Magazine

The Slippery Slope Of Outsourcing R&D


Your recent "Outsourcing innovation" (Special Report, Mar. 21) addressed an important transformation that is often underestimated: the offshoring of knowledge work. It is hoped that this story will help to put the sources of innovation back on the agenda of corporate strategists. While retaining the work of highly educated workers can be expensive, letting it go can weaken the competitiveness of companies.

I would have liked your article to mention solutions. There are different kinds of knowledge work. Knowledge work that is a commodity can be exported. But expertise involving a complex array of local and tacit knowledge does not necessarily have to go. The overall effect depends on whether companies and individuals understand that competition is an ongoing quest for depth and integration of new knowledge.

Patrick Reinmoeller

Rotterdam School of Management

Rotterdam

Your perspective is U.S.-driven and as such deals with large corporations and the increasing design and production pressures driving them towards outsourcing research and development. More pertinent to European industry is the plight of small and medium enterprises (SMES). If large corporations contemplate outsourcing research and development despite having the means for internal R&D, imagine the urgency for SMEs to do the same since they do not have (or cannot afford) in-house R&D. Remember, most of European industry still produces low-tech goods.

Industrialized nations have only two technological avenues ahead to preserve or improve competitiveness: a) enhancement of their tech contents (high-tech strategy), and b) acceleration and/or improvement of their existing tech contents (low-tech strategy). Most European SMEs have only this second strategy realistically available. Therefore it will require a more dynamic service sector managing and matching tech supply and demand. It has not happened yet, because of the unmodernized structure of EU patenting, and narrow-minded EU legislation having left out any funding, grant, or incentive for intermediaries or service companies. As a result, my company is one of very few doing it in Italy and indeed in Europe, unlike the far more active market situation in the U.S. This activity will bridge the gap between the countless sources of low-tech innovation and the millions of SMEs, a far larger, more liquid, more short-term, technologically easier, less high-risk activity than high-tech can ever be.

Giancarlo Migliori

Milan

Despite what you wrote in "Welcome to Old India" (Asian Business, Mar. 21), Gautama Buddha, the messenger of peace, was born not in the Indian state of Bihar but in Lumbini, in the Kapilbastu District in southern Nepal. But he attained enlightenment and did most of his preaching in India.

Vijay Shrestha

Kathmandu, Nepal

Editor's note: We should have said that Buddha attained enlightenment in Bihar.

Four points about "WTO, Listen to the states" (Editorials, Mar. 7): First, U.S. trade negotiators are fully aware of the need to respect state powers, and they do so; however, the President does have the constitutional authority to negotiate trade agreements. Second, at no time has the World Trade Organization overturned U.S. environmental regulations; rather, it has insisted that these laws not discriminate against foreign firms.

Third, the European Union, which negotiates for its 25 members, is at least as "fragmented" as the U.S., and the European Parliament can be just as assertive of its approval rights as the U.S. Congress. Finally, there is no relationship between trade liberalization and our trade deficit, which reflects our propensity to consume about 5% more than we produce annually, and would exist irrespective of new trade agreements. Could the WTO be more open and transparent? Sure, and it is taking steps to do so. But blaming the WTO for the actions and statements of some lawmakers won't help.

Thomas M.T. Niles

President

U.S. Council for International Business

New York


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