The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&DR&D Spending and FundingIndia’s R&D expenditure is still low compared to major industrial economies, indollar terms, on a per-capita basis and in terms of its ratio to GDP (about 0.8percent of GDP in 2005, according to official estimates). These figures can,however be misleading. India’s official data excludes much corporate andinternationally funded R&D activity. Also, international comparisons at marketprices are deceptive. One dollar equivalent spent on R&D in India results in anoutput many times larger than the same amount spent in high cost economies.Indian R&D spending levels are indeed substantial on a purchasing power parity(PPP) basis. Adjusting data on R&D expenditure to differences in purchasingpower is, however, a complex affair (NSF 2006). According to UNESCO data,India’s R&D expenditure has increased from 10 billion dollars in 1996 to 20 billiondollars in 2000, making it the seventh largest country in that year in gross domesticexpenditure on R&D (GERD) measured at PPP. China was the fourth largestcountry with R&D expenditure, estimated at 49 billion dollars (UNESCO 2005).On the other hand, a large share of government R&D outlays in India is not utilizedeffectively, especially compared to spending in the private sector. One example ofthis is the fact that a large number of, so-called, scientists in government researchlabs do no, or little, actual R&D.Furthermore, it should be noted that the pattern of financing R&D operations hasbegun to change significantly since the late 1990s. One major development isincreased access to local and international private financing for R&D, includingfunding from multinational companies and the emergence of more significantforeign venture capital industry activities.Patents and PublicationsMaking a balanced assessment of the outputs from India’s national innovationsystem is perhaps even more difficult than assessing its inputs. The number of filedpatents and internationally acknowledged scientific publications from India is stillsmall despite the country’s large stock of graduates and academic faculty. Inaddition, India gets very little in worldwide royalty and license fee receipts.India’s number of patents and publications does not fully reflect R&D andinnovation capabilities. In the India-specific context, several factors havehampered incentives to file for patents and to publish in foreign academic journals.Filing for patents is, in many quarters, considered complicated and expensive evenwhen innovation capabilities are present. Academic faculty and scientists havetraditionally had secure jobs with more-or-less guaranteed promotion, providingless incentive to publish than in more competitive environments. Most R&D in thecorporate sector is development rather than research, and applied development272
THE INTERNATIONALIZATION OF CORPORATE R&Dwork typically does not result in scientific contributions. In addition, mass-scaleKPO work, while often related to science, does not generally produce scientificpublications or patents.While still lagging behind industrial economies, India has experienced a sharp increasein terms of patents and publications since the late 1990s. Gradually, the national innovationsystem has provided for greater incentive to do work that can result in patentsand publications. Multinational companies are playing a major role but much of theiractivities are still not fully reflected in published statistics.The number of patents granted by the United States Patent and Trademark Office(USPTO) to foreign-owned R&D establishments has increased rapidly since the late1990s. An increasing trend is also discernable in the number of patents granted by theIndian Patent Office. The 2005 amendments to the Indian Patent Act, adopted to adhereto the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, haveboosted the confidence among international players to seek Indian patents for theirinnovations. Particularly Indian patents on drugs and electronics that have shown asharp increase in the recent years (Bowonder et al. 2003 and Bowonder 2005).The Indian-based R&D centers of companies such as Texas Instruments, GeneralElectric, IBM, Hewlett-Packard, Hoechst and Intel have contributed significantly to asharp rise in patent filings from India in the 2000s. Industry analysts expect a significantexpansion of competition and collaboration between the Indian and foreign R&Dentities. Also, several Indian universities are strengthening R&D programs. Overall,India’s record in patents and internationally acknowledged scientific publications islikely to improve significantly in the next 5 years and beyond.Finally, it should be noted that the number of patents and academic publications originatingfrom the Indian’s working overseas is significantly larger than that coming fromIndia-based R&D activities (Mitra 2006b).Foreign Investment and TradeIndia has lagged behind major industrial nations, East Asian and other economiesin growth of foreign direct investment (FDI) and trade over the past decades. Itcurrently trails China in FDI and high-tech trade, although official data understatesIndia’s position (Kumar 2005 and Mitra 2006a). There are signs that India is pickingup as manifested in ICT-related FDI and exports and imports. FDI inflows toIndia have increased from 5.3 billion dollars in financial year (FY) 2004/05 to 7.5billion dollars in FY 2005/06 and is expected to reach 10 billion dollars in FY2006/07 (RBI 2006 and The Economic Times 2006).273
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The Swedish Institute for Growth Po
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