This document discusses the globalization of research and development (R&D) by multinational corporations, with a focus on trends among foreign ICT and biotechnology firms in India and China. It outlines the increasing internationalization and "triadization" of R&D as firms establish more R&D centers abroad. The document presents research questions on the motivations, structures, and linkages of foreign R&D units in India and China. It proposes examining input and output indicators like expenditures, personnel, publications, and patents over time. The methodology involves a literature review and case studies of firms in key sectors.

1. Globalization of R&D: Trends of Foreign ICT and
Biotechnology Firms in India and China
Swapan Kumar Patra
Centre for Studies in Science Policy
School of Social Sciences
Jawaharlal Nehru University
New Delhi-110067 INDIA

2. Why this topic
• Highlighted in scholarly journals and media report
• Similar but quite dissimilar NIS
• Some studies in 1980s and 1990s but no systematic
study in the last decade.

3. • Not a new phenomenon started with long distance trade, exploration & conquest
• Globalization
• 1.0 Focus on country
• 2.0 MNEs become the dominating force
• 3.0 MNEs from developing world (Friedman 2005 )
IBM acquisition by Lenovo Jaguar & Land Rover by Tata Motors (Globalization3.0)
• Large MNEs are the main actor/driver of globalization (Freeman 1995 )
• Usually, among many other corporate functions, offshore R&D by multinationals is
usually considered to be the one of the last corporate functions to internationalize in
the value chain (Mansfield 1979).
• Scattered manufacturing units in different offshore locations to take advantage of
skilled work forces, cost differences and quality factors of production
• FDI to merger & acquisition (Brownfield investment) and green field investment.
Even the most strategic of corporate functions, (R&D), is now a target of companies'
globalization efforts

4. Science and Technology Indicators Report OECD (1990)
Science and Engineering Indicators United States National Science Board
MNEs account for at least
• 46% of total R&D expenditures in the world
• 69% of business R&D expenditures in the world
• The R&D expenditure of some MNEs is higher than that of many
countries (WIR 2005)
MNEs from developing economics have
19% of cumulative stock market share of 1,000 global companies
Among 1,000 top stock market capitals 221 are from developing
countries (Ernst &Young 2008)

5. Phases in internationalization of R & D
Source: Hedge & Hicks, 2008, Reddy 2000, Neosi, 1999
Period Overseas R&D function Facilitating factor Drivers
First Wave up Very little R& D abroad To capture new Based on clients’ need
to 60 market
Second Wave Market customization Learning to operate Increasing demand by
60’s to 80’s abroad foreign customer
Third Wave Listening post Decreased Industrial &
80’s-90’s communication costs technology strength
Fourth Wave Sources of innovation Increased variety in S&T,
90’s till date Incremental innovation means of Knowledge base
Multi-product innovation communication human capital
Frontier Innovation Proximity to
manufacturing & to
industrial customers

6. Internationalization of R&D
-One way interaction between patent and subsidiary
-Technology transfer units
-Limited to product adaptation to local markets
-Mainly restricted to developed countries
Globalization of R&D
-Two way interaction
-Global production units
-MNEs subsidiary are important for headquarter
-Globally disperded particularly exploiting knowledge based in
developing countries (India and China)

7. Evolution of R &D Type & Structure
Authors Variables Types
Ronstadt (1977) Location of R&D Transfer Technology Units (TTUs)
and market of Indigenous Technology Units (ITUs
R&D Result Global Product Units (GPUs)
Corporate Technology Units (CTUs)
Bartlett & Locality and Central Innovation
Ghoshal (1989) intended market of Local Innovations
R&D activity Locally Leveraged Innovation
Globally Linked Innovations

8. Gassmann & the quest for 1. domestic research and domestic
von Zedtwitz external science development: national treasure
(2002) and technology, R&D;
new markets and 2. dispersed research and domestic
new products development: technology-driven
R&D;
3. domestic research and dispersed
development: market-driven
R&D;
4. dispersed research and dispersed
development: global R&D.
Present Foreign R&D Market demand based
scenario directed towards Technology based
developing Human resource availability at lower
countries specially cost
India and China Strong Knowledge base in developing
countries

9. •MNEs have increasingly internationalized R&D since the 1980s
•Internationalization might more appropriately be characterized as
‘triadization’ as most R&D investment flows are within the Triad
•Recently R&D investment into developing and transition countries
has increased
•Today, R&D units abroad have broader missions and mendate of
more than the technology transfer unit or local sales support
activities
•Both the quantity (expenditure, investment, personnel) and quality
(mandate, functions, organization) of R&D establishments abroad
differ considerably with the sector, home country, host country,
technology base, and even companies.

10. Research Questions
Q:What are the motivating factors of foreign firms to locate their R&D centre in India and China?
Is there any preference in particular location and what are the factors?
Q: What is the structure of foreign R&D units in India and China? Are they doing adaptive
R&D and a Technology Transfer Unit? Or doing higher order R&D? Is the typology fit into the
existing typology already developed by scholars in the field or a new typology coming up which will be
significantly different from the existing typology? Are foreign R&D centers evolving with the time?
How they are changing in terms of expenditure, manpower and products?
Q: How the ICT and biotechnology sectors firms, are embedded with the local innovation system ?
What is the knowledge scouting process and who are the possible actors and with whom foreign firms
are interacting with?
Q: What is the latest corporate R&D strategy? Are foreign firms going more towards open
innovations? Who are the partners?

11. Summary of hypothesis
Growth, Location & Motivation
Trends in internationalization of R&D,
Type of R&D units,
Input indicators (R&D Manpower, R&D expenditure)
Output indicators- Publication and Patenting trends
New product announcement
Linkages, Spillovers

12. Methodology
First Phase
Pilot study
--India 471 with 647 R&D units
--China 287 firms with 516 R&D units
News paper report (The Hindu Business Line, Times of India, Economic
Times, Business Standard, China Daily, Xinhua, US-China Business Council
report) Lexis-Nexis Database
Second Phase
Firms in high technology sectors (ICT and BT )selected based on the
following criteria
--in fortune 500 list
-- more than 1000 global patent till 2010
--have publication activity
--data availability
Third Phase
Interviews conducted in selected firms in Beijing, China and New
Delhi, India

13. • This is not a firm level analysis
• It is adopting S&T policy macro analysis; scientometrics
indicators;
• Innovation studies literature
• Case studies
Study is undertaken with a number of limitations time, data
availability, field visit to China and language

14. Empirical part

15. Year wise growth of foreing firms in India and China
Year wise Growth
of foreign firms in
China
Year wise Growth
of foreign firms in
India

16. Locations of foreign R&D units in India

17. Location of foreign R&D units in China

18. Motivation for setting up of R&D centre in Health Care sector
Cause Factors India (n=35) China (n=22)
Talent Technology-driven (pull) 11(32.3%) 7(31.8%)
Local Market Market-driven 10(29.4%) 9(40.9%)
Cost effective R&D Cost-driven 7(20.5%) 2(9.0%)
R&D Capability building Innovation-driven (push) 6(17.6%) 8(36.3%)
Local Partner Technology-driven (pull) 6(17.6%) 5(22.7%)
Particular location advantage Technology-driven (pull) 6(17.6%) 4(18.1%)
Global Market Market-driven 4(11.7%)
General Expansion Innovation-driven (push) 4(11.7%) 2(9.0%)
IPR regime Policy-driven 3(8.8%)
Infrastructure Innovation-driven (push) 3(8.8%) 4(18.1%)
Diversified population Innovation-driven (push) 2(5.8%) -
Competition Technology-driven (pull) 2(5.8%) 1(4.5%)
Shorter Product Life Cycle Market-driven 2(5.8%) 3(13.6%)
Government Support Policy-driven 2(5.8%) 4(18.1%)
Local Customer support Market-driven 1(2.9%) 5(22.7%)
Low cost clinical trial Cost-driven 1(2.9%) 2(9.0%)
Near Manufacturing facility Production-driven 1(2.9%) 2(9.0%)
Cost effective Raw material Cost-driven 1(2.9%)
Others 1(2.9%)

19. • ---Mr Joseph Hogan, President and CEO of the GE Healthcare, said, India, is no longer viewed
for cost arbitrage but for its vast pool of talented engineers. "Today India has the best
talent and this is where we have to be," (2009).
• --The company's decision to set up the R&D centre in India is due to the availability of a pool of
educated scientists who are capable of providing R&D output faster at a lower cost
Nektar Therapeutics (India), (2009).
• --"We found a pool of high-quality engineering talent available in Hyderabad and that's
why we've chosen it as the location for our new research and development centre," explains
Adrian Hartog, chief tecCTO and senior vice president, consumer business unit,
ATI Technologies, Inc. (2007)

20. Type of R&D centre
Sector Global Local Regional Global- Global- Local- Global-
Regional
Local Regional regional Local-
Regional
Information
Health Care
Technology
India 86 27 14 19 7 1 1
India (n=98)
(n=27) (87.75%) (27.22%) 1 (3.7%) (19.38%) (7.14%) -
19 (70.3%) 7(25.9%) (14.28%) 1(3.7%) - (1.02%) -
(1.02%)
Information
Technology 48 39 11 15 2 3
China (n=76)
Health Care (63.15%) (51.31%) (14.47%) (19.73%) - (2.63%) (3.94%)
China
(n=20)
8 (40%) 11 (55%) 7 (35%) 1 (5%) 1(5%) 2 (10%) 1(5%)
Health Care
India 19 7 1 1
(n=27) (70.37%) (25.92%) (3.70%) (3.70%) - - -
Health Care
China
(n=20) 8 11 7 1 1 2 1
(40%) (55%) (35%) (5%) (5%) (10%) (5%)

21. Patents and publications of Software & Services Industry
group firms*
Name Total India China India China Publication Publication Publication
Granted Granted Applied Applied Global India China
Adobe 988 39 - 6 - 168 4 4
Cadence 789 25 2 14 1 626 26 8
IBM 58,840 453 136 606 484 52,866 175 216
Microsoft 16,771 99 790 340 1376 6,177 109 1,178
Novell 467 32 - 15 - 47 5 2
Oracle 1,345 73 3 241 17 785 12 18
SAP 1,546 51 13 53 37 209 1 2
Unisys 2,482 - 2 - 354 4 0
Yahoo 750 33 1 103 5 494 20 9
*USPTO & WoS data till 2010

22. US Patents Granted & Applied from India and China in
Pharmaceuticals Sector*
Global Granted Granted Applied Applied
Patent from from from from China
Firms Granted China India India
Aventis Pharma 18,599 4(0.02%) 63(0.33%) 0
GE Medical Systems 1,901 35(3.2%) 41(3.75%) 13 12
Novartis AG 15,811 6(0.03%) 32(0.20%) 2 8
AstraZeneca 2,650 2(0.07%) 15(0.56%) 13 3
Bristol-Mayers Squibb 2,811 1(0.03%) 7(0.24%) 1 1
Pfizer 3,898 8(0.20%) 7(0.17%) 0 2
Johnson & Johnson 11,908 13(0.1%) 7(0.05%) 2
Abbott Lab 3,186 0 5(0.15%) 0 0
Bayer AG 14,308 35(0.24%) 4(0.02%) 4 6
Merck & Co. 5,659 8(0.14%) 4(0.07%) 1 0
Wyeth 10,000 3(0.03%) 4(0.04%) 4 0
Novo Nordisk 1,086 0 3(0.27%) 0 4
Eli Lilly 4,055 0 1(0.02%) 2 0
*USPTO data till 2010

23. Co-relation matrix of patent output of
Pharmaceutical firms
Global Global India India China China
Patent application grant application grant application
Global patent 1
Global application .877 1
(**)
India grant -.475 -.461 1
India application -.413 -.574 -.128 1
China Grant -.633 -.818 .033 .492 1
(*) (**)
China applications .057 -.407 -.757 .589 .511 1

24. Not only adaptive R&D – some examples
• GE’s John F Welch Technology Centre in India houses more
than 2,000 technical staff
• Eli-Lilly, Sanofi-Aventis, Novartis etc do clinical trials in India
• India has about 84 United Stated Food and Drug
Administration (USFDA) approved manufacturing facilities. It is
the largest number of manufacturing sites outside the US.
Indian pharmaceutical firms apply about 35 per cent of Drug
Master File applications and 25 per cent of all Abbreviated New
Drug Application filings in FDS. Presently, 1 percent of global
clinical trials are conducted in India, but it is predicted that in a
couple of years it will reach up to 10 percent.

25. Open Innovation- A new paradigm for global innovation
Firms are tapping knowledge from both institutes of scientific excellence
(Universities, Research Institutes) along with their own research and development
centers across the world
Eli Lilly, Eli Lilly is transforming form an independent research and development
pharmaceutical company (FIPCo) into the pharmaceutical research and development cooperation
network (FIPNet) mode
Johnson & Johnson Paul Stoffels, M.D., Global Head, Pharmaceutical Research
and Development, Johnson & Johnson said “By establishing our R&D headquarters in
Shanghai and using a networked, open innovation model through which we work collaboratively
with universities, research institutes and companies, we are ensuring that we are part of Asia’s
growth as a research leader

26. Foreign firm’s collaboration trends with different actors in
India and China

27. Healthcare firms’ linkages in India

28. Healthcare firms’ linkages in China

29. Spillovers :Example of Spin off firms
Name of the person Spin off firm Parent company
Srini Koppolu Setu Software Systems Microsoft
JA Chowdary, Mojostreet NVDIA
Sharad Sharma Brand Sigma Yahoo
Bala Parthasarathy Snapfish HP Lab
Ramesh D. Grover CMS Group of companies IBM
Mr S Ramadorai CMS Group of companies IBM
Mr Varun Prasad CMS Group of companies IBM

30. Technology Transfer – Few Examples
• Hindustan Semiconductor Manufacturing Company (HSMC) has tied up with
Infineon, the fourth largest semiconductor company in the world, for technology
transfer (2007)
• TCS’ multi-million euro deal with Nokia Siemens Networks indicates a very
significant climb up the IT service delivery value chain for the former (2008).
•
• Nokia Siemens Networks has transferred its radio R&D arm in Berlin, Germany,
to Wipro Technologies (2007)
• AMD has established a close relationship with key Chinese government
organizations by transferring key x 86 microprocessor technologies and helping
China develop its own supercomputing capability (2009)
• Nortel Networks concluded a technology transfer agreement with one of its largest
and most successful joint manufacturing ventures, Guangdong Nortel (2000).

31. Type of R&D units vs Linkages
Name Country Type of R&D units Total
of origin
Abbott Laboratories USA Local 2
AstraZeneca Pharmaceuticals LP UK Global 9
Aventis Pharma Limited France Regional 2
Bayer Aktiengesellschaft Germany Local 2
Bristol-Mayers Squibb Company USA Global-Local 5
Eli Lilly & Company USA Global 13
GE Medical Systems USA Local 10
GlaxoSmithKline UK Global 8
Johnson & Johnson USA Global 3
Merck & Co., Inc. USA Local 5
Merck KGaA Germany Local 2
Novartis AG Switzerland Global 6
Novo Nordisk A/S Denmark Global 5
Pfizer Inc. USA Global-local 10
Wyeth USA Regional 3
Total 85

32. Major Findings
Majority is the green field investments occurred between the years 2004 to 2007.
Bangalore, Pune, Hyderabad, NCR, in India Beijing & Shanghai in China where there are
abundant supply of knowledge workers. Tire II cities are getting focus
In India it is more technology driven where as in China more Market driven’
More and more firms have established their R&D centre in India and China as seen from the
growth pattern of R&D units
Indian R&D units are more ‘global’ type but Chinese R&D units are more ‘local’ type
Firms’ expenditure on R&D and investment on manpower is increasing in an exponential
rate
Growth of patenting activity is not correlated with the global patenting but there is a
correlation between Indian and Chinese patenting
In India linkages with local firms are more pronounced than China. Firms prefer local
universities and GRIs in China as preferable alliance partners.

33. Concluding Remarks & Policy implications
•No uniform estimate about the number of R&D centre either India or China
•From the Tire I Cities firms are now preferring Tire II Cities, infrastructure of
these cities need to strengthened
•In China its ‘Adaptive R&D’, while in India its more towards ‘Creative R&D’
•Foreign Firms in China is relying on more towards ‘Open Innovation mode’.
To reap benefit from this ‘venture capital’ ecosystem of both these countries
needs to be strengthened
•In India Firms are deeply embedded with the local innovation system because
ICT and Pharma sector in India is comparatively stronger.
•University-Industry linkages is very strong in China while weak in India.
Needs attention

34. Acknowledgements
• ICSSR (Financial grant to field visit China)
• Tsinghua University (Specially Dr. Lu Li, Prof. Xue Lan, Dr. Liang Zheng)
Orange Labs, Beijing,
ZTE Corporation, Beijing
SK Telecom (China) Holding Co. Ltd.
HP Labs China,
Beijing Yahoo!
Ericsson (China) Communications Company Ltd.
Microsoft Asia-Pacific Research and Development Group,
Advance Micro Devices
IBM India Research Lab
Adobe India,
Microsoft Corporation (India) Pvt. Ltd.
HP Labs,
Yahoo! labs
Maruti Suzuki India
Globelics Academy