The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&Dwas a rapid expansion of these activities. Indian companies are increasingly activein seeking trade and offshoring business opportunities, including BPO and R&D.Several Indian IT companies have established offices in Sweden in the last fewyears. They include large Indian IT companies such as Infosys, TATA ConsultancyServices (TCS) and Wipro. In addition, several companies have established smalleroperations, for example in ICT and KPO (Evalueserve and others). Several ofIndian companies with offices in Sweden or other European locations focus ondrumming up business for offshoring to India and to source technology fromSwedish companies. Indian biotechnology companies (including Dr. Reddy’slaboratories) have begun to offshore R&D work to Swedish companies and theIndian company Biocon Ltd. is collaborating with the Royal Institute ofTechnology in Stockholm and the Swedish company Innate Pharmaceuticals.In recent years, several Swedish companies have shifted their strategic perception ofbusiness opportunities in India. In the past, companies typically viewed India’s marketpotential as limited and had little interest in Indian-based research. However, as thescale and scope for developing Indian-related business has expanded, India is increasinglyseen as part of large companies’ global business operations, including opportunitiesfor offshored industrial production and service provision. Manufacturing industrytrade and investment is expected to continue to grow and dominate the economic relationsbetween the two countries but other areas, including R&D and BPO-KPO, havealso attracted significant interest.Swedish-related corporate R&D operations in India are expected to expand in software,telecommunication, engineering, pharmaceuticals and in other areas. Large companieslike Ericsson plan further expansion of R&D operations in India, both in-house andoutsourced, as do engineering companies such as ABB and Volvo Trucks. The totalnumber of people employed in R&D operations (broadly defined) by Swedish-relatedcompanies in India (both in-house and outsourcing) could potentially reach over 5,000by 2010, compared to about 3,000 in 2006, and less than 100 in the early 1990s.It is difficult to assess to what extent the expansion of Swedish corporate R&D operationsin India (and other Asian economies) is occurring at the expense of activities in Sweden. Insome cases, the expansion of R&D abroad might reflect the transfer of R&D activities fromSweden to India. In other cases, it is a new investment. The record from U.S. and Britishcompanies suggest that locating R&D abroad often is required to sustain competitivenessand can benefit all parties in the home and host countries (Mitra 2006b).294
THE INTERNATIONALIZATION OF CORPORATE R&D11.6 Conclusions11.6.1 Main FindingsThe review of India’s social and economic development points to that the country is poisedto be one of the worlds major powers both in terms of the size the domestic market and itsinternational economic role. Also, India has potential to emerge as a major R&D power,although the timing, scale and scope of the latter is especially hard to predict. The country’sprincipal strength includes its educated workforce, entrepreneurial talent and institutionalinfrastructure. Multiple considerations drive the expansion of multinational companies’R&D operations in India. These include potential for cost savings and access to technicalcompetency and markets, along with a range of other factors.India’s development continues to be uneven. The country has traditionally scored poorly inareas such as income levels, R&D spending, education outcomes and ICT diffusion, ifjudged on a per capita basis, as large parts of the economy remain underdeveloped. At thesame time, income levels are rising. The use of computers, telecommunications and Internetand the number of persons with higher levels of education is already large in absolute termsand continues to grow rapidly. An increasingly larger share of the population is proficient inthe English language and receives higher education which makes them employable in competitiveand internationally-oriented industries. India’s cities are more economically developedand increasingly integrated with the global knowledge economy, as demonstrated byhigh-technology industry development in Bangalore, Chennai, Delhi, Hyderabad, Mumbaiand Pune.India’s emergence as a major economic and R&D power will have wide-ranging localand global consequences. These include direct, as well as indirect, effects in trade,investment, employment, the environment and trajectories for technological development.The impact is poised to be significant in major sectors such as: ICT, industrialmanufacturing, construction and other engineering, agriculture and life sciences.Spearheaded by developments in the software industry, coupled with those in ICThardware and telecommunications, continued rapid growth is expected in IT-enabledservices, including the higher-end, knowledge process industry niches (e.g. finance,accounting, insurance, education, health and other services). The knowledge processoutsourcing industry is still in a very early stage of development but has considerablepotential in a wide range of areas. It may well employ more individuals than traditionalR&D operations within the next ten years.In many respects, India is still in an early phase of development in the areas of high-techindustry and international R&D. There is a considerable scope to build on strengths andtackle weaknesses in the national innovation system and corporate investment climate.Challenges include the critical needs to improve physical infrastructure, to enhance theeducation system and the functioning of government. Moreover, it is essential to build pri-295
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