The Internationalization of Corporate R&D

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