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Why Are Firms Increasingly Seeking Alliances for Their R&D and Product Development?

In: Business and Management

Submitted By Alhudhrah
Words 972
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Why are firms increasingly seeking alliances for their R&D activities?
For many years firms have always invested great amount of money and time into their research and development activities. It is considered a major aspect for every business and a crucial point for success. It is seen as so important that some firms have created their own R&D departments. However in recent years many firms have continuously sought out alliances for their R&D activities. Alliances have been defined as all forms of collaborative relationships between separate companies that involve joint contributions and shared ownership and control. These alliances take place inter firms within countries and also inter-firms internationally. Firms who decide to enter into alliance do so to reduce the cost of technological development or market entry, reduce the risk of development or market entry, achieve scale economies in production, reduce the time taken to develop and commercialise new products and promote shared learning.
Many R&D and product managers recognise that no company can continue to survive as a technological island. It has become necessary for firms to enter the global market because of the limitations of the domestic market and also because in a globalised world, the market shares in a domestic market becomes threatened by foreign competitors. The liberalisation of trade and investments flows in the 1980’s was a drive for the globalisation of markets and enterprises. Moreover, advances in communications and information technologies contributed to the globalisation process as well as making global operations easier and more manageable. Internationalisation is a process that involves strategic planning and a risk minimisation approach.
For many firms who wishes to expand internationally, entering a joint venture with local partners could; minimise…...

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