The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&Dducer CVRD, and the purchase of Petro-Kazakhstan for 4.2 billion dollars by ChinaNational Petrol Corporation (CNPC). Securing access to natural resources and energyhas become an important determinant of China’s foreign policy, and outward FDI isone of its key instruments:Beijing’s access to foreign resources is necessary both for continued economicgrowth and, because growth is the cornerstone of China’s social stability, for thesurvival of the Chinese Communist Party (CCP) /…/ Beijing has been encouragingrepresentatives of state-controlled companies to secure exploration and supplyagreements with states that produce oil, gas, and other resources. Meanwhile, ithas been courting the governments of these states aggressively, building goodwillby strengthening bilateral trade relations, awarding aid, forgiving national debt,and helping build roads, bridges, stadiums, and harbors. In return, China has wonaccess to key resources, from gold in Bolivia and coal in the Philippines to oil inEcuador and natural gas in Australia (Zweig & Jianhai 2005)Beyond the need to secure natural resources, the government also views outward FDI as ameans for generally increasing China’s international political and economic influence(Accenture 2005). In 2002, the government launched its “go-global” policy, encouragingChinese companies to increase their presence abroad. One clearly defined goal is to have30–50 “national champions,” or globally competitive Chinese companies, by 2010. In 2005,China had 15 companies among the Global Fortune 500, although to what extent they areglobally competitive is questionable, since many of these are government-owned orprotected monopolies (The Economist 2005a).Gaining access to foreign markets and, perhaps even more importantly, to gaining access totechnologies, are other factors driving Chinese outward FDI. According to von Zedtwitz(2005), technology sourcing is the primary reason for Chinese companies’ directinvestments in developed countries. Lenovo’s purchase of IBM’s PC business, TCL’s jointventure with Thomson to create TTE Corporation, and Nanjing Automotive’s acquisition ofRover are examples of Chinese companies seeking both access to foreign markets and totechnologies. Instead of acquiring or merging with a foreign company, telecommunicationsmanufacturers Huawei and ZTE have set up R&D centers in Sweden and the U.S., amongother countries, as a way of increasing visibility and sourcing technologies.In summary, the bulk of China’s outward FDI has been closely linked to foreign policyobjectives of securing access to raw materials and expanding economic and politicalinfluence. As a result, China’s prospective “national champions” are targeting developingcountries and transition economies, more so than developed countries, in their internationalcooperation and expansion efforts. China’s strategies for going abroad were exemplified byZTE’s Chinese New Year reception held in Beijing in January 2006. This is the first timeZTE organized a formal reception tailored only to foreign diplomats. Of the 33 countries inwhich ZTE has activities, 27 are developing countries or transition economies.242
THE INTERNATIONALIZATION OF CORPORATE R&D10.4 Corporate R&D Activities in China10.4.1 Number of Foreign R&D Centers is Growing RapidlyAs the previous section has shown, transferring knowledge and technologies to Chinathrough foreign companies has been a long-standing goal of China’s FDI policies.However, foreign companies’ establishment of R&D centers in China is a relativelyrecent phenomenon. A few pioneering companies, such as Microsoft, Nortel,Ericsson and Nokia, set up innovative R&D labs in China in the second half of the1990s. Since 2000, the number of foreign R&D centers in China has increaseddramatically.While in the 1980s and 1990s most R&D activities by foreign companies in Chinaconsisted primarily of product development and adaptation to the Chinese market,now large multinational companies, many of whom are technology leaders in theirfields, are increasingly locating innovative R&D in China. We use the term“innovative” to differentiate between R&D activities devoted merely to adaptingproducts to the Chinese market (adaptive R&D), and operations with a scope andnature that exceeds the domestic Chinese market. Centers with innovative R&Dfunctions are also sometimes referred to as “global R&D centers.”Examples of companies carrying out innovative R&D in China include Nokia,Microsoft, Ericsson, Intel and Motorola. For example, “Nokia shifted a significantpart of its third-generation software development to Hangzhou, transferringtechnologies and people from the former competence centre in Finland” (vonZedtwitz 2004). Another example of an “early mover” locating innovative R&Dactivities in China is Microsoft. Microsoft China’s R&D operations are an importantpart in Microsoft’s global value chain. One of Microsoft’s six research labsworldwide, Microsoft Research Asia (MSR Asia) established in 1998 and employingapproximately 170 researchers, is based in northwest Beijing. In late 2003, Microsoftopened its Advanced Technology Center (ATC) in the same building (Buderi 2005).The lab and the technology center are not only researching and developing productsaimed at the Chinese market, but also expect to be the key technology transfer pointfor a host of new Microsoft products worldwide, such as web search and mobiletechnologies.There are three ways for foreign companies to establish R&D operations in China: aswholly independent R&D labs; as R&D departments or activities within either abranch of a Chinese operation or a joint venture with Chinese partners; and, ascooperative R&D with Chinese research universities or institutes (von Zedtwitz2004). According to Gassmann & Han (2004), the more sensitive the technology isfor the company, the more likely that its Chinese operations are wholly foreign-243
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ITPS, Swedish Institute For Growth
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The Swedish Institute for Growth Po
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