The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&DThe CSIR is the largest government entity that carries out research, with a networkof over 38 laboratories that form the core of India’s public sector industrial R&Dactivities. The organization been a principal played on the Indian R&D scene sincethe 1950s. It represents R&D infrastructure investments worth over 220 milliondollars and a workforce of over 25,000, including 6,000 scientists and 2,500 Ph.Ds.Further, the CSIR has bilateral scientific collaborations with over 35 countries andspends over 110 million dollars on R&D, files about 250 patents, and publishesmore than 2,000 scientific papers every year. The CSIR network of laboratoriesundertakes basic as well as applied research, and earns about 20 percent of itsrevenues by contract research. The R&D capabilities of these laboratories havebeen leveraged by several multinational companies, including General Electric,Boeing, DuPont, Akzo Chemicals and Novo Nordisk. The DST promotes basicresearch, scientific services and societal development (CSIR 2005 and 2006).Three major S&T policy statements have been adopted since India gained its independence:the Science Policy Resolution of 1958, the Technology Policy Statementof 1983, and the Science and Technology Policy of 2003. The Indian governmentrecognized the inevitability of the globalization and liberalization of the Indianeconomy. Among other things, it articulated the need for reconstruction of theacademic scientific system, technology development through appropriate rewardmechanisms, measures to increase active involvement of industry in basic andapplied research, and management of intellectual property rights (Bowonder et al.2003 and Bowonder 2005).Since 2003, the Indian parliament has passed a series of laws protecting intellectualproperty rights (IPRs). In 2005, it passed a patent regime that is compliant withWTO standards. The legislation is aimed particularly at pharmaceuticalmanufacturers, but has also raised confidence that other industries will receiveprotection.In addition, economic liberalization policies pursued since the 1990s have fosteredcompetition and internationalization. Important reforms in a number of areas, suchas: the tax regime, liberalization of foreign ownership and exchanges regulations,and improvements in industrial and other regulatory frameworks and theintellectual property rights regime, have contributed to accelerate growth in foreigntrade and investment including R&D related activities. The Indian government hasalso launched a wide range of initiatives targeted at specific industries such assoftware, electronic hardware and telecom, biotechnology-pharmaceuticals andautomotive.276
THE INTERNATIONALIZATION OF CORPORATE R&DThis is illustrated by special incentives announced in the Union Budget for 2005–06,namely:• A tax deduction of 150 percent on in-house R&D expenditure in the automotive sector.• Zero custom duty on items bound under the IT agreement for the software sector.• Increase in telecom FDI equity stake limit from 49 percent to 74 percent.• Corporate tax for pharmaceutical companies reduced from 35 to 30 percent, andexemption for 100 percent deduction of profits of pharmaceutical companies carryingout R&D (Ministry of Finance 2005).11.2.4 The Role of the Indian DiasporaInternationally, the debate on “brain drain” has gradually been shifting toward a moreprominent focus on “brain circulation” in which formal and informal cross-nationalnetworks of engineers and entrepreneurs can play a pivotal role in transferring technology,skills and capital to their country of origin. Such networks, coupled with thedevelopment of industry clusters, can promote high-technology development in thehome country, sometimes more effectively than traditional forms of FDI (Saxenian2002 and 2005).While hard to measure, it can be argued that the Indian Diaspora, in the past two decades,has made a larger contribution to international corporate R&D than Indiansworking in India itself. The Indian Diaspora has played a pivotal role in attracting R&Dactivities to India, especially from the U.S., Canada, the U.K. and South-East Asia.Diaspora Indians’ role in the U.S. R&D community is reflected by the large number ofIndians in leading academic institutions and U.S. high-tech companies. In the U.S.,Indians constitute 5 percent of medical doctors, 12 percent of scientists, 36 percent ofthe scientists in NASA, 34 percent of the employees in Microsoft, and 20 percent of thescientists at Intel (FICCI 2005).Together with the Chinese Diaspora, Indians are estimated to account for close to halfof the IT industry-engineering workforce in Silicon Valley. Over the last decade, Indianengineers have started hundreds of technology businesses in Silicon Valley. Thesenew immigrant entrepreneurs generated jobs, exports, and wealth for the region, whilesimultaneously accelerating the integration of California into the global economy.About half the jobs outsourced by Silicon Valley companies are going to India, accordingto a 2005 carried out at Santa Clara University (Belotti 2005).277
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The Internationalization of Corporate R&D

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