The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&DHewlett-Packard, Ericsson and many more. The trend gained strength when not justlarge companies but also small- and medium-sized enterprises (SMEs) expandedR&D operations in India.More than 150 foreign companies carried out R&D in India in 2006. Over 100 of themstarted their operations between 2002 to 2006. Foreign companies have invested over1.1 billion dollars in R&D between 1998 and 2003 (TIFAC 2006). There has been afurther marked increase in multinational companies’ interest in investing in R&D operationsin India in the 2004–2006 period. The following investment plans were announced in thelast quarter of 2005:• Microsoft announced that it would invest 1.7 billion dollars over four years to expandits operations in India and increase its staff from 4,000 to 7,000. Half the proposedinvestment would go into making India a major hub for Microsoft research, productapplications development, services and technical support covering requirements ofboth the local and global markets.• Intel presented an investment plan totaling more than 1 billion dollars over five years,focusing on expanding its R&D center in Bangalore, as well as marketing, educationand community programs.• Cisco Systems announced it would invest 1.1 billion dollars over three years, and tripleits staff in India to 4,200. It may also be considering setting up major hardwaremanufacturing facilities.Generally, multinational companies are able to recruit and retain much of the top-leveltalent in India. They typically offer high salaries and advanced training, as well asinternational career opportunities – advantages domestic companies cannot match.Foreign R&D operations in India are carried out in three principal ways: in-house R&D,which means that it is performed by a fully owned or principally controlled subsidiary ofthe multinational company in India; collaboration with other companies, for exampleoutsourcing to Indian companies, including strategic alliances; and contracts or other formsof collaboration with private entities, public sector laboratories and universities.In-house R&D has been a principal form for larger multinational companies, although theyoften outsource and pursue contract research in parallel. Thus, the strategy is often based ona combination of operational modes. In-house and other forms of equity-based operationsoffer more control and are preferred in instances when activities are highly complex, whenthere are major concerns about intellectual property rights or when the intra-companycommunication is of high intensity.282
THE INTERNATIONALIZATION OF CORPORATE R&D11.4 Sector and Company-Level Developments11.4.1 Overview of Stakeholders and SectorsIndia has developed a capacity to undertake R&D work in a wide range of areas, includingICT (software and hardware), life sciences (including biotechnology and pharmaceuticals),engineering (including manufacturing and infrastructure construction), space, aviation,nuclear technology and material sciences. Figure 11-1 provides broad estimates of R&Dactivity levels by stakeholder and key sector.Figure 11-1 Estimated R&D activity levels by stakeholders and sectors in India, 2006.StakeholdersBasicResearchAppliedResearchProductDevelopmentProcessDevelopmentIndian government, public enterprisesand academic institutionsHigh Medium Low LowIndian companies Low Low Medium HighForeign companies Low Medium Medium HighSectorsICT: software services and products,IT hardware and telecommunicationLow Low Medium HighLife sciences: biotechnology,pharmaceuticals, bio-informaticsEngineering: automobile, othermanufacturing, infrastructure andconstruction industriesSpace, aviation, defense, nucleartechnology and material sciencesFinancial, accounting, insurancelegal, education, health and otherscience and knowledge processindustry servicesLow Medium High MediumLow Low Medium MediumHigh Medium Medium MediumLow Low Medium HighNote: Estimated levels of activity (low, medium and high) are broadly defined in an India-specific comparative contextcovering levels of R&D expenditures and number of employees. Level activity as used here differs from research intensity,which often is defined as R&D expenditure as a percentage of sales/revenue/expenditure at the company level, or asGDP at the national level. Estimates for stakeholders and sectors are based on preliminary generalized observations anddo not reflect that there are significant variations in levels of R&D activity within each sector, industry and individualentities.Source: Estimates derived from published information and interviews (Mitra 2006b).283
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