At a time when many corporations are scaling back research and development operations, General Electric, the world’s largest company, reaffirmed its commitment to R&D last Friday with a $100 million dollar pledge to modernize its Niskayuna, NY research center, which it will rename the GE Global Research Center. The 101-year-old center, one of the oldest central research facilities in American industry, opened in a Schenectady carriage barn in December 1900 at the urging of the legendary inventor and GE chief engineer Charles Steinmetz.
“The most admired companies of the future will be known for their technical excellence,” CEO Jeff Immelt told attendees at a press conference at the center. “The Global Research Center is at the heart of this philosophy and will spearhead innovation and growth.”
Over the next four years, GE will expand the upstate New York center, previously known as GE Corporate Research and Development Headquarters, with new laboratories for research into biotechnology, nanotechnology, optical media, lighting and displays. The company will also add high-tech meeting and conferencing facilities.
“It’s certainly bold timing, with the economy the way it is,” said Ross Armbrecht, president of the Industrial Research Institute, an industry group. He calls the announcement “seemingly contrarian” in a year when corporate belt-tightening shrunk many R&D budgets and industry-wide research spending barely kept up with inflation.
Armbrecht said GE’s move also bucks an industry trend to acquire new technologies from startup companies, rather than develop them in-house (see “Is the Central R&D Lab Obsolete”). “Over the last three years, the thinking has been that R&D may be replaced by ‘A&D,’ acquire and develop.” But GE’s investment affirms its commitment to doing its own research, he said.
David Hounshell, professor of technology and social change at Carnegie Mellon University, praised GE’s timing. “Smart companies spend countercyclically,” Hounshell said. “It’s cheaper than spending when things are hot.” GE, which announced record earnings last week, is one of only a few companies that can afford to spend during hard times, Hounshell said, adding that the company’s diverse businesses spread out the cost of research, while sharing the benefits.
General Electric employs 310,000 people in more than 100 countries. Its businesses range from home appliances to power systems to the National Broadcasting Company. The Niskayuna laboratory, only some four miles from its Schenectady roots, today employs 1,700 people; its scientists win between 200 and 250 patents each year (see “2001 Corporate R&D Scorecard”). The company has two other research facilities, in Bangalore, India and Shanghai, China, although the $100 million initiative is earmarked only for the U.S. lab.
Since the 1980’s, the lab’s funding has come primarily from GE’s business units and customers, a model that emphasizes product improvements over blue-sky research. According to Immelt, the new initiative will not change that model-nor does GE plan to significantly increase the size of the center’s staff or research budget.
“People here at the lab are working on new product introductions, and ultimately those are pulled by the businesses,” Immelt said. “We don’t do a lot of things that aren’t ultimately tied to and aimed at the businesses.” He added that GE was committed to long-term research if that research served a market need. He pointed to digital x-rays, which the company introduced in 1997, as an example.
Even though $100 million dollars is not an earth-shattering sum compared to GE’s $130 billion annual revenues, Armbrecht said, the money’s biggest impact may be on the researchers’ morale-and their productivity. “Not because of the facilities’ grandeur or equipment, but because it makes a statement about GE’s value of R&D and their commitment to thinking long range,” he said. “This announcement says to the GE staff, ‘We’re here for the long term,’ and that really helps the creativity.”