When it comes to the corporation, economic historians, legal scholars and management theorists all tell the story in somewhat different ways, but it is significant that they all tend to trace the metamorphosis of corporate structures in many developed countries back to roughly 1980. The trigger seemed to be the widespread conviction that the United States had lost ground to international competitors during the oil crisis and economic slowdown of the later 1970s. Although there was substantial disagreement over the causes of the supposed sclerosis, an imposing array of initiatives were crafted to defeat the diverse culprits thought to be sapping America’s economic dominance. One major candidate for economic reform was the organizational structure of the large Chandlerian corporation. Various businessmen and market participants had become convinced that the huge managerial conglomerate had become too unwieldy to effectively compete in the world market in the 1970s, and the 1980s initiated the era of hostile takeovers, leveraged buyouts and shareholder attacks on the top management of large corporations. In response, there was a significant retreat from diversification within firms, with one calculation suggesting that by 1989 firms had divested themselves of as much as 60% of acquisitions made outside of their core business between 1970-82. There was also a retreat from previous levels of vertical integration in industries like automobiles, computers, telecommunications and retail. Consequently, corporations began to equate agility with repudiation of hierarchical managerial control of process, and with it the M-form paradigm, and thus sought to re-engineer the supply chain to depend to a greater extent on market co-ordination. Networks of sub-contracts began to displace ownership ties as modes of organization; venture capital began to channel investment into startup firms. Labor-intensive heavy manufacturing was outsourced to low-wage countries. Moreover, the roster of America’s largest corporations experienced severe shakedown, after having enjoyed relative stability for the previous sixty years. The lumbering giants were prodded into defensive action, which was widely interpreted as a return to market methods of co-ordination.

It is significant for everything that follows for the reader to appreciate that the in-house corporate R&D laboratory had been a major component of the Chandlerian model. Starting in the early 20th century, a substantial proportion of all PhD scientists were employed in well-funded separate research divisions within many large corporations. The breakdown of the Chandlerian model of the hierarchical integrated firm then prompted the nagging question: Why integrate R&D into the firm when you can buy it externally, and reduce costs by doing so? But that question presumes that R&D is a distinct fungible commodity in a well-developed market, one so competitive that it can lower the costs relative to doing it yourself.

A very common dismissal of those worry-warts like Viridiana is that science has “always” been market-oriented, in one way or another, and so all the qualms about the modern commercialization of science are misplaced. The problem with this conventional wisdom is that it neglects the fact that market-oriented science assumes very different formats throughout history. Some familiarity with the past demonstrates that, no matter how ‘commercialized’ science may or may not have been in the previous American science regimes, this state of affairs—the ability to outsource commercial research as an external for-profit proposition — until recently was uniformly absent. The strengthening of intellectual property, the weakening of both domestic antitrust and the ability of foreign governments to counter corporate policies, the capacity to shift research contracts to lower-wage and easier regulatory environments and therefore engage in regulatory arbitrage, the availability of low-cost real-time communication technologies, and the presence of an academic sector which was willing to be restructured to surrender control of research to its corporate paymasters: all of these were necessary prerequisites to seriously countenance the corporate outsourcing of research on a mass scale.

The globalization of corporate R&D is one of the characteristic hallmarks of the new regime of knowledge production. Of course, multinational companies headquartered in smaller countries like the Netherlands and Switzerland have long internationalized their R&D activities essentially from their inception; but the more striking trend is the sharp rise in international outsourcing of research across the board since the 1980s. Global outsourcing to foreign low-cost performers tends to be concentrated in a few industries, such as pharmaceuticals, electrical machinery, computer software and telecommunications equipment. Nevertheless, surveys within these industries reveal a sharp increase in research carried out beyond the home country’s boundaries from the 1960s to the 1990s. One attempt to measure the extent of growth of outsourcing by the National Science Board is presented in Figure 1 below. A more recent survey by the Economist Intelligence Unit reveals the globalization of R&D gathering pace over the 1990s, with over half the respondents indication they would expand their overseas R&D investment in the next three years. When queried as to the major considerations governing their decision, the most popular responses cited strong protection of intellectual property, lower costs and the tapping of indigenous research capacities. It is the access to lower wage labor in the context of an academic infrastructure, which is disengaged from any corporate obligations to provide ongoing structural support for local educational infrastructure, which helps explain the shift in research funding to countries like China, India, Brazil and the Czech Republic. Another way to cut costs is to disengage the firm from nationalist appeals to help support scientific infrastructure, accompanied by improved opportunities to further reduce or avoid corporate taxation.

Approaching the commercialization of science from this angle profoundly revises the usual narrative of the privatization of modern academic science as a straightforward case of cash-strapped universities simply following the money, albeit beset by a few nagging qualms concerning the propriety of telling corporations only what they want to hear. Rather, an alternative account might be proposed where many of the novel institutions of globalized privatized research were first pioneered outside of the academic sector per se, as adjuncts to the modification and re-engineering of the modern corporation. Once these innovations were well under way, only then were universities forced to react to these exemplars of the new globalization regime in their own internal restructuring of scientific research.

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