Open Access

Stefano Losardo

• The ongoing globalization process facilitates the internationalization of operations, and therefore, intensifies the competition in almost every industry. Innovation is a key factor for companies to defy the competition of multinational organizations in highly competitive markets, especially considering that multinational ones are able to benefit from economies of scale due to their total market size. Technological progress is a significant driver for innovation and a result of intense research and development. In a country with comparatively high wages like Germany, research and development is an expensive issue for domestic companies, above all for the small and medium-sized ones. Considering also higher technological standards in some other countries, German companies have to search for opportunities to carry out research and development activities abroad in order to stay competitive. Especially China and India, which are mainly known as popular target countries for carrying out production due to low labor costs, became important locations for technology development activities. If companies plan to relocate their research and development activities in those countries, they have to choose an appropriate entry mode. Therefore, companies should take into consideration the desired level of control over operations, institutional restrictions and the availability of monetary resources. In addition to the difficulty in measuring precisely the impact of innovations on a company’s success, particularly in the long run, attractive location factors are volatile and can change due to new trade and tariff agreements, political tensions between countries or economical changes, complicating future predictions. Furthermore, the relocation represents a major challenge to the organizational structure as the degree of decision-making authority given to the subsidy determines whether operations abroad will lead to success and ensure the backflow of knowhow. Thus, innovation management’s tasks consist of adjusting processes and structures in order to promote the dispersion of this critical information within the entire organization.