Policies to attract and benefit
from globalization of R&D
Prasada Reddy
Research Policy Institute
Lund University
Sweden
Category of R&D units
• Technology transfer units (TTUs) - to facilitate transfer of parent’s
technology to affiliate and local technical services;
• Indigenous technology units (ITUs) - to develop new products for the
local markets, drawing on local technology;
• Global technology units (GTUs) - to develop new products and
processes for major world markets
• Corporate technology units (CTUs) - to generate basic technology of a
long term nature for corporate use (Ronstadt, 1977);
• Regional technology units (RTU) - to develop products for the regional
markets.
Corporate R&D - prior to the 1960s
Home Country-based R&D
- need for coordination between manufacturing, R&D,
finance & marketing,
- R&D scale economies.
- sophisticated and advanced home markets,
- technologically advanced home economies.
Evolution of Globalization of R&D - 1960s
The beginnings of internationalization of R&D - first wave
TTUs (adaptation R&D) - need to tap markets abroad,
- technology transfer for cost effective production.
- large local markets,
- proximity to production facilities.
Category of industries - mechanical, electrical, and
engineering, including automobiles.
Evolution of Globalization of R&D - 1970s
The growth of internationalization of R&D - second wave
ITUs
- to enhance market share in local markets abroad,
- need to understand sensitivity of local consumer,
- host country government policies.
- large and protected markets with unique characteristics,
- proximity to market and production.
Category of Industries - branded packaged consumer goods,
chemicals and allied products.
Evolution of Globalization of R&D - 1980s
(1)
External forces in the business environment:
- liberalization of economies worldwide,
- homogenization of consumer preferences worldwide,
- emergence of regional markets,
- science-base of new technologies and multidisciplinary
innovations.
Internal forces:
- rationalization of TNCs’ operations, leading to
specialization of affiliates,
- world and regional product mandates for affiliates
Evolution of Globalization of R&D - 1980s
(2)
From internationalization to globalization of R&D - third
wave GTUs/RTUs/CTUs
- need for monitoring and learning the new trends
worldwide,
- need for multi-sourcing of technology inputs.
- improved information and communication technologies,
- flexibility of new technologies allows de-linking of
manufacturing & R&D,
- comparative advantages of host countries.
Category of Industries - microelectronics, pharmaceuticals,
biotechnology and new materials.
Evolution of Globalization of R&D - 1990s
Evolving patterns globalization of R&D - fourth wave
(location of R&D outside the industrialized world)
- shortage of R&D personnel in industrialized world,
- increasing R&D costs.
- availability of R&D personnel at lower costs in some
developing countries,
- divisibility of R&D into core and non-core activities,
- changes in policy regimes, including intellectual property
rights in host countries.
Category of Industries - microelectronics, pharmaceuticals,
biotechnology and new materials.
National Policies for attracting global R&D 1
• General Agreement on Trade in Services
(GATS) - R&D as a service (trade affiliate
to parent)
• R&D as a Performance Requirement
- International framework, TRIMs, PTIAs
& BITs
- Incentives vs. subsidies (SCM Agreement)
National Policies for attracting global R&D 2
• Performance requirements - implications for type of R&D.
• Standards & Regulations (depends on the size of the
market).
- technology monitoring units
Supply-side:
Strengthen national innovation system (domestic R&D, startups)
Driving force - access to skills
Access to national research programs
Regional Policies for global R&D
• Availability of human resources (numbers) in
required specializations.
• Programs in local universities.
• Science Parks (thematic).
• Focus on areas of competitive strength
• Cluster development
• Incubators
• Regional Investment Promotion Agency