Internationalisation of R&DThe local level

Session reportStefan Kuhlmann, Fraunhofer ISI / Univ. Utrecht

Raimo Lovio, Multinational corporations in a local perspective – the case of Varkaus in Finland

• Foreign-owned companies are doing well in Finland (profitability; management; R&D?)

• Varkaus: small industrial city, dominated by Ahlström (pulp&paper); 1985-2002 all units sold to international companies (S; DK; USA; A; CAN)

• Today in particular Honeywell active in Varkaus: originally wanted to place own product – but not successful. Instead: locally embedded and customized know-how turned out to be more productive and attractive

• Message: in favourable circumstances local business units may have some power vis-à-vis MNCs – at least with focus on customer-driven R&D

• Open questions: What kind of cultural problems envisaged by Honeywell? Differing management styles? Role of technology? Given strong local capabilities – to be complemented by national R&D policies (in pulp&paper and new, advanced technologies)?

Dermot O'Doherty, From technology acquisition and absorption to international R&D strategies – the Ireland case

• Ireland's economy doubled in size in a decade: in 1990s very strong FDI in software (also pharmaceuticals and medical devices) because of skilled workforce, low taxes

• But: success based mainly on import of advanced technologies from overseas• Response: need to shift to a "knowledge economy"/system of innovation: HEI

and public R&D to be resourced strongly• Government's RTDI strategy accordingly aiming at indigenous knowledge

creation and competitiveness; variety of policy initiatives launched• Open questions: Public and private sector's spending sufficient? Size of

domestic economy sufficient? Attention to medium-tech industries?

Moshin U. Khan, India's R&D policy and growth of software industry in comparison with China

• India: after a long period of tight regulation and protection; relaxation of regulation since the late 1980s (reduction of "public sector" industries; abolished licensing obligation and restrictions on mergers, take-over …; less protection of SME; etc)

• Result: strong FDI in electronics and software industry; influx of MNC; e.g. IT industry added 100,000 new jobs 2003/4; many new software companies created

• Reasons: High quality of Indian production; supportive regulatory framework; (low labour cost?)

• China: economic reforms started earlier; strong focus on IT hardware industries

• China's software industry suffering from small company size; only medium quality; "cultural confusion"

• Conclusion: Need for strong resource exploitation capabilities (human resource; learning; …); managerial capabilities (interface R&D and production; joint R&D; …)

• Open questions: Policies for indigenous sustainable growth? (education, skills, domestic research base, local demand, …)

Staffan Laestadius; Vicky Long, The relocation of ICT R&D activities

• Conventional wisdom: "Tigers" grow fast but don't catch up with leading economies; MNCs keep strategic R&D at home

• But empirical research shows: Chinese companies are rapidly becoming strong in high-end ICT based on R&D – not only domestically but increasingly in home countries of MNCs!

• Result: global convergence of knowledge formation, favoured by mobility of ICT knowledge!

• Open questions: Supporting the main hypothesis means a methodological challenge! Can a country like China with authoritarian/technocratic public policy develop and sustain favourable, learning-oriented frame conditions and institutions – when becoming a developing consumer society, striving for individualism …?

Lessons

• "Local"? (ranging from regional to national level)• FDI as (one) important factor of "local" growth• Medium-tech level, FDI targeting at local or regional markets …• High technology level: exploitation of cheap high-level skills in R&D and/or

production …• [Very advanced technology level: FDI striving to build on high level of local

knowledge]• "Local" factors attracting FDI: favourable national regulation; attractive skills of

local labour;• How to sustain such growth? Indigenous knowledge creation as a base for

long-term attractiveness and competitiveness …• Development of HEI, domestic science and technology, capable production

labour force, "systemic" managerial capabilities, …• Stimulation of local demand …• Challenge for public innovation-oriented policy! Systemic perspective?

Sectoral scope? Institutions (HEI, research, regulatory bodies, ministries, local authorities, …) both reliable and learning-oriented and flexible?

• In China some signs of upcoming dramatic changes in global knowledge regimes (trend: Eu over China; US over Eu; J over US; Asia over rest?)