The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&DIn the ongoing debate, most think tanks and independent economists argue that offshoringis good for the U.S. According to the Brookings Institution, U.S. policymakersshould stimulate more international trade and the opening of other markets, like India(Brainard & Litan 2004). The fears about job losses and wage cuts due to offshoring,which have been fueled recently by the U.S. media, are dramatically overstated, accordingto studies by McKinsey Global Institute. Protectionism will not save jobs in thelong run, but stifle innovation and job creation (Farrell & Rosenfeld 2005).Nevertheless, analysts also point out that there are areas for policy reform in the U.S.For example, the current corporate tax system may artificially encourage offshoringby permitting deferral of taxation on foreign earnings but not on domestic earnings(Brainard & Litan 2004).1.2.1 Strengthen the National Science and Technology Base (A)Policymakers in many countries are considering and implementing broad frameworkswith the objective to create world-class innovation systems. The basic component is astrong national science and technology base, featuring public investments in (A1) scienceand technology, (A2) education and training, and (A3) infrastructure and regulationsto support innovative activities. A strong science and technology base is becomingan increasingly important factor for attracting domestic and foreign corporateR&D activities. Comprehensive overviews of innovation policies in Europe and inother countries can be found in EC 2004 and OECD 2005b.Integrated Strategies and National Policy FrameworksSeveral countries have recently launched integrated strategies to strengthen innovationsystems and competitiveness. These policy frameworks include measures tobuild up the national science and technology base.In the U.S., several framework proposals have recently been launched in Congress,including bi-partisan Senate bills titled: Protecting America’s Competitive EdgeAct (PACE Act), and, in January 2006, a proposal from the administration calledthe American Competitiveness Initiative (ACI). The comprehensive proposal callsfor: increased federal R&D investments in physical sciences and engineering;making permanent the research and experimentation tax credit; increased resourcesfor basic and science education and for educating teachers in mathematics andscience; a program for workforce training; and an initiative for immigration reform(ACI 2006). The recent wave of innovation initiatives largely follows the recommendationsof a few, highly publicized reports (NII 2004, NA 2005).The European Commission launched an integrated policy approach to E.U. researchand innovation in October 2005. The action plan included several initiativesin the areas of state aid, intellectual property protection, research funding, and37