The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&DThe aim of the interviews was to supplement the lack of reliable statistics on China,and to gain a realistic picture of the extent and drivers of foreign R&D operations inChina. To assess how much innovative R&D is conducted by foreign companies inChina, we have cross-referenced press clippings (e.g. on the establishment of a foreignR&D center in China with companies’ annual reports and websites) and interviewedexperts and company representatives.10.2 Economic Development and National InnovationSystem10.2.1 IntroductionThe magnitude of economic change that China has experienced in the past 20 yearscannot be overstated. After decades of isolation (particularly from the western world),the effects of cultural revolution, and the effects of a strongly Soviet-inspired model foreconomic planning and technology policy, Deng Xiaoping’s “open door” strategy ofthe late 1970s ushered in a new era in China’s economy. The strategy laid the foundationfor an economic opening toward the world, in the form of trade, investments andpersonal mobility; for far-reaching, market-oriented legal reform; and for an explicitfocus on improving China’s scientific and technological competitiveness through increasedcooperation with the Western world. 2 In the past two decades, China hassuccessively liberalized and privatized sectors and companies, as well as opened itsborders for trade. Its accession to the World Trade Organisation (WTO) in 2001 constitutesan important milestone in China’s integration into the global economy.The reform of China’s science and technology system, begun in 1985, belongs to theprincipal policy decisions that have enabled China’s progress in economics, technologyand science in the past 20 years. Whereas China’s science and technology resourceshad previously been closely connected to its military needs, the government formallyacknowledged that these resources were of vital importance for economic development.Consequently, China made a deliberate decision to link science and technology to theproductive sector (Walsh 2003).China’s economic reforms have been impressive, particularly when considering theresults in terms of economic growth. A number of areas, however, require further reformin order to secure China’s successful transition to a stable market economy. Thegovernment needs to continue restructuring and privatizing the approximately 150,000state-owned enterprises (SOE). China’s financial sector is still underdeveloped, inefficient,and too sheltered from market competition. Bad loans, which according to someestimates are equivalent to nearly half of China’s GPD, constitute a significant threat to2 A good overview of China’s technology policy since 1978 can be found in Walsh (2003).229