Abstract

The aim of this paper is to discuss how R&D is organized in diversified firms - i.e. multidivisional firms and business groups - according to different theoretical approaches. Special emphasis is given to the degree of centralization or decentralization in the management of R&D. We identify three issues on which there are still open and controversial questions: 1) the nature of R&D (basic versus applied); 2) the interplay between the external acquisition of knowledge and the internal organization of R&D; 3) the role played by the degree of diversification. We also discuss the peculiarities of R&D organization in business groups as opposed to other forms of decentralized firms. The paper derives the main management implications for the organization of R&D in diversified firms and discusses the questions that remain open to further research.