The cost and complexity of R&D efforts today, coupled with accelerating technological change and shrinking product lives, create an urgent need to improve R&D performance. Canon and Sony do this by focusing their internal R&D efforts on the commercialisation of technology, while going outside to source specialised technologies and competencies. In this article, we will argue that external sourcing of advanced technologies and their related competencies actually enhances a company's ability to perform market-driven R&D and to commercialise these technologies. We first examine how Canon and Sony keep their R&D activities responsive to market needs, and then discuss the link between R&D and Manufacturing.