The Internationalization of Corporate R&D

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