The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&Dhave strong language skills, specialized knowledge about their home markets and theU.S. market, and can serve to connect the two.Silicon Valley: a world hub for venture-capital? In the past, Silicon Valley venturecapital firms have invested only in local companies. The current trend is to go regional,national and global; more venture capital firms now invest outside SiliconValley and even overseas, and some analysts have predicted that this developmentmay transform Silicon Valley into a world hub for venture capital, as New York is aworld hub for financial markets or Chicago is for commodities.Some venture capital firms and investment banks in Silicon Valley have set upbranches in Asia. For example, Silicon Valley Bank, which lends capital to high-techstartups, opened a branch in Bangalore, India, in September 2004.The role of government could expand. It will be important for political and educationalsystems to respond earlier to new market demands, especially in providing a skilled orretrained workforce. The government’s role in business could become more importantin the coming years; the government must prepare the nation and its innovative regionsto be more competitive in the global marketplace. For example, the government willhave to provide high-class education, a skilled workforce, and attractive infrastructure,as well as find ways of attracting foreign talent.Skill levels are on the rise. The R&D skill level of researchers and engineers has gone up inSilicon Valley in the last five years, and is expected to continue to rise. There are concernsthat the mid–range level skilled labor could be hollowed out as the market for middleengineers shrinks due to offshoring and outsourcing to other regions and countries.Employee structures and career patterns are expected to change in Silicon Valley becauseof offshoring and outsourcing.Coordination of skills will be a competitive advantage. The ability to coordinate allbusiness activities (local, outsourced and offshored) in a timely and efficient manneracross different time zones will be a much more needed skill in the future. Also, theability to manage cultural differences between staff at the R&D centers and SiliconValley headquarters is becoming even more important.200
THE INTERNATIONALIZATION OF CORPORATE R&D8.7 Conclusions and Implications8.7.1 Conclusions: Main FindingsSome of the most interesting findings from internationalization of corporate R&D inSilicon Valley are described below.Has Silicon Valley been affected by internationalization, especially ofcorporate R&D?As in many developed regions around the world, internationalization by SiliconValley companies has steadily been climbing up the value chain and reached theR&D segment. It is mostly the large company strategy to establish R&D activitiesabroad. This is expected to change during the next few years. This kind of offshoringis primarily affiliated, due to intellectual property (IP) protection and securityreasons. However, smaller and more innovative companies, driven by venturecapital firms trying to encourage cost reduction, are also beginning to engagein internationalization. Both large and small Silicon Valley companies are alsoshowing tendencies to offshore directly, bypassing the domestic option.What are the driving forces behind this development?The most significant forces driving the offshoring of corporate R&D to foreigncountries are: the need to reduce costs and the increased access to skilled laboroverseas. In addition, companies also use offshoring of R&D to gain access andknowledge about emerging markets. The large number of Asians in Silicon Valleyplay an important role for the regions connection with emerging markets such asChina and India. Finally, another important driving force is the venture capitalfirms encouraging their portfolio companies to consider locating part of their businessactivities abroad in order to cut costs.What are the impacts and effects of this development?While the internationalization of corporate R&D has affected Silicon Valley tosome extent, some studies show that offshoring is only one factor affecting jobcreation and job losses in the region, and is less important than other factors, includingtechnological change and outsourcing within the U.S.Some interesting findings show that small companies have increasingly establishedparts of their business functions abroad. At the same time, however, these samesmaller companies will keep most of their jobs in the region (compared to the largercompanies) and will create most of the innovation and new jobs in Silicon Valley.Those business segments that that are aligned to the region’s strength are most likelyto create new jobs and growth. Another noticeable trend is that the skill level of re-201
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ITPS, Swedish Institute For Growth
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The Swedish Institute for Growth Po
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