The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&Din favor of locating R&D in China. A more important question, which is difficult toassess, is whether future expansion of R&D activities in China will occur at the expenseof expanding similar activities in Sweden.While Swedish small and medium-sized enterprises (SMEs) are increasing their activitiesand presence in China, R&D activities by Swedish companies are limited tolarge companies. This pattern is not surprising when considering that large multinationalcompanies dominate international R&D activities in general (see for exampleITPS 2005 and UNCTAD 2005b). At the same time, however, SMEs experiencespecific challenges when setting up operations in China (Schwaag Serger & Widman2005). As a result, it is important to examine the extent to which absence of SMEs’R&D activities is a reflection of difficulties encountered in China, and whether thisabsence has consequences for their ability to participate in, and benefit from, theinternationalization process in the long term.10.4.6 Drivers of Foreign Corporate R&D Activities in ChinaAs mentioned in Chapters 1 and 2, three key drivers determine companies’ decision tolocate R&D activities in a given country. The first is a supply of knowledge resourcesthat may be better or cheaper in some countries than others, or may be unique to aspecific country. The second factor is the intention to adapt products and services to thelocal market or to be near production facilities. A third reason companies might locateR&D to, for example China, is in response to political or institutional conditions (vonZedtwitz 2004). Examples of the third driving force include “local content” rules, lawsconcerning intellectual property rights. There are also national regulations that mayrequire foreign companies interested in setting up production facilities to also set upR&D facilities. And there are fiscal incentives as well.In the case of China, all three factors play a role in explaining foreign companies’ R&Dactivities in China. However, the relative weight of each factor is changing over time.This section examines the driving factors by combining results from published studieswith findings from interviews carried out with R&D managers and other experts betweenMay 2005 and January 2006.247