The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&DHistorically Japan has been successful in attracting foreign direct investments. The totalnumber of newly-established foreign companies increased from 237 (between 1976 and1980) to 565 cases (1986–1990) (JETRO 2004b). However, between 1991 and 1995,Japan entered an economic recession and foreign investment plunged to 406 new companies.Then, between 1993 and 2003, numbers rose again to 897 new companies.According to the METI survey, 42 percent (861) of foreign companies established inJapan between 1999–2003, were European. U.S. companies accounted for 38 percent(744) (METI 2004).Foreign Companies Establishing R&D in JapanThe main type of activity performed by foreign companies established in Japan is sales.R&D activities remain minor with these companies (METI 2004).The total R&D investment by foreign affiliates reached 7.2 billion dollars in fiscal year2003, up by 16 percent from the previous year. R&D expenditures by the manufacturingindustry were 7 billion dollars, which accounted for 97 percent of the total expenditure(METI 2004). The transport machinery industry accounted for 72 percent of the total expenditure.According to a study by the Cabinet Office, 51 percent of the 126 American- andEuropean-affiliated companies in Japan in 2002 considered Japan to be a very attractivecountry for innovative R&D and technology monitoring.Very few Swedish companies have established R&D activities in Japan. For this study weinterviewed a large, well-established Swedish high-tech company in Japan. The companyhas an R&D group of ten researchers, eight of whom are Japanese; they plan to doublestaff in the coming years. The Swedish company’s main reason for establishing R&D inJapan is to access advanced Japanese technology. Japan is believed to be five years aheadof other countries in this company’s particular business area. The main goal of the groupis to conduct innovative R&D to create new products, based on global standards, for theglobal market. In addition, the company expects that having R&D in Japan will help thempenetrate the Japanese domestic market. As they phrase it, “selling from Japan to Japan ismuch easier than selling from outside Japan.”Generally, the main barriers to doing business in Japan are differences in businessculture and low levels of English proficiency in the Japanese workforce. For thisSwedish company, the future of R&D investments in Japan will depend heavily on thecompany’s revenues in the near future. Surprisingly, they seem not to have encounteredany issues with the internal mix of cultures (Western and Japanese). The company hasits own global corporate culture and Japanese employees are expected to adapt.216