Foreign research and development in China: a sectoral approach

Abstract

This study systematically examines foreign R&D in China's manufacturing industries, using the most recent census data published by China's State Council. It reveals that foreign firms are committing less R&D resource than China's domestic enterprises. Foreign R&D activities are far more active in high-tech industries than in labour-intensive industries. This study also demonstrates that China's dynamic domestic market and export, as well as its large pool of well-educated labour are the major drivers for foreign R&D, while the technology drive is not significant yet. Finally, the result shows that foreign firms are less likely to conduct R&D in sectors where they possess strong advantages. Such results suggest that the Chinese governments and domestic firms should focus on building up indigenous innovative capabilities in order to attract more foreign R&D: the majority of foreign firms will invest in R&D when they feel the competition from domestic firms.

Influence of technological innovation capabilities on product competitiveness

“…Application R&D also significantly affects new product development of Chinese manufacturers. The result is supported by Sun (2010), who indicated that Chinese domestic enterprises prefer to application development. The market demand and the availability of quality labor are the major drivers of application development in China.…”

“…Application R&D is different from fundamental research, the latter usually requires large amount of resources and undertake greater risks. Therefore, Chinese domestic enterprises prefer to the application development (Sun, 2010). Furthermore, the market demand and high-quality labors are major drivers of application development in China.…”

U.S. R&D captive offshoring in Brazil, China and India, 1997-2014

“…A research based on the 276 international R&D alliances established in China show that only 27% are researchoriented (Li & Zhong, 2003). Moreover, a recent econometric study based on data from the China Economic Census Yearbook shows that the majority of foreign R&D investments in China is largely involved in adaptive development rather than innovative research (Sun, 2010).…”