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33512 GLOBAL INNOVATION

MINI-CASE 12.1

Global giants’ R&D networks – Siemens and BASF

R&D at Siemens

Siemens is a global electronics and electrical engineering corporation, operating in energy, healthcare, infrastructure and industrial solu- tions sectors. Founded in Germany, the company has activities in nearly 200 regions, with 336,000 employees working at 1640 locations around the globe, including 176 R&D facilities. Its turnover in 2010 was €75 billion.

Innovation is at the core of its success. According to Peter Losgher, president and chief executive: ‘We closely align R&D activities with business strategy, hold key patents and have a strong position in both established and emerging technologies. Our goal is to be a trendsetter in all of our businesses.’14

In 2010, Siemens invested approximately €3.8 billion in research and development (5.1% of sales), of which around €1000 million was devoted to developing green technologies. In 2011 Sie- mens generated 8600 inventions thanks to its 27,800 researchers and developers worldwide.

The R&D network is organized at the corpo- rate level and within divisions and business units.

Corporate level R&D15

R&D at corporate level is managed within Cor- porate Research and Technology, the Corporate Development Center (CDC) and the Corporate Intellectual Property and Functions.

CTT has a budget of around €280 million, and employs 1770 people who work on key technolo- gies that are strategically important and can be applied across sectors. One of the key functions is the corporate Technology Strategic Market- ing that identifies future technologies using a methodology called ‘Pictures of the Future’ and informs the sectors about their potential future. They also use global account managers to col- lect technology requirements from the various Siemens industry sectors and communicate that information to the CTT researchers. CTT researchers are organized in clusters, grouping experts in domains such as Materials, Electric and Energy, Process and Production, Software Security and Systems.

There are 13 Corporate Research and Technol- ogy centers across the world:

• Berlin (Germany): 85 researchers

• Munich (Germany): largest corporate location with 958

• Erlangen (Germany): 379 researchers

• Vienna (Austria): 80 researchers

• Moscow (Russia): 30 researchers

• St Petersburg (Russia): 30 researchers

• Princeton (USA): 369 researchers

• Berkeley (USA): 12 researchers

• Bangalore (India): established in 2004, 105 employ ees

• Singapore: 6 researchers working on water technology

• Beijing (China): established in 1998, 140 researchers

• Shanghai (China): 64 researchers

• Tokyo (Japan): 8 researchers.

The sites in China and India work on smart technologies (low-cost innovations suitable for emerging economies).

The Corporate Development Center (CDC) employs 3160 software developers working on new products and services. Locations for these activities are in Europe, India and China.

The Corporate Intellectual Property and Func- tions (CT IT) with 500 specialists in 19 locations around the world are in charge of registering and safeguarding intellectual property rights. In 2010 the CT IT registered 8800 innovations and 4300 patents.

Another feature of the Siemens R&D system is to maintain strategic partnerships with lead- ing research institutions such as the Technical University of Denmark (DTU), the Technische Universität München, the RWTH Aachen Uni- versity, the Technische Universität Berlin, Massachusetts Institute of Technology and UC Berkeley in the USA, as well as Tongji University and Tsinghua University in China. This is done both by the corporate centers and divisional development units.

Lastly, Siemens has initiated the Strategic Technology Accelerator (STA) that organizes the spin-off of new ventures out of the Siemens

Lasserre, Philippe. Global Strategic Management, Macmillan Education UK, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/kingston/detail.action?docID=6234922. Created from kingston on 2020-10-14 13:17:43.

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336 III MANAGING GLOBALLY

organization and supports these new ventures financially, legally and organizationally.

The divisional R&D

Divisional R&D centers are distributed regionally and provide local product development for the benefit of business units.

R&D at BASF16

BASF is a global chemical company founded in Germany. Its sales were €63.9 billion in 2010; 109,000 employees work in six business segments: Chemicals, Plastics, Performance prod- ucts, Functional solutions, Agriculture solutions and Oil and Gas. It operates 385 production sites and 9600 employees work in 70 R&D centers worldwide with a budget in 2010 of €1.5 billion. The distribution of R&D sites is:

• Europe: 33 sites and 7500 employees

• Americas: 25 sites and 1550 employees

• Asia Pacific: 8 sites and 550 employees.

BASF focuses on the five growth clusters: energy management, raw material change, nanotechnol- ogy, plant biotechnology, as well as industrial or ‘white’ biotechnology.

In addition to this direct effort, BASF has cre- ated two subsidiaries:

• BASF Venture Capital GmbH is a venture capi- tal company that invests in start-up companies

and venture capital funds worldwide. It also supports innovative start-ups, both financially and with expert know-how from the BASF Group.

• BASF Future Business GmbH has the goal of tapping into new business fields for BASF. Spe- cial areas of innovation include solving issues in the fields of energy management, electron- ics, health and the environment.

BASF has developed a management approach called Verbund that integrates manufacturing and research. Production plants at large sites are closely interlinked and in addition, the by- products of one plant can be used as the starting materials of another. BASF considers that Ver- bund is the foundation of its competitiveness in all regions.

There are six Verbund sites and some 385 pro- duction sites. The six Verbund sites are in:

• Ludwigshafen (Germany): the world’s largest integrated chemical complex, the location of BASF Group’s technology platforms and com- petence centers

• Antwerp (Netherlands): the second largest site

• Nanjing (China): a 50:50 joint venture between BASF and China Petroleum & Chemical Com- pany (SINOPEC)

• Kuantan (Malaysia)

• Freeport (USA)

• Geismar (USA).

Questions 1 How does the global management of R&D at Siemens and BASF compare? 2 What are the potential benefits of the Verbund concept?

Summary and key points 1 International product life cycle

a How product innovations and production migrated from country of origin of innovative firms to other country subsidiaries through a three stage sequential process: (1) innovative country; (2) second-tier country; (3) third-tier country, mainly developing world

b This model cannot explain the globalization of innovation that occurred after the 1960s

2 Global R&D network

a Global firms more and more use a distributed network of R&D centers involving the collaboration of multiple sites scattered around the world

b Main motivations to set up a center in a particular country are: • proximity to local markets