The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&Dinclude direct funding of R&D projects, the granting of preferential loans or subsidies,and the provision of various services.Several countries have an open policy and provide full access for foreign companies tonational R&D and technology programs. This is the case in Sweden, Denmark,Finland, Norway and the Netherlands. Other countries are more restrictive, such asKorea, Poland and Italy, where foreign companies have little or no access to nationalR&D funding. In New Zealand, participation is only possible if the R&D activitiessatisfy the criterion of “national benefit” (NIFU 2005, OECD 2005c).Some developing countries are forcefully developing investment incentives to attractmultinational companies. China and India have strengthened their support for foreignR&D, including more flexible establishment rules, tax and custom duty exemptions. InSingapore, 100 percent of R&D expenses are deductible. Brazil applies a tax reduction onimported products if companies are investing in R&D (UNCTAD 2005, EIU 2004). Foran overview of tax deductions and other financial incentives, see World Bank 2004.General tax incentives schemes for R&D investments have been implemented by twothirds of OECD countries and sometimes foreign companies are also eligible (OECD2004). Canada has one of the most beneficial systems and the country has noted a substantialinflow of R&D investments. The Nordic countries have long been exceptions fornot having R&D tax credits. However, Norway introduced a tax reduction scheme forsmall- and medium-sized companies in 2002 that was extended to include all companiesin 2005, including large and foreign-controlled companies based in Norway. Similarly,the U.K. has extended their tax incentive schemes to cover large companies as well(OECD 2005c). A general R&D tax credit has been proposed in Sweden (ISA 2005).Apart from incentive packages, both developed and developing countries have introducedspecific R&D investment requirements to foreign investors and trade partners.These types of measures work in countries with a large and attractive domestic market,such as China (for example in the automobile and communications industry) and tocertain degree, in India. In addition to R&D investments, requirements might come inthe form of technology transfer or joint-ventures. Foreign R&D investment requirementsmay also be a part of public procurement. In Poland for example, foreign suppliersof military equipment must make compensatory investments in Poland. Financialsupport for local researchers and entrepreneurs as well as investments in knowledgetransfer in several key sectors, are preferred under the policy (OECD 2005c).Internationalize Domestic Companies (C2)Governments can support domestic companies to connect and collaborate with foreignsources of innovation and global centers of excellence. In the process both companiesand countries need to increase their abilities to internalize and assimilate knowledge44
THE INTERNATIONALIZATION OF CORPORATE R&Dand technologies developed elsewhere in the world. To strengthen this absorptive capacity,companies must maintain a certain degree of in-house R&D and technologicalcapacity in order to understand and evaluate new technological trends and innovationsand acquire outside technologies. Countries need to create local environments open totechnological development, with well-developed innovative clusters and a robust nationalscience and technology base (Blomström & Kokko 2003).Policymakers in certain countries provide funding for international collaborative R&Dprojects at national level and, through the European Framework Programme, negotiatebilateral science and technology agreements to facilitate international collaboration anddesign programs such as the Innovation Partnership Subsidy (the Netherlands) and theIntelligent Manufacturing Systems initiative in Australia. These types of programssupport international collaboration in the development of advanced manufacturing andprocessing technologies (OECD 2005c). More detailed policy recommendations in theEuropean context are provided in ETAN 1998 and BEPA 2005.Research agencies can give priority to projects promoting international collaboration inthe R&D funding selection process (Finland and Australia) or help companies, especiallysmall- and medium-sized ones, find international R&D partners (e.g. the IndustrialResearch Assistance Program in Canada). Match-making activities can be supplementedwith consulting services that advise how to access international funds and howto coordinate international projects.Other policy measures used include: support for technology intelligence and monitoring,foresight activities, international fairs, conferences, seminars and technology missions.Attract Foreign Talent and Increase Mobility (C3)Attracting highly skilled researchers and engineers, as well as removing barriers forinternational mobility, are also priorities for policymakers. Governments have implementedvarious policies that seek to attract, retain, repatriate and circulate talent. Suchpolicy measures include immigration regime reforms, income taxation policies andsupport for returning researchers and engineers.Immigration policy reforms are triggered by real or feared skills shortages, driven bydemands from companies and business associations. Countries have liberalized immigrationpolicies (i.e. Singapore), simplified immigration procedures and expeditedapplication process (recent reform in Finland, the Netherlands and Germany), issuedwork permits for foreign researchers (Finland, Norway), and increased entry quotas andspecial funding programs, for example post-doc programs. See ISA 2001 for anoverview of these policy measures. In Sweden, a parliamentary committee is currentlyreviewing immigration regulations (KAKI 2004).45
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The Swedish Institute for Growth Po
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