Several policy implications emerge from this study, which can be categorised into three subjects – motivation, management, and performance, which are the core elements of the conceptual framework of this study (see Figure 1-1). In addition to these elements, the role of a government support programme is discussed in this section because this study started with the following RQ: Should the government encourage SMEs to be involved in international R&D collaboration with other SMEs?
6.2.1. Motivation
Various motivations for SMEs’ international R&D collaboration with other SMEs are observed in this study. Furthermore, the motivation evolves as collaboration experience is accumulated. Each of the motivations has distinguishing characteristics in terms of the establishment and management of the collaboration. More interestingly, SMEs with different motivations define successful international collaboration in different ways. For example, SMEs with the capability-combining motivation regard their collaboration as success when they gain a profit “from” a collaboration and emphasise the acquisition of exploitation opportunities or capability building based on synergies. On the other hand, to SMEs with stepping-stone or global-scouting motivations, the key success factors include new product development and commercialisation. All of these findings indicate the need for some diversification and sophistication of government support for SMEs, particularly in relation to international R&D collaboration, to increase the effectiveness of SME support programmes.
Nevertheless, existing programmes to support SMEs’ international R&D collaboration in many countries are likely to be relatively simple, unable to support such heterogeneous motivations. Especially as a catch-up country, Korea has been running two major programmes to facilitate such collaboration: one is to help domestic firms to acquire superior technologies and knowledge from abroad, whereas the other is to help them to enter into new foreign markets. To gain the most benefits from international R&D collaboration among SMEs, more elaborate programmes need to put in place to satisfy the varying needs of SMEs, and different systems for monitoring and evaluating project and programme performance need to be applied to collaborations with different motivations and operational strategies. For example, SMEs pursuing capability building require different approaches to collaboration in terms of choosing target countries, searching for target partners, and protecting potential issues expected during collaboration than those pursuing capability combining. Hence, a different set of support is needed for each type of motivation. SMEs also need to be fully aware of the characteristics of the collaboration in which they are planning to engage, thereby increasing the chances of success as well as their satisfaction with the collaboration.
6.2.2. Costs and benefits
According to the transaction-cost theory, SMEs choose international partners instead of domestic partners to minimise the sum of three types of cost: production costs (i.e., sharing R&D costs and outputs), transaction costs (i.e., searching for a partner and creating synergies with that partner), and management costs (i.e., networking and costs incurred due to language and cultural issues). This study found that SMEs have actually experienced more difficulties relating to production and transaction costs than management costs. For example, SMEs have had difficulties allocating tasks in a way that creates synergy and sharing costs and benefits in a way that is fair rather than suffering from language issues or geographical distance. Indeed, of the three types of cost, management costs seem to continue to decrease with accelerated globalisation bridging language and cultural differences and with advances in ICTs enabling close interactions with a partner. Furthermore, SMEs expect significant management costs and in
general are well prepared for them. Government support has also focused on reducing management costs by supplying videoconference equipment for SMEs to share or offering programmes for SMEs to learn about other cultures. In contrast, SMEs are less prepared for transaction costs. Two main forms of transaction cost were identified in this study: search costs and commitment costs, which may arise due to uncertainty about the partners. Unlike management costs, the magnitude of both search and commitment costs is not generalisable because different firms will experience different levels of such costs. That is, it is not possible to predict how much a partner will contribute to the collaborative R&D until firms actually start to work together.
Therefore, government policy should focus more on reducing those costs. Firstly to reduce the search cost, a match-making programme, enabling an SME to consider a wide range of candidates for collaboration, can be designed. SMEs’ attempts to reduce the search cost may lead to situations in which they decide to work with trustworthy but less capable partners. Such collaboration may generate less successful results due to having less appropriate partners. The analysis results also indicated that a firm regarded its partner search strategy as more effective when the partner was chosen from a formal network than from previous collaboration experiences. Thus, the government can help SMEs to expand their formal networks, giving them more options for collaboration partners.
Similarly, in order to reduce the commitment cost, the government can play a larger role as an intermediary for collaborations among SMEs until they have acquired sufficient capability to design and manage such collaborations by themselves. If collaboration is initiated by government agencies, SMEs’ opportunistic behaviour may be limited as well because SMEs tend to be concerned about their reputation and its effect on further support from the government. Thus, government programmes should focus not only on the initiation of such collaboration but also on the monitoring and results of the collaboration, as a partial solution to reduce the commitment cost.
Finally, production costs need to be reduced through collaboration. To do so, how to share R&D costs and outputs between collaboration partners should be considered before the collaboration is formed. Accordingly, designing a collaboration project before the collaboration is initiated is quite important. Despite this importance, however, SMEs may have limitations in exploring potential collaboration partners for mutual understanding and in having enough discussions about possible issues that can occur during collaboration due to their lack of resources. To overcome such limitations, basic principles of sharing R&D costs and outputs are required for SMEs to have realistic expectations about the collaboration, which can either be provided by government or developed by participants.
6.2.3. Performance
This study showed the diversity regarding what constitutes success of SMEs’ international R&D collaboration, possibly due to the diversity in motivations and the time lag between the collaboration and performance. SMEs’ diversity in motivation makes it difficult to measure the performance of such collaboration. However, despite such diversity, the most important and common criterion is whether SMEs have experienced a satisfactory level of technology commercialisation or not. Quite naturally,
because technology commercialisation takes time, the benefits of international collaboration are neither easily observable nor objectively measurable. Therefore, an evaluation system to measure the performance should be designed, carefully considering the motivation of a programme to support SMEs. Unfortunately, most of the existing evaluation systems fail to measure the performance of such collaboration. The metrics used in these systems (e.g., patents and publications) are not as important as they were thought to be by managers and policy-makers in charge of supporting SMEs. For example, one of the common metrics to measure innovation performance is the number of patents or publications. Yet, SMEs are more likely to grant patents for licensing or convincing investors about the value of their innovation, and thus, patents or publications cannot be a good measure for SMEs’ innovation performance. Another metric to measure collaboration performance is the number of co-patents or co- citations. However, SMEs tend to collaborate on the basis of different knowledge bases and modularise their work to be as independent as possible, and thus, such a metric fails to assess the genuine value of international R&D collaboration involving SMEs. Sometimes, the degree of continuous collaboration with the same partner is used as a proxy to measure the collaboration performance. This also may not be an appropriate measure because SMEs may find better partners than previous ones, even if they were satisfied with the previous collaboration; with limited capabilities, SMEs are always faced with such a choice. On the contrary, there are certain previously neglected issues that need to be considered in evaluating the performance of international R&D collaboration projects. These issues include synergistic effects and revenue share. More effort is required to add such neglected criteria to the list of existing performance measures.
Another remarkable finding of this study is that international R&D collaboration with other SMEs is one of the most preferred types of collaboration among SMEs, and yet, this actually generates the least satisfaction among various types of technology collaboration with foreign partners. This low satisfaction may come from the discrepancy between expectation and reality, which can be reduced in two ways. A policy programme can be designed for SMEs to deal with a number of unexpected costs incurred by international collaboration with other SMEs. By making such costs more predictable and manageable by SMEs, such a discrepancy can be resolved to some extent. The first step will be to identify the difficulties that SMEs may face during such collaboration to control the level of expectations. The next step will be to design a policy instrument in a way that helps SMEs overcome those difficulties. For example, SME- matching algorithms can be developed to help SMEs search for and select the best candidates for their collaboration partners considering their needs and collaboration purposes; having the right collaboration partners can be one of the most effective approaches to lead to full commitment to collaboration, prevent opportunistic behaviours, and ultimately achieve the goal of collaboration. On the other hand, as an institutional strategy, a government funding programme may require SMEs to carry out their collaboration in two stages: one for planning and the other for R&D. SMEs that successfully undergo the planning stage are the final beneficiary of R&D funding. Finally, it is possible to reduce the management costs stemming from the differences in R&D support systems across countries by complying with the global standards for global R&D collaboration projects.
6.2.4. The role of government funding
There are two types of support – direct and indirect – from the government to facilitate international collaboration among SMEs. First, direct support is related to public funding, particularly for such collaboration, which actually plays a significant role in initiating the collaboration. However, there may be two quite different types of SMEs that apply for the funding: one aims to use the funding for internal R&D, while the other seeks to access the funds for accelerating international R&D collaboration. It is only for the second type that the funding is used to improve the innovation capabilities of SMEs. Distinguishing the second from the first type will be a significant issue when choosing the beneficiaries of such funding.
Second, the purpose of indirect support is to provide an environment in which SMEs can gain benefits from international R&D collaboration. For example, a platform to support long-distance interactions may be useful to reinforce interactions between collaboration partners, while designing a policy instrument to achieve effective knowledge exchange is also required. Here, a strong IP system that can protect firms’ own resources while accessing those of partners is key to encouraging such collaboration; only when an SME’s own resources are under strong protection, ensuring that unwanted knowledge spillovers are prevented, are they likely to be actively involved in collaboration.
Finally, when evaluating the effect of government policy programmes for international R&D collaboration, whether they are direct or indirect, both the short- and long-term effects of the policy need to be considered. Government funding is useful to encourage SMEs to start such collaboration. Once SMEs realise its value, they will continue to be engaged in other collaborations with overseas partners. Such collaboration experiences will improve SMEs’ ability to search and manage overseas partners and thus increase the value of further collaborations. These outcomes can be observed only from a long-term perspective.