The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&Dvate-public partnerships, expand foreign investment and enhance the role of the large IndianDiaspora and other form of international collaboration.Following the current trends, India can emerge as one of the principal internationalcenters for R&D and high-technology industry investment and trade within the next10–20 years. It is however hard to predict the specific timing, scale and scope ofthese developments. Multinational companies and a wide range of Indian parties aredeveloping the country’s capabilities to undertake production-supportive and adaptiveR&D and design work as well as innovative R&D both in terms of serving localand international market requirements. The cost of not having comprehensive strategiesfor developing the scope of economic and technology relations with India (andChina) will prove to be significant, especially for companies with global aspirations.The Swedish industry has a long tradition of exporting to and producing goods locallyin India. These activities have gradually expanded and now often include productionas well as sales directed at both the Indian and other markets. Furthermore,since around 2003 there has been significant expansion of R&D activities bySwedish companies in India. Indian private and public sector companies have a significantinterest in acquiring technology from Sweden in a wide range of areas.Indian companies are increasingly active in seeking trade and offshoring businessopportunities, including BPO and R&D.Economic and technology relations between Sweden and India have gradually strengthenedbut lag when compared to ties with China and Japan. However, trade and investment linksbetween the two countries are poised to expand substantially in the long-term. This appliesto sales, production and R&D activities performed by Swedish companies in India as wellas Indian companies’ operations in Sweden.11.6.2 Looking AheadScenario for the Next Five Years and BeyondThe long-term consequences of India’s (and China’s) transformation from a minor toa major power in goods and services production, foreign trade and investment as wellas R&D entails the emergence of a new world economic order of which the fullimplications are hard to foresee (Mitra 1985a, 1985b and 2006b). Few analysts anticipatedthe rapid, export-oriented high-tech industry developments that took placein India since the 1990’s. Similarly, it is difficult to predict the future with respect tocorporate R&D.The following principal scenario for development of R&D in India is based on theinterviews conducted for this study and analysis of information and forecasts by variousinternational business intelligence providers, government entities and industry296
THE INTERNATIONALIZATION OF CORPORATE R&Dassociations. The emerging baseline scenario for Indian-based R&D in the next fiveto ten years entails the following: 4 (Mitra 2006b).• Total R&D spending is likely to more than double in the five-year period from2006 to 2010. Reflecting the low starting point, R&D investment (and output) levelsin India are however not likely to match that of the G5 nations or China withinthe next 10 years. The number of patentable innovations of Indian origin is likelyto continue to grow rapidly, albeit lagging behind that of larger industrial nationsin absolute terms.• Growth in R&D spending will be led by the corporate sector. Corporate R&Dspending is likely to be significantly larger than government outlays in the secondhalf of the 2000s and beyond.• Foreign multinational companies will continue to be the principal driving force ofhigh-end corporate R&D investments in India. R&D in the Indian corporate sectoris also likely to expand, but the research intensity of both larger and smaller Indiancompanies is likely to continue to be low compared to leading foreign companies.• Corporate R&D will expand rapidly in a wide range of areas, particularly in ICT,but also in biotechnology-pharmaceuticals, engineering and social sciences. TheKPO sector including finance, accounting, law, and health and education serviceswill grow rapidly.• Government-financed R&D will continue to focus on defense, space and nuclearpower. Private-public sector partnership is likely to become increasingly significantas government institutions become more commercially oriented.• High-tech industry centers will enter a more mature production phase, and play amore substantive role in innovation. Bangalore, for example, has potential to becomean Asian version of the Silicon Valley in software and IT-related industriesproduction as well as R&D.• The Indian Diaspora will strengthen its importance overseas as well as in its linkageswith India-based R&D activities. The Indian Diaspora’s total contribution toglobal R&D is likely to continue to be larger than the output from India-based operations.• Access to skilled researchers and engineers will constrain growth, resulting inhigher wages and requiring more active efforts for offshoring both to and fromIndia and greater efforts to attract skilled persons to work in India. Both govern-4 The principal scenario is in line with the past five years’ trends in economic growth and structural change inIndia as well as the country’s economic and technology relations with the rest of the world. A significantlylower or higher scenario for R&D development would imply major diversions in these trends (Mitra 2006b).297
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