The article outlines the evolution of large multinationals as a result of the appearance of new market demands. Companies having to meet specific market demands, are shown to possess certain characteristics, related to the market demands concerned. The analysis shows that innovativeness will, in all probability, be the new market demand in the 199Os, in addition to the already existing ones of efficiency, quality and flexibility. Descriptions of ideal types illustrate the evolution of companies as they move from the Efficient Firm to the Quality Firm on to the Flexible Firm to, finally, the Innovative Firm. The phase model also includes the symptoms of crisis, when moving from one phase to another. Skipping phases appears to be difficult, if not impossible. The same holds true for moving to the next phase, while the organization has not finished with the preceding phase.

TOWARD THE INNOVATIVE FIRM--CHALLENGE FOR R&D MANAGEMENTAn analysis of the changing character of international competition shows how and why success is increasingly dependent upon the R&D function.OVERVIEW: Industrial strategies for multinationals have undergone profound changes. Underlying causes are to be found in new market factors, technological developments and intensified competition. More and more, it is recognized that companies are confronted with increasing demands for efficiency, quality and flexibility. Product prices are under continuous pressure, ever-higher quality standards are simply a must, and the rate of product renewal has increased considerably. under these conditions, it is increasingly difficult for companies to distinguish themselves from competitors. Innovation proves to be the magic word. This places R&D in the midst of the competitive battle, dramatically changing the role of the R&D function.Until the early 1960s, the successful firm was the Efficient Firm, having a hierarchic, bureaucratic and rational organization. The Efficient Firm directs its main efforts toward increasing efficiency; consequently, the firm is internally oriented. Adherence to standard procedures is called for, with negative sanctions as the means of control. Organizational design is based on the creation of routine tasks. Investments in Manufacturing are primarily focused upon growth and efficiency improvements, with much attention being paid to the output of machines. Little thought is given to viewing Manufacturing as a total, integrated system. The whole resembles a well-oiled, smoothly running machine. The message to the customers is, "We are cheaper." This is in line with the sellers' market conditions prevailing during this period.Effective trade barriers result in hardly any international competition, and demand almost always exceeds supply. Although growth rates are high, the environment can be called static. Large companies can reliably predict their sales turnover, both in terms of volume as well as in mix. This well-known "archetype" of the large industrial company was highly successful until the mid-1960s. R&D in the Efficient FirmThe distance between Marketing and R&D is large in the Efficient Firm, but this is hardly seen as a weakness in the absence of market-pull. Product renewal takes place at a moderate rate. It is the task of Manufacturing just to produce according to the designs of R&D. The walls between R&D and Manufacturing are taken for granted, if noticed at all. There are few, if any, contacts between R&D and customers. Product design and process engineering take place separately and consecutively. Indeed, the whole product creation process is functionally

When building competitive advantage the actions of successful firms influence and actually change market demands. This complex interaction between firms and markets leads to an evolutionary process, during which companies – by a process of organizational learning – pass through evolutionary phases of efficiency, quality, flexibility and innovativeness, in that order. Just as technology is the driving force in the evolution, customers are the deciding force and, last but not least, employees are the decisive force. Fundamental strategic changes, effecting structure as well as culture of organizations, and which have taken place at practically all major organizations, are characteristic of the evolutionary process. This paper shows that the disappointing results of many such strategic changes must be sought in insufficient involvement of, and insufficient changes in Human Resource Management. Also, the challenges posed to both top-management and HRM to remedy such failures are described.

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