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Location of R&D centres in Europe : a new kind of competition between host countries

Location of R&D centres in Europe : a new kind of competition between host countries. Fabrice Hatem, AFII. OECD Meeting 16/17th of november, 2006. Summary. A new kind of market : The location of R&D centres in Europe The demand side : home countries and industries

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Location of R&D centres in Europe : a new kind of competition between host countries

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  1. Location of R&D centres in Europe : a new kind of competition between host countries Fabrice Hatem, AFII OECD Meeting 16/17th of november, 2006

  2. 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

  3. 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

  4. 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

  5. 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.

  6. 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

  7. 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

  8. A quantitatively limited market : 5,4 % of projects, 3,9 % of jobs Breakdown of projects by function, 2002-2005 Breakdown of jobs created by function, 2002-2005 Source : AFII

  9. Small average size of R&D projects Average size of projects by function, 2002-2005 Taille moyenne des projets en emplois, 2002-2005 Source : AFII

  10. Main R&D projects in Europe 2002-2005 (more than 300 jobs) Source : AFII

  11. 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

  12. A high concentration on some industries, for projects… Breakdown of projects by industries, 2002-2005 Source : AFII

  13. … as well as for jobs Breakdown of job created in R&D centers in Europe by industry, 2002-2005 Source : AFII

  14. 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

  15. 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

  16. … as well as for jobs International jobs in R&D centers by home region, 2002-2005 Source : AFII

  17. 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

  18. Host countries : domination of western Europe... Job created and international projects in R&D by host region 2002-2005 Source : AFII

  19. But the market share of east-european countries is increasing Job created in R&D centers projects in Europe 2002-2005 Projects in R&D centers in Europe 2002-2005 Source : AFII

  20. The average size of projects is larger in east-european countries Average size of projects by host region 2002-2005 Source : AFII

  21. East-european countries are attractive for global development centers Source : Sachwald, AFII meeting on R&D localization strategies in Europe, oct.2006

  22. Thank you for your attention fabrice.hatem@afii.fr Merci pour votre attention Merci pour votre attention

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