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Fabrice Hatem, AFIIOECD Meeting
16/17th of november, 2006
Location of R&D centres in Europe : a new kind of competition between host
countries
© AFII 20052, avenue Vélasquez75008 Paris
Summary
A new kind of market : The location of R&D centres in Europe
The demand side : home countries and industries
The supply side : competition between host countries
© AFII 20052, avenue Vélasquez75008 Paris
Location of business support functions :
a major stake for host territories
The firms’ activity relies on various functions : not only production, but also logistics, R&D, administrative services, etc.
Transnational corporations organise their international network of sites in order to capture the specific advantages of various host regions
This strategy regards all the business functions, which consequently become « internationaly mobile »
There is thus a growing competition between host territories for the location of those functions
© AFII 20052, avenue Vélasquez75008 Paris
The trend to internationalisation of R&D activities creates a « market » for the location
of R&D centers The internationalization of R&D is motivated by three driving
forces : access to scientific ressources (fundamental research), access to technico-industrial skills (development of new products), access to local market (product adaptation)
It can take various shapes : alliances, research contracts and outsourcing, acquisition of foreign companies…
But also greenfield projets for the creation/extension of R&D centers abroad…
.. This resulting in the apparition of a « market » for the location of R&D centers, especially in Europe
© AFII 20052, avenue Vélasquez75008 Paris
A measurement tool : the invest in France agency « European investment observatory »
The traditional FDI statistics are not well adapted to the measurement of greenfield investment projects. Thus, new economic intelligence tools are being developped to measure those projects. Ex : Ernst/Young EIM, IBM/PLI, Locomonitor, AFII observatories
Method : census of mobile international investment projects based on various sources (WEB, press, etc.) « Mobiles » projects are those giving way to a competition between various potential home countries. They are generaly related to the production of an internationaly tradable good or service.
Each project is described by about fifteen parameters (host and home country, industry, job created, amount invested, business function, etc.).
Scope : Europe (+ Mediterannean countries through the Anima/Mipo spillover data base). Data collected since 2002 till.. yesterday.
© AFII 20052, avenue Vélasquez75008 Paris
A interesting market for developped countries despite a relatively limited size
limited size : 5,4 % of projects, 3,9 % of jobs between 2002 and 2005, less than 10 000 jobs per year in Europe
The average size of projects is lower than that of factories
But strong structuring impact on the host country : innovation, hiring of highly qualified manpower, high added value per capita…
The competition of emerging countries is less intense than in manufacturing activities
This market is thus very interesting for developed countries
© AFII 20052, avenue Vélasquez75008 Paris
R&D centers : between 130 and 140 international projects yearly in Europe, sharp
rise in 2005
Number of international projects in R&D centers in Europe, 2002-2005
Source : AFII
0
20
40
60
80
100
120
140
160
180
200
2002 2003 2004 2005
Germanic countries & Sw.
Britannic Islands
France
Southern Europe
Northern Europe
Benelux
Hung, Cz, Poland
Other Eastern Europe
© AFII 20052, avenue Vélasquez75008 Paris
A quantitatively limited market : 5,4 % of projects, 3,9 % of jobs
Source : AFII
Breakdown of projects by function,2002-2005
Breakdown of jobs created by function,2002-2005
31%
5%
2%
8%9%
37%
8% 0%
Repres. Offices
R&D Centers
Call Centers
Logistics
Services to customer
Production
HQ, Internal services
Waste management
1% 4%6%
7%
6%
71%
5% 0%
Repres. Offices
R&D Centers
Call Centers
Logistics
Services to customer
Production
HQ, Internal services
Waste management
© AFII 20052, avenue Vélasquez75008 Paris
Small average size of R&D projects
Source : AFII
Taille moyenne des projets en emplois, 2002-2005Average size of projects by function, 2002-2005
0
50
100
150
200
250
Repres. Off ice R&D Center Total Services HQ andinternal
services
Services tocustomer
Logistics Total Call Centers Production
© AFII 20052, avenue Vélasquez75008 Paris
Main R&D projects in Europe 2002-2005 (more than 300 jobs)
Year Company Jobs Home country Host country Opération Industry
2002STMicroelectronics; Philips ; Motorola 984 U.S. France Creation Electr., Electron. Equipment
2002 Abbott Laboratories 700 U.S. Irland Creation Pharmaceuticals, cosmetics
2005 Samsung Corporation 600 South Korea Poland Extension Software
2003 Faurecia 550 France Germany Creation Automotive
2002 General Electric 520 U.S. Hungary Creation Pharmaceuticals, cosmetics
2004 Siemens 500 Germany Portugal Creation Software
2005 Inverness Medical Innovations 500 U.S. United Kingdom Creation Biotechnologies
2005 Delphi Corp. 500 U.S. Poland Creation Automotive
2005 Motoraola inc . 500 U.S. Germany Extension Electr.components
2005 IBM corp. 500 U.S. Poland Creation Software
2003 Honeywell 400 U.S. Tch. Rep. Creation Other Transport. Mat.
2005 Sun Microsystems Inc. 400 U.S. Tch. Rep. Creation Software
2005 Volkswagen AG 370 Germany Tch. Rep. Extension Automotive
2002 Dow 350 U.S. Switzerland Creation Chemicals & plastics
2005 Tata Consultancy Services 350 India Germany Creation Software
2005 General Motors Corp. 350 U.S. Germany Creation Automotive
2003 GlaxoSmithKline Biologicals 300 U.K. Belgium Extension Pharmaceuticals, cosmetics
Source : AFII
© AFII 20052, avenue Vélasquez75008 Paris
Strong concentration on some industries
Main industries : software, electric and electronic equipements, automotive, health products, electronic components, biotechnologies
Those six industries alone account for more than 75 % of projects and job creation
© AFII 20052, avenue Vélasquez75008 Paris
A high concentration on some industries, for projects…
Source : AFII
Breakdown of projects by industries, 2002-2005
22%
18%
13%13%
8%
5%
4%
3%
2%2%
2%2%2% 4%
Softw ares
Electric & electronic equipement
Pharmaceuticals
Automotive
Electronic components
Biotechnologies
Chemicals & plastics
Agrifood
Machines & mecan. equipments
Other transport equipements
Other services to business
Household electronics
Telecom & Internet operators
Others
© AFII 20052, avenue Vélasquez75008 Paris
… as well as for jobs
Source : AFII
Breakdown of job created in R&D centers in Europe by industry, 2002-2005
23%
21%
17%
15%
6%
4%
3%
3%
2%
2%
4%
Software
Automotive
Pharmaceuticals
Electric & electronic equipement
Electronic components
Other transport equipements
Agrifood
Chemicals & plastics
Biotechnologies
Household electronics
Others
© AFII 20052, avenue Vélasquez75008 Paris
Important share of anglo-saxon firms in R&D projects in Europe
Large share of US and UK companies in projects. Why?
Important role of high tech industries in the home countries (US, UK)
The globalisation of R&D involves locations outside the home continent of the company (Europe for US firms, US for European companies) for fundamental research as well as for adaptation centers
In Europe, no strong need to create adaptation centres in neighbouring countries of the home country of the company
Nevertheless, European companies amount for more than 40 % of international jobs creation in R&D centers in Europe
© AFII 20052, avenue Vélasquez75008 Paris
International investment R&D centers: key-role of north-american investors, followed by west-
europeans, in projects….
International projects in R&D by home region, 2002-2005
Source : AFII
47%
1%6%3%0%3%3%
7%
7%
8%
1%
14%North America
Others
Other Asia
Benelux
Eastern Europe
Northern Europe
Southern Europe
France
Britain Islands
Japan
Océania
Germanic Countries & Sw.
© AFII 20052, avenue Vélasquez75008 Paris
… as well as for jobs
Source : AFII
International jobs in R&D centers by home region, 2002-2005
54%
0%5%
3%0%
3%1%
9%
5%
3%0%
17%
North America
Others
Other Asia
Benelux
Eastern Europe
Northern Europe
Southern Europe
France
Britain Islands
Japan
Océania
Germanic Countries & Sw.
© AFII 20052, avenue Vélasquez75008 Paris
R&D : the breakthrough of east-european countries
Western European countries provide the best scientific clusters (for the attraction of fundamental research centers) and offer large-size markets (for the attraction of adaptation centers)
Their market share thus remain dominant (Germany, UK, France), especially for fundamental R&D centers
But East European countries offer a high-quality manpower at low costs
Their market share thus is quickly increasing, especially for global development centers (Cz. Rep. Poland, Hungary)
The average size of projects in terms of jobs is much larger in eastern- european countries
© AFII 20052, avenue Vélasquez75008 Paris
Host countries : domination of western Europe...
Source : AFII
Job created and international projects in R&D by host region 2002-2005
0%
20%
40%
60%
80%
100%
Projects Jobs
Germanic countries & Sw .
Britannic Islands
France
Southern Europe
Northern Europe
Benelux
Hung, Cz, Poland
Other Eastern Europe
© AFII 20052, avenue Vélasquez75008 Paris
But the market share of east-european countries is increasing
Job created in R&D centers projects in Europe 2002-2005
Source : AFII
0%
20%
40%
60%
80%
100%
2002 2003 2004 2005
West
Est
0%
20%
40%
60%
80%
100%
2002 2003 2004 2005
West
EstProjects in R&D centers in
Europe 2002-2005
© AFII 20052, avenue Vélasquez75008 Paris
The average size of projects is larger in east-european countries
Source : AFII
Average size of projects by host region 2002-2005
0
50
100
150
200
Hung., CZ,Poland
Geman.Countries,
Sw.
Benelux Total SoutherEurope
Brit. Islands France OtherEasternEurope
NorthernEurope
© AFII 20052, avenue Vélasquez75008 Paris
East-european countries are attractive for global development centers
Source : Sachwald, AFII meeting on R&D localization strategies in Europe, oct.2006
© AFII 20052, avenue Vélasquez75008 Paris
Merci pour votre attentionMerci pour votre attentionThank you for your
attention
fabrice.hatem@afii.fr
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