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LIANG Zheng, Associate Professor, CISTP, Tsinghua University. Presentation to the UK-China Innovation Workshop for Sustainable and Equitable Development, Tsinghua University, 19 March 2010, co-organised by China Institute for Science and Technology Policy (CISTP) at Tsinghua University and the STEPS Centre. http://anewmanifesto.org/news/china-workshop-presentationschina-workshop-presentations/
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Comparison of China and India in R&D Globalization
UK-China Innovation Workshop for Sustainable and Equitable Development
March 19, 2010, Tsinghua University
Dr. Liang Zheng China Institute for Science&Technology Policy (CISTP) School of Public Policy and Management (SPPM) Tsinghua Universtiy [email protected]
Outline
Globalization of R&D: New Trends FDI Inflows and Outflows R&D Inflows R&D Outputs in Global OFDI and R&D Outflows Conclusions
I. Globalization of R&D: New Trends
Top 15 locations for R&D by the world’s largest R&D spenders in the UNCTAD survey, 2004-2005
(per cent of respondents)
Source: World Investment Report 2005
Most R&D is performed in industrialized countries, but a number of developing ones now also host MNC R&D.
More than half of the top R&D spenders already have R&D facilities in China, India or Singapore.
8.8
8.8
11.8
13.2
13.2
14.7
17.6
19.1
19.1
25.0
29.4
35.3
35.3
47.1
58.8
0 10 20 30 40 50 60
Switzerland
Sweden
Belgium
Spain
Brazil
Italy
Singapore
Germany
Canada
India
Japan
France
China
United Kingdom
United States
Among the developing world, Asia is the preferred destination. Some examples:
The share of developing Asia in United States MNCs' overseas R&D rose from 3% in 1994 to 10% in 2002.
More than half of the top R&D spenders have R&D activities in China, India or Singapore.
More than 700 foreign-owned R&D centres in China(2005).
More than 100 MNCs conduct R&D in India and in Singapore.
Developing Asia now accounts for 30% of global semiconductor design.
Source: World Investment Report 2005
Most attractive prospective R&D locations in the UNCTAD survey, 2005-
2009(per cent of respondents)
Source: World Investment Report 2005
Further shift towards some developing countries, mainly in Asia, and in Russia is expected.
Few respondents plan to expand R&D in Latin America or Africa.
2.9
2.9
2.9
2.9
2.9
4.4
4.4
4.4
4.4
5.9
8.8
10.3
13.2
14.7
29.4
41.2
61.8
0 10 20 30 40 50 60
Thailand
Republic of Korea
Malaysia
Italy
Belgium
Taiwan Province of China
Singapore
Canada
The Netherlands
Germany
France
Russian Federation
United Kingdom
Japan
India
United States
China
China and India become the“hot-spot”
Source: Booz & Company analysis (2008)
Ⅱ. FDI Inflows and Outflows
0
10
20
30
40
50
60
70
1990 1995 2000 2005
FDI Inflows to China (billion USD)
FDI Stocks in selected countries
Source: MOFCOM FDI Statistics, OECD
0 20 40 60
UK
Canada
China
France
Germany
US
Korea
India
Japan
Outward
Inward
% of GDP
FDI from and to India, 2000-01 to 2007-08 (in Millions of US $)
Source: Sunil, 2009
Ⅲ. R&D InflowsThe Growth of Foreign R&D Centers in India and China
Year Number
1985 3
1995 19
1999 49
2000 64
2005 145
2006-07 200*
Growth of Foreign R&D Centres in India Growth of Foreign R&D Centres in China
Source: TIFAC Survey and CSSP/JNU Data base.
Source: MOFCOM Statistics
Year Number
2001 124
2002 100
2003 400
2004 700
2005.8 750
2006.10 980
2007 1160
2008 1200
2009.7 1250
The location distributions of foreign R&D centers in India and China
Location of Foreign R&D Centres in India
The regional distribution of the R&D organizations settled by Business1000 MNCs in China ( 2004 )
Source: TIFAC Survey (2006).
Source: Xue and Liang(2008)
Region No of Centres
Bangalore 45
Hyderabad 7
Chennai 4
NCR (Delhi) 22
Pune-Mumbai 17
Other regions 5
Total 100
Regions
Total OrganizationsAutonomous R&D
CentersR&D Units
Number Percent Number Percent Number Percent
Beijing 65 39.2% 51 47.7% 14 23.7%
Shanghai 49 29.5% 35 32.7% 14 23.7%
Tianjin 8 4.8% 2 1.9% 6 10.2%
Guangdong 15 9.0% 8 7.5% 7 11.9%
Jiangsu 14 8.4% 5 4.7% 9 15.3%
Other regions 15 9.0% 6 5.6% 9 15.3%
Total 166 100% 107 100% 59 100%
The Industry distributions of foreign R&D centers in India and China
Major R&D Segment (Target areas of application) Number of Companies Share(%)
Software development (software applications for different sectors, networking tools, multi-media applications, CAD/CAM tools, multimedia tools)
34 25.8
Hardware-computer/telecommunications and embedded tools (chip designing-aerospace/mobile, optical switching systems, broad band system)
19 14.4
Automotive sector (vehicle and component design, embedded control system, safety systems)
14 10.6
Pharmaceuticals (formulations, intermediaries, vaccination, drug discovery)
13 9.8
Agro-chemicals (insecticide, hybrid seeds) 11 8.3
Chemical (coating, basic inorganic chemicals, polymers and synthetic materials, tanning agents, textile chemical)
11 8.3
Consumer products 11 8.3
Engineering goods (Medical equipments, textile machinery, electrical test equipments, compressors, motors)
9 6.8
Biotechnology (Genomics, bio-informatics) 6 4.5
Food industry (fermentation, processed foods) 4 3.0
Total 132 100
Major R&D Segment of FDI Firms in India
Source: Based on TIFAC Survey (2006), Krishna and Bhattacharya,2007
The Industry distributions of foreign R&D centers in India and China R&D organisations set up by MNEs in China by industry, 2004
Industry Total organisations1 Autonomous R&D centres
R&D units
Number Share (%) Number Share (%) Number Share (%)
Software 37 17.2 26 24.3 4 6.8
Telecommunication 35 16.3 20 18.7 5 8.5
Semiconductors 19 8.8 15 14.0 0 0.0
Industrial equipment and components 30 14.0 5 4.7 16 27.1
Automobiles 17 7.9 7 6.5 5 8.5
Commodity chemicals 10 4.7 7 6.5 1 1.7
Biotechnology and drugs 18 8.4 6 5.6 9 15.3
Household electronics 13 6.0 6 5.6 3 5.1
Other IT products 14 6.5 5 4.7 8 13.6
Chemicals 9 4.2 4 3.7 3 5.1
Food and beverages 7 3.3 3 2.8 4 6.8
Industrial conglomerates 2 0.9 2 1.9 0 0.0
Others 4 1.9 1 0.9 1 1.7
Total 215 100 107 100 59 100
Source: Xue and Liang (2008)
Types of R&D Activity of TNC Centers in India
The types of foreign R&D centers in India and China
R&D Activity Type from TIFAC Survey
Pearce (2005) R&D Type Activity
Collaborative R&D Type
Number of TNC Centres (%)
Only Offshore R&D for In-house R&D (ie parent TNC R&D)
Support Laboratories
-
53 (47%)
R&D exports + Domestic Marketing
R&D exports + local manufacturing
Locally Integrated Laboratories
-do- -
23 (20%)
19 (16%)
Contract research - Collaborative R&D 20 (17%)
Total 115 [1](100%)
[1] Note: Actually 15 centres were involved in multiple types of activities and hence the figure escalates to 115 instead of 100.
Source: Krishna and Bhattacharya, 2007
Types of Foreign R&D Centers in Beijing
The types of foreign R&D centers in India and China
Cluster
1( N= 10)
2( N= 11)
3( N= 1)
4( N= 9)
FAC1( Knowledge Screen and Explore)
2.83(-) 3.52(+) 4.00(+) 4.11(+)
FAC2( Technology Adaption and Support)
4.15(+) 2.59(-) 1.00(-) 4.61(+)
FAC3( New Product Development) 3.15(+) 4.09(+) 1.00(-) 4.33(+)
TypesKnowledge Exploiting
Knowledge Generating
Knowledge Screening
Multi-type
Source: Liang et. al(2008)
Source : CISTP Survey(2004-2005)
Influence factors in attracting foreign R&D investments
The importance of different factors which have impacts on MNCs' R&D investing decision in China
3.86
4.29
2.86
2.29
2.86
2.71
2.71
2.14
2
012345
Acquirement of high quality human resources
Level of Chinese economy development, market scale and chances
Level of science and education development of China
Status of protection of knowledge right of China
Level and resources of technology of Chinese related industries
Chinese favorable policies attracting R&D investment
Level of infrastructures of China
W orking efficiency of government departments
Extent of being a native the R&D organization enjoys
ShanghaiBeijing
Drivers of Future R&D Sites
(figures in % in responses from 186 global firms)
Source : INSEAD Survey 2006
China India Brazil USA
Qualified Workers 12 25 21 17
Technology Cluster and Academic institutions
13 13 14 27
Low cost skill base 24 30 11 3
Proximity to production facilties
17 11 18 12
Others(business/markets)
34 21 36 41
Ⅳ. R&D Outputs in Global
Patents as representative indicators
Source: Sunil, 2009
Trends in patent applications by Indian inventors in the USPTO in comparison with BRICS (Number of patent applications)
Source: Sunil, 2009
Trends in patents granted to Indian inventors in the USPTO in comparison with those granted to BRICS (Number of patent granted)
Foreign R&D Centers (In India) Actively Involved in Patenting in USPTO: Patents Granted by USPTO
(1990-2006)
Organizations/ Industries 1990-94 1995-98 1999-02 2003-04 2005-06 Cumulative Texas Instruments Incorporated 1 13 28 34 64 140
International Business Machines Corporation - 1 16 37 52 106
General Electric Company - 2 24 19 56 101
STMicroelectronics Ltd. 1 11 35 47
Hoechst Aktiengesellschaft 21 7 3 - - 31
Hewlett Packard 3 13 8 24
GE Medical System Global 10 11 21
CISCO 4 16 20
Unilever Home & Personal Care - - 8 8 3 19
Cypress Semiconductor Corp. - 1 5 4 10
Analog Devices 2 1 2 5 10
Intel Corporation 4 - 4 8
Adobe Systems 1 1 1 4 7
Lucent Technologies 1 2 - 3 6
Monsanto Company 6 - - - - 6
Microsoft Corporation 3 3
Source: Krishna and Bhattacharya , 2007
Patent Activity of Select Firms and Organisations in USPTO (1990-2006)
Organizations/ Industries 1990-94 1995-98 1999-2002 2003-04 2005-06Cumulative
Patents
Council of Scientific & Industrial Research (CSIR)
29 71 278 272 248 898
Ranbaxy Laboratories Limited 7 9 23 20 19 78
Dr. Reddy's Research FoundationDr Reddy Labs
-3
37
321
15-
15-
6511
Dabur Research FoundationDabur India Ltd
-5
-5
156
101
92
3419
Indian Oil Corporation Limited - 2 16 7 6 31
Orchid Chemicals & Pharmaceuticals - - 2 11 5 18
Lupin Laboratories Limited - 7 4 1 4 16
Panacea Biotech Limited - 2 11 1 1 15
Indian Petrochemicals Corporation Limited
1 2 4 3 4 14
National Institute of Immunology 1 2 10 - - 13
Wockhard Limited 6 6 12
Aurobindo Pharma 2 3 4 9
Bicon India Limited 1 5 3 9
Source: Krishna and Bhattacharya, 2007
First-Named Assignee Accumulative Grants
INDIVIDUALLY OWNED PATENT 1033
HON HAI PRECISION IND. CO., LTD. 641
MICROSOFT CORPORATION 295
HONG FU JIN PRECISION INDUSTRY (SHENZHEN) CO., LTD. 205
FU ZHUN PRECISION INDUSTRIAL (SHENZHEN) CO., LTD. 109
HUAWEI TECHNOLOGIES CO., LTD. 103
TSINGHUA UNIVERSITY 101
CHINA PETROCHEMICAL DEVELOPMENT CORP. 79
INTEL CORPORATION 74
CHINA PETROLEUM AND CHEMICAL CORPORATION 65
SEMICONDUCTOR MANUFACTURING INTERNATIONAL(SHANGHAI) CORPORATION 62
SAE MAGNETICS (H.K.) LTD. 61
INTERNATIONAL BUSINESS MACHINES CORPORATION 49
SHENZHEN FUTAIHONG PRECISION INDUSTRIAL CO., LTD. 42
WINBOND ELECTRONICS CORP. 37
UNITED MICROELECTRONICS CORPORATION 27
ASIA OPTICAL CO., INC. 24
CHANGCHUN INSTITUTE OF APPLIED CHEMISTRY, CHINESE ACADEMY OF SCIENCES OF CHINA 23
Patents Granted by USPTO to Chinese inventors (till 2008)
Source :
USPTO Database
Ⅴ. OFDI and R&D Outflows
Indian Firm Target Firm Country Deal Value (Million $) Sector
Tata SteelTata SteelTata MotorsTata Tea
Corus GroupNatsteelDaewooTetley
UKSingaporeKoreaUSA
12000293118430
SteelSteelAutomotiveTea
Hindalco Hindalco
NovelisStraits Pty
CanadaAustralia
598256
SteelSteel
VideoconVideocon
Daewoo ElectronicsThomson SA
KoreaFrance
729290
ElectronicsElectronics
Dr Reddy Labs Betapharm Germany 597 Pharma
Suzlon Hansen Group Belgium 565 Energy
HPCL Kenya Petroleum Kenya 500 Oil and Gas
ONGC and Mittal Group
Sakhalin and other firms Russia, Sudan, Venezuela and African countries
30,000 Oil and Gas
Ranbaxy LabsRanbaxy Labs
Terapia SARPG(Aventis)
RomaniaFrance
32480
PharmaPharma
VSNL Teleglobe Canada 239 Telecom
Reliance Ind.Reliance Ind
Flag TelecomTrevira
BermudaGermany
21295
TelecomTelecom
Subex Systems Azure Systems UK 140 Telecom
Bharat ForgeBharat Forge
Carl DanSwedish Imatra Kilstra AB
GermanySweden
Na1300
ForgingAuto
Infosys 4 acquisitions Australia, USA Na Software
Wipro 7 acquisitions USA, UK, Austria, Portugal, Finland
250 Software
TCS 2 acquisitions Chile, Australia na Software
Patni Computers Cymbal USA 68 software
M&
A o
f To
p In
dia F
irms 2000
-2007
Source: Various websites – http://track.in/Tags/Business/category/mergers/; Wall Street Journal; http://ibef.org;
Selected M&A deals by Chinese firms, 2001-05
Source: Wu (2005), Boston Consulting Group (2006), see OECD , 2008
Chinese bidder Target foreign firm/unit Industry
Holly Group Philips Semiconductors, CDM hand-set reference design (United States), 2001
Telecommunications
TCL International Schneider Electronics AG (Germany), 2002 Electronics
TCL international Thomson SA, Television manufacturing unit (France), 2003 Electronics
BOE Technology Group
Hyundai display technology ( Korea), 2003 Electronics
Shanghai Auto Industry Corporation (SAIC)
Sangyong Motor (Korea), 2004 Automotive
Lenovo Group IBM, PC Division (United States), 2004 IT
Nanjing Automotive MG Rover Group (United Kingdom), 2005 Automotive
Selected overseas design and R&D labs of Chinese firms
Source: Various press reports, see OECD , 2008
Chinese firm Location Industry
Huawei R&D centres in Sweden (Stockholm), United States (Dallas, Silicon Valley), India (Bengalooru) and Russia (Moscow)
Telecommunications
ZTE R&D centres in Sweden (Stockholm), India (Bengalooru) Telecommunications
Glanz Group R&D centre in the United States (Silicon Valley) Electronics
Konka R&D centre in the United States (Silicon Valley) Electronics
Haier R&D centre in Germany, United States (South Carolina) and India, design centre in Boston
IT and electronics
Kelon Design centre in Japan Electronics
Foton Motor R&D centres in Japan, Germany and Chinese Taipei Automotive
Ⅵ. Conclusions
There are really similarities between India and China on their roles in globalization of R&D, which are more complementary than competitive
India is more skilled than China in integrating innovative resources globally, but China has huge potentials and learn quickly
The rising of China and India influence global industry composition and innovation governance.
…………
Thank you!
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