Strategic or Tactical? Foreign Research and Development in Developing Countries, a Case Study of China

Abstract

This study oflers a new framework of classifying research and development (R&D) at multinational corporations (MNCs): strategic vs. tactical. Strategic R&D facilities are serving not only domestic markets, but also the global markets; they are involved not only in development, but also in original research; they are working not only on short-term projects, but also on projects that are crucial for MNCs' future in the long-term. Mainstream theories have limited possible locations of strategic R&D facilities to developed countries where markets are most demanding and R&D infrastructures are readily available. It has been assumed that MNC R&D facilities in developing countries are only marginally important to their parent companies' iongterm fortune, if such facilities exist at all. It is argued that such a point of view is too simplistic. Large and fast growing developing countries, such as China and India, are becoming increasingly attractive locations for strategic R&D facilities from MNCs, particularly in the new technological fields. In this process, their large and growing market demands are particularly crucial in understanding the existence of strategic R&D in developing countries. The above arguments are examined and supported through detailed examinatioiz of four foreign research labs in Beijing.

Foreign research and development in China: a sectoral approach

“…The decentralisation of R&D is further enabled and facilitated by advances in telecommunication technologies (Howells, 1990(Howells, , 1995. The few studies on foreign R&D in developing countries (Gassmann and Han, 2004;GEI, 2001;Reddy, 1997;Reddy and Sigurdson, 1997;Sun, 2003;Sun et al, 2006;Wen, 2007a, 2007b;von Zedtwitz, 2004;Walsh, 2003;Xue et al, 2001) have confirmed the findings from the general studies on foreign R&D, and factors from both the demand side and the supply side are important in explaining the recent surge of R&D performed by foreign companies. In the case of China, its growing domestic market and increasing roles as a 'world's factory', as well as its large pool of well-educated labour have become a huge attraction to foreign companies.…”

“…Despite its increasing importance, foreign R&D in developing countries only recently has received some attention (Gassmann and Han, 2004;GEI, 2001;Reddy, 1997;Reddy and Sigurdson, 1997;Sun, 2003;Sun et al, 2006Sun et al, , 2008Wen, 2007a, 2007b;von Zedtwitz, 2004;Walsh, 2007;Xue et al, 2001). This study wishes to contribute to the field of R&D globalisation in general and foreign R&D in China in particular on a few fronts.…”

“…Many existing studies on foreign R&D in China have largely relied on a small number of ad hoc interviews (Sun, 2003;Sun et al, 2006;Wen, 2007a, 2007b;von Zedtwitz, 2004). However, basic issues such as how much foreign R&D has been invested in China and how they are distributed are not clear.…”

The Localization Choice of Multinational Firms’ R&D Centers: A Survey in the Piedmont Area

“…Y. Sun (2003) indicates an alternative approach based on two different categories: strategic or tactical according to their relevance. Strategic R&D gives more importance and relevance to the MNE global markets and it has a long-term aim.…”

“…Multinational Enterprises (MNE) are increasingly adopting a global strategy for their activities of research and development (R&D); consequently, academics have shown growing interest in this phenomenon since the 1990s.The most debated areas of interest include the classification of the ac-tivities carried out abroad (Kuemmerle, 1999;Y. Sun, 2003), the choice of the location of R&D centers (Dougherty, Inklaar, McGuckin, & Van Ark, 2003;Belderbos, Lykogianni, & Veugelers, 2008), the organization of R&D networks all around the world (Alfaro & Chen, 2009) and the MNE strategies to run a global R&D process (Arora, Fosfuri, & Gambardella, 2001;Chesbrough, 2003;Ernst, 2005).…”