Draft Report of the Expert Group on International STI Cooperation to ...

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S&T rise <strong>of</strong> Asia has translated into Asia becoming an increasingly attractive location for multinational companies' research activities. Internationalisation <strong>of</strong> R&D and innovations by firms Since <strong>the</strong> second part <strong>of</strong> <strong>the</strong> nineties, R&D expenditure by foreign-controlled affiliates has grown faster than <strong>the</strong>ir turnover in <strong>the</strong> OECD area, illustrating that R&D is one <strong>of</strong> <strong>the</strong> most dynamic elements in <strong>the</strong> globalisation process <strong>of</strong> large multinationals (OECD 2009, DB 2010). The sector with <strong>the</strong> most internationalized R&D is pharmaceuticals. The EU business sector is <strong>the</strong> most internationalised on R&D spending. Most <strong>of</strong> <strong>the</strong> EU outward R&D-FDI is destined for <strong>the</strong> US and vice versa. However, if <strong>the</strong> EU has long been <strong>the</strong> major host for US foreign research and vice versa, <strong>the</strong> emerging markets and most notably China, are currently attracting also an increasing share <strong>of</strong> overseas outlays by MNEs. Survey evidence on intentions for R&D investments confirms <strong>the</strong> increasing importance <strong>of</strong> emerging markets (UNCTAD 2005, EUI 2004, McKinsey (2006)). With <strong>the</strong> share <strong>of</strong> R&D activities by MNEs located abroad on <strong>the</strong> rise, and with R&D expenditures from foreign controlled firms increasing much faster than those from firms under national control, foreign controlled R&D becomes an increasingly more important part <strong>of</strong> <strong>the</strong> R&D landscape in many recipient countries. This holds particularly for small countries, but not exclusively. For instance in <strong>the</strong> UK, it is thanks to R&D investment by foreign affiliates that overall business-sector R&D continues to grow. International collaboration in R&D: a phenomenon on <strong>the</strong> rise? A trend in <strong>the</strong> internationalisation <strong>of</strong> R&D is <strong>the</strong> rising number <strong>of</strong> cooperation agreements or alliances since <strong>the</strong> 1980’s between partners residing in different countries (e.g. Hagedoorn and Schakenraad, 1990, 1993; Duysters and Hagedoorn, 1996). The increasing similarity <strong>of</strong> technologies across sectors and cross-fertilisation <strong>of</strong> technology between sectors, coupled with <strong>the</strong> increasing costs and risks associated with innovation, has led firms to consider international R&D alliances as a first-best option in many circumstances. Through R&D cooperations and strategic alliances, leading international technological enterprises have created new solutions that allow for <strong>the</strong> rapid and flexible networking <strong>of</strong> institutionally or regionally scattered centres <strong>of</strong> competence. The formation <strong>of</strong> research joint ventures enables companies to pool resources and risk, exploit research synergies and reduce research duplication. It creates investment ‘options’ in emerging technology fields (Contractor and Lorange, 1988; Hagedoorn et al., 2000). Companies are increasingly carrying out joint R&D projects with <strong>the</strong> best possible partners, who can be o<strong>the</strong>r firms or science partners. This search for best partners is done at a global scale. From a traditional transaction cost economics perspective (Williamson, 1996) one would expect that companies are somewhat hesitant to enter into R&D partnerships with foreign companies due to <strong>the</strong> lack <strong>of</strong> control over long-distance, lack <strong>of</strong> trust between 80
companies from different countries and <strong>the</strong> high asset specificity <strong>of</strong> R&D. However, as increased international competition has led many companies to follow a strategy <strong>of</strong> gradual internationalisation, one can assume that this experience gradually also opens <strong>the</strong> way to nondomestic R&D partnerships (Hagedoorn and Narula, 1996). The evidence shows that since <strong>the</strong> 80s <strong>the</strong> number <strong>of</strong> newly established international strategic technology alliances has increased considerably (Hagendoorn 2001), in line with <strong>the</strong> general boost in technology alliance activities. In relative terms, one could expect that, in <strong>the</strong> context <strong>of</strong> <strong>the</strong> overall importance <strong>of</strong> internationalisation to companies and <strong>the</strong>ir partnerships, <strong>the</strong> share <strong>of</strong> international R&D partnerships in <strong>the</strong> total number <strong>of</strong> R&D partnerships should also have increased during <strong>the</strong> last four decades. However, <strong>the</strong> past forty years indicate a somewhat irregular and slightly downward trend in <strong>the</strong> share <strong>of</strong> international R&D partnerships. Changing innovative strategies <strong>of</strong> transnational companies Given <strong>the</strong> prominence <strong>of</strong> large technology intensive multinational firms in STI capacity building, it is important to understand <strong>the</strong> changing motives <strong>of</strong> firms to source and exploit technology abroad within <strong>the</strong> process <strong>of</strong> increasing globalisation <strong>of</strong> STI, as described in <strong>the</strong> previous section. Historically, multinationals (essentially US multinationals) tended to keep R&D in <strong>the</strong>ir ‘home’ country. This meant <strong>the</strong>y could manage <strong>the</strong> risks <strong>of</strong> innovation and de-bug new products and processes with <strong>the</strong> minimum <strong>of</strong> transaction costs (Vernon 1966) and (ra<strong>the</strong>r incidentally) it also limited <strong>the</strong> extent to which <strong>the</strong>y could suffer knowledge ‘leakage’ in distant markets. They would <strong>the</strong>n successively ‘roll out’ new products and processes to plants abroad, doing only R&D for local adaptation at a distance. Later writers call this ‘home base exploiting’: <strong>the</strong> idea being that <strong>the</strong> foreign R&D builds on <strong>the</strong> position <strong>of</strong> <strong>the</strong> home country. While most R&D abroad was associated with market-related motives (integration with foreign production, responsiveness to local demand and regulations), <strong>the</strong> increase in foreign R&D activities that emerged from <strong>the</strong> early 90s, could not solely be explained by demand related motives. The new evidence ga<strong>the</strong>red shows that MNEs are establishing foreign R&D facilities, driven increasingly more by supply related motives; in an attempt to tap into knowledge and technology sources in centres <strong>of</strong> scientific excellence located worldwide. These decentralized R&D activities have been defined as “home-base augmenting” (HBA) (Kuemmerle, 1996) or “asset-seeking” R&D activity (Dunning and Narula, 1995), as opposed to <strong>the</strong> more traditional “home-base exploiting (HBE) or asset-exploiting strategies. This correlates with a shift towards MNE subsidiaries that are R&D active, not just in incremental, adaptive innovations, based on development activities, but also in drastic innovations, creating basic generic know-how, where <strong>the</strong> subsidiary is as active as headquarters in external linkages. In this new perspective, supply related motives, related to <strong>the</strong> presence <strong>of</strong> scientific and technological skills, become more important as location factors. Location decisions for this 81
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International Cooperation in Scienc
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EUROPEAN COMMISSION International C
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Table of contents
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Composition of <st
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List of abbreviati
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Executive summary Changes in <stron
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Research and innovation infrastruct
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allow strategic partnerships with a
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5. Variable geometry should be expl
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ERA was discussed as part o
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• Enable EU and MS to tackle glob
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innovation policy needs to anticipa
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• Developing economies with stron
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• The general opening principle a
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third countries, while the<
Page 31 and 32: and Member States of</stron
Page 33 and 34: intrinsic objectives of</st
Page 35 and 36: Fig. 2: Measures and instruments fo
Page 37 and 38: and lead to a significantly more at
Page 39 and 40: Fig. 4 Long and medium term priorit
Page 41 and 42: in nature, and in general occur bet
Page 43 and 44: egulations and values that make up
Page 45 and 46: Towards a strategic approach A stra
Page 47 and 48: Exploit variable geometry Objective
Page 49 and 50: third countries, typically with <st
Page 51 and 52: c) with a strong jointly accessible
Page 53 and 54: e) funded by the E
Page 55 and 56: The need for an evidence- and analy
Page 57 and 58: 1) Understanding the</stron
Page 59 and 60: Scientific collaboration: (priority
Page 61 and 62: • International acquisition <stro
Page 63 and 64: • a collaboration of</str
Page 65 and 66: • Information on national priorit
Page 67 and 68: Conclusions and key policy recommen
Page 69 and 70: educational level of</stron
Page 71 and 72: Kaiser L., Ganea P., Gibson J., and
Page 73 and 74: Annex 1: Mandate of</strong
Page 75 and 76: Consideration should include: - def
Page 77 and 78: Annex 2: Dimensions of</str
Page 79 and 80: Annex 3: Trends, Drivers and Impact
Page 81: however, is not so far justified by
Page 85 and 86: competitors are located in
Page 87 and 88: This engineering pattern is, howeve
Page 89 and 90: Researcher mobility schemes operati
Page 91: SME are usually constricted due to
Page 95 and 96: How to obtain EU publications Free
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