
R&D Collaborations
Introduction
Collaborations with external companies is considered a positive innovative strategy for organizations, mainly because the external company offers the resources required by the focal firm, which is mainly knowledge. Sherwood and Covin (2008) state that due to its importance, a number of researchers have studied the influence of collaborations on innovation, with most of them paying close attention to particularities in the associations. In a number of economies, R&D collaborations continue to be widespread, with hundreds of agreements now linking companies to R&D efforts. For over a century, companies have been collaborating with institutions and other industry leaders as a means of improving economic returns and competitiveness. The growing interest in collaborations is associated with the benefits to the focal firm, particularly in terms of technological innovation. Companies that collaborate normally lack a certain resource that is available in the other company. In many cases, both partners might also lack the desire to either internally produce the desired input or partner with a company to produce the input required. Instead, the organizations consider collaborations as the most effective strategy. Companies can engage in various R&D collaborations at any given time. These multiple engagements is advantageous since it provides the focal company a larger variety of useful information. However, the high number of collaborations might also be difficult to manage, and therefore, the company should be careful when selecting a partner.
There are various types of innovations that increase a firm’s chance of engaging in R&D collaborations. Research shows that R&D intensive companies tend to collaborate with higher education and research institutions to achieve technological and product development, whereas organizations that are more interested in radical innovations have a higher chance of collaborating with other companies. The idea of R&D collaborations for product innovation is centered upon the knowledge-based view. The knowledge-based view categorizes companies as instruments that aid in the creation of knowledge (Spender, 2007). In light of this, organizations provide the environment, mindset, and incentives required to assist the integration of knowledge and the creation of information. Part of this integration process involves the conversion of tacit knowledge owned by individuals into explicit information that is purposefully applied to product invention. As such, every individual in the firm is able to contribute equally to the idea of product innovation. However, since internal knowledge is normally insufficient to generate innovative products, companies opt for R&D collaborations. Through these collaborations, the firm can obtain the knowledge it needs from the external company and increase its chances of generating innovative products. As stated by Spender (2007), the diversity of knowledge is highly essential for successful product innovation.
Resource-Based View
Aside from information, companies also rely on the already existing resources and potential to form alliances. This notion is centered on the resource-based view. The focal idea of the theory argues that for companies that want to get an edge over their competitors, rather than focusing on the competitive business landscape, the organization should work on their already available potential and resources. Based on this perspective, it is easier for firms to use the already existing resources to exploit new knowledge and opportunities than to obtain new functions, traits, and skills for every opportunity that presents itself. More importantly, the key premise of the theoretical perspective is that organizations rely on their core competencies, which result in sustainable competitive advantage acquired through the implementation of a strategy for managing resources (Bosch, 2018). The lack of resources is a significant liability for a number of organizations. These deficiencies present themselves in the company’s capability to fully utilize its strengths, size-specific disadvantages, and financial constraints. Therefore, the vital part of the collaborations is to contribute to the exchange of resources between the partners. The usefulness of these resources depends on the partner’s ability to utilize them in executing specific strategies, which would positively impact performance. In light of this, resource-based R&D collaborations are reliant on resource-driven and firm-specific strategies (Zaheer & Bell, 2005). Through these collaborations, the partner company contributes several types of resource inputs that compensate for the focal company’s lack of strength in specific areas. As such, the collaborations enable organizations to use external resources to execute strategies that would have been impossible to undertake. Against this backdrop, this discussion seeks to analyze the R&D collaborations at Bosch with much attention to its resources, types of collaborations, and their impact on its performance.
The Case of Bosch
Company Background
Bosch is a multinational electronics and engineering organization that manufactures a variety of industrial products and automotive components. The company is headquartered in Germany and has various subsidiaries all over the globe. The company was founded by Robert Bosch, who started with a backyard workshop in Stuttgart. Having established the first company in 1901, Bosch has grown to include more than 440 subsidiary organizations and employing over 100,000 workers (Bosch, 2019). Since its establishment, Bosch has been characterized by social commitment and innovative strength. The commitment to innovation is clearly defined by its mission, which is ‘Invented for life’ (Bosch, 2019). The company is committed to establishing innovative solutions by defining specific areas of innovation that apply research activities to increase the pace of technological progress. Bosch relies on both resources and competitive know-how to develop innovations. The areas of innovations invested by the company are carefully selected based on international networking and an interdisciplinary approach. This strategy increases the company’s chances of developing products that successfully compete in the current landscape. The large investment in innovations placed the company among the most innovative companies in 2018 (Orth, 2019).
Collaborations
At the heart of innovation in Bosch are the collaborations with partners from the industry and research. Over the years, the company has strived to form R&D collaborations with partners who are particularly interested in solving tomorrow’s issues today. This approach enables the firm to offer the best chances for creating innovative ideas and rapidly converting the ideas into practical elements to gain a better foothold. Partnerships are therefore an opportunity for the company to boost its innovative capabilities to higher levels. Through the collaborations, Bosch and its partners have access to a variety of useful resources and industry insights. The collaborations allow the companies to integrate the latest business developments in their research as well as practically test their theories. The company relies mainly on its expertise in leadership and project management to help its partners to put their innovative framework into place. Bosch also allows its partners to conduct experiments in a real-world environment as a means of facilitating practical feasibility. The high value in research and development has led the company to set up more than 125 R&D centers worldwide, which have employed approximately 64,500 researchers. Over a period of six years, the company has also invested more than $33 billion in research and development, with 7.3 billion euros spent on R&D in 2018 (Bosch, 2019). Innovation is the company’s main drive since it thrives to create products that are useful and make life easier. The innovations at Bosch focus mainly on consumer goods, industrial technology, mobile solutions, and energy and building technology.
Over the years, Robert Bosch GmbH has collaborated with companies in a number of projects. Part of the partnership was done with Junkers and Vulcano (Bosch, 2019). A particular analysis of the two companies is presented in this article. The collaborations play a key role in Bosch’s energy and building technology business sector, which generates approximately 7 percent of the company’s total sales. The energy technology division focuses on solutions for energy efficiency and building automation and incorporates products such as a software management system and thermo-technology. The thermos-technology division supplies hot-water solutions and heating products mainly across Europe. Initially, Bosch produced injection pumps for diesel cars and windshield wipers. However, the desire to change direction and venture into the household consumer goods led to the acquisition of the gas appliances production from Junkers in 1932. Junkers sold its heating appliances to Bosch in an effort to save the company from a difficult financial situation. As such, Junkers benefited financially, while Bosch benefited through the acquisition of a useful technological idea that would boost its competitiveness. Bosch used the pre-existing idea from Junkers and added other features to create a new product. The acquisition of Junkers was, therefore, strategic in that the company acquired manufacturing knowledge on heating appliances. Additionally, the collaboration between Junkers and Bosch was strategic in that Junkers offered technical assistance as well as training to the Bosch staff who handled operations in the heating appliances department. To further its innovation, Bosch established an R&D center for Bosch Thermo-technology. The center played important roles, including a reverse engineering role that aimed at analyzing the products made by competitors and identifying new approaches for creating better equipment. This indicates that the division was an important innovation toolkit (Bosch, 2011). The second role was to create new knowledge and systemize the existing information about the appliances to design better water heaters in the industry.
The Compact Advanced Engineering (CAE) project
The CAE project was the largest project carried out by Bosch Termotecnologia and plays a fundamental role in the company’s overall innovation blueprint (Bosch, 2019). The goal of the project was to minimize energy consumption tenfold. This required utilizing the strength of gas flow pressure to act as a lever to enable ignition without necessarily demanding battery or electrical power. This idea formed part of the new product development project pursued by the organization. The utilization of the idea can also be considered as converting tacit knowledge into explicit knowledge since notion initially took the form of models, analogies, and concepts. The successful implementation of the CAE project required the company to collaborate with various partners, including suppliers. Suppliers play a crucial role, particularly in the development of water heaters, since they act as the main source of components used to assemble the water heaters and gas valves. Moreover, suppliers also contribute as co-developers by providing specific knowledge required by the company concerning the components supplied. For instance, in the CAE project by Bosch, Kinetron played an important role as a co-developer for the focal company. The organization mainly produces micro-kinetic systems. Aside from information, the supplier also contributed greatly to the development of components and ensuring a smooth supply to facilitate production processes at Bosch. This aligns with the process of mobilizing external resources to increase innovation.
To facilitate the success of the project, Bosch utilized the Time-To-Market (TTM) approach (Bosch, 2013). The TTM approach by Bosch was highly detailed and enabled the cascading of processes with the identification of the characteristics and timing of the specific functional area. The TTM approach focuses mainly on three key objectives (Bosch, 2013). The first objective involves integrating the process into one. Meaning that every subsidiary combines their project requirements into one unique process that is similar to that of other subsidiaries for easy management. The second objective is to ensure the reliability of the process. This requires the company to deliver the right product at the appropriate time. Furthermore, Bosch also needs to meet the requirements of the market by focusing on quality, cost, timing, and features. This focus ensures that Bosch delivers a product that satisfies all the needs. To achieve this, Bosch was required to note the technical specifications of the gas valve produced in the CAE project. A user experience approach is an effective means of defining the technical specifications. Since Bosch had successfully implemented previous projects, the company used the acquired knowledge to improve the gas valve. As required by the TTM, the process of defining the technical specifications is achieved at the project preparation phase. In this phase, the company requirements of product development are defined and spread along the concept phase. The product requirements are then tested as prototypes to determine whether they meet the required technical specifications (Bosch, 2013). However, the existence of technical constraints regarding improving the products to meet the required specifications made it impossible for Bosch to create products that fully met their technical specifications. In this case, Bosch had three main options to make the ignition more energy-efficient aside from the gas valve. The first involved making recourse to the micro servo-valves, the second was to use piezoelectric valves, while the third involved developing a modulation motor. The decision to do away with the three options was made on the basis of security, technological, strategic, and economic considerations. The value of the project was also highly considered from the concept phase to the zero series production phase. This meant that the samples were taken through a series of tests throughout the stages. The concept phase also constituted the design of the product. In this phase, Bosch was required to design a product with much consideration to the concept and cost of the design. Bosch had a number of options in designing the valves since the company could either opt to use standard components, use multifunctional parts, or create a modular design.
Bosch and Vulcano
The case of Vulcano presents a unique scenario since a number of factors led the company into an agreement on becoming a subsidiary of Bosch. The company had a significantly low competitive advantage in the European market as well as in the global market since other metal mechanics firms had occupied large market shares in the global landscape. Also, Bosch was a well-established organization with much experience to share with Vulcano concerning project management and development (Bosch, 2019). As such, the acquisition offered Vulcano an opportunity to learn mainly about product marketing and technology. Moreover, the level of employment in Portugal was an issue for Vulcano since the country had a low number of skilled employees that were capable of helping the company to improve in terms of innovation and product development. As such, the acquisition helped Vulcano in three dimensions; sustainability of the company, better learning opportunities, and provision of highly skilled personnel from the Bosch team. Consequently, the collaboration between Vulcano and Bosch equipped Vulcano with the best manpower, equipment, and market opportunities to become a leading producer of water heating appliances. Bosch, therefore, collaborated with Vulcano in the development of new water heater appliances. The partners were eager to develop a new generation of water heaters for the internet of things. This approach coincides with Bosch’s notion of maintaining its leadership in the sector. The companies also focused on developing water heaters as objects of desire. However, this notion does not coincide with the concept of water heaters, considering they are mostly hidden inside cabinets. More so, the partners would need to focus more on the design aesthetics to create a product that is attractive in appearance but also highly functional. Despite the complexity in the design of the appliances together with the low market, the pros of the venture outweigh the cons, since successful product launch would help build the reputation of Vulcano and increase sales for Bosch. The company also considered establishing a product meant for the elderly. However, the concentration of one target market would limit the company.
Resources and Capabilities
The idea of R&D collaboration between Vulcano and Bosch was dependent on a number of factors. The first consideration is the ability to convince stakeholders on the importance of collaborating with Vulcano. Considering Vulcano did not have much success compared to other industries on a global scale, the Bosch Termotecnologia sector had to convince the Robert Bosch GmbH about the importance of the collaboration in terms of profit turnover and enhancement of innovation. The capability of convincing the Bosch organization to invest in the Vulcano collaboration acts proves the strength of Bosch Termotecnologia. More importantly, Bosch’s high investment in R&D in terms of manpower and research centers was a great resource for collaboration. Over the years, Bosch’s R&D centers had experienced significant growth in the number of highly skilled personnel, particularly in electronics engineering (Bosch, 2019). Moreover, the company invested more than three million euros in 2015 to cover R&D initiatives until 2020 (Bosch, 2019). This move acts as a great advantage for the collaboration since it ensures that the companies have sufficient funds and labor to enhance their innovation capabilities and achieve full potential in terms of profit turnover and growth. Moreover, Bosch has a highly skilled human resource. The company is divided into various sectors with each incorporating a large number of highly professional staff. As such, Vulcano is able to acquire enough knowledge and know-how concerning innovation, technology, and marketing to aid in the development and sale of the water heaters. Besides the financial, technological, and highly skilled human resources offered by Bosch, Vulcano also had much to offer in the partnership. The company had a particular learning approach that enabled its employees to quickly grasp concepts and innovative ideas from its partner. Specifically, Vulcano mastered the technology licensed by Bosch, from Junkers to incorporate into their appliances. Vulcano also had good manufacturing capabilities, considering other organizations in Portugal were struggling. Nonetheless, Bosch’s financial capabilities enabled the company to relocate the plant to Aveiro. Overall, Bosch contributed more than 84 million euros in the expansion of units in three main areas, mainly Ovar, Braga, and Aveiro (Bosch, 2019). This expansion was triggered by the growing number of customers in the regions.
Innovation Management Process
The successful implementation of innovation by Bosch is determined by the strategic innovation process implemented by the company. The innovation management process at Bosch is divide into three sections. The first being developing the innovation strategy (Bosch, 2011). In this phase, the company creates an environment that encourages individuals to contribute creative ideas on new products or improving existing products. The company does so by rewarding employees who submit the best innovative idea and organizes yearly contests to encourage creative ideas among employees. The company’s innovation strategy also focuses on current trends and company vision (Bosch, 2011). Meaning that the ideas proposed should not only align with the company’s vision and objectives but should also align with current trends.
The second phase involves managing the innovation idea (Bosch, 2011). In this phase, the company selects the most appropriate ideas from the pool. The final phase is innovation feasibility, which involves investigating the practicality of the idea proposed. The company analyses the practicality implementing the idea as well as the practicality of the outcomes that might be experienced from making the idea a reality. In this process, Bosch is able to develop a roadmap that guides the company throughout the process of initiating the idea to realization.
Impact of the Collaboration of Performance
To better understand the impact of the collaboration on performance, this section aims at analyzing the key performance indicators that are directly related to the collaboration. In terms of sales, Bosch Termotecnologia increased its total revenues from the sale of water heaters from 194 million euros in 2004 to 235 million euros in 2007 (Bosch Termotecnologia SA, 2008). The company also increased water heater exports from 76 percent to 81 percent during the same period. The number of units sold increased significantly as well from 974,000 in 2004 to 1.23 million in 2007. Additionally, Bosch Termotecnologia experienced an increase in the number of skilled personnel from 1 million to 1.13 million in a span of three years (Bosch Termotecnologia SA, 2008). The increase in sales and staff reflect on the increased performance of the company after the acquisition of Vulcano. Moreover, since the acquisition, Bosch set up other resource centers and hired more staff to work on research and product development. Eventually, the company managed to develop different segments of water heaters, including the basic segment, comfort segment, and high output segment. Aside from financial improvements, Bosch has also gained from the collaboration in terms of improved innovation capabilities (Bosch, 2019). The increase in R&D centers in Ovar, Braga, and Aveiro has helped the organization to increase its number of skilled and highly creative personnel who contribute to giving the organization a highly competitive edge. The increased human resource also results in more diversified personnel resulting in increased opportunities for obtaining and utilizing knowledge in the development of products. Aside from Bosch, Vulcano and Junkers have also benefited from the collaboration. Considering the fact that Bosch is a well-known company globally, Junkers and Vulcano are able to utilize Bosch’s market share, supply chain, and personnel to market their products across the globe. The collaboration, therefore, resulted in a win-win situation for all partners.
Conclusion
In conclusion, R&D collaborations are highly effective in increasing company performance. In this case, Bosch’s collaborations were effective in ensuring that the company did not rely heavily on one industry since it proved too risky. The diversification also proves beneficial since it helped to increase market share and sales as well as create a more skilled R&D team to support its innovative projects. Partners such as Vulcano and Junkers also benefited from the collaborations by utilizing Bosch’s skilled personnel, supply chain, and other resources. This indicates that the specific resources that each partner provided were useful in ensuring the R&D collaboration was successful. More importantly, the resource-based view of R&D collaboration presented by the case indicates that companies with fewer resources such as Vulcano can be seduced into collaborating with companies that are more capable rather than willingly collaborating.
References
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