Globalization of Corporate R&D - actor network 1

1. Globalization of Corporate R&D - actor network 1 • Actors - transnational corporations (TNCs), home and host countries. • Degree of globalization - depends on the type and cost of complementary knowledge available. • Degree of integration - the greater the degree of complementary knowledge available in a host country, the greater the integration. • The greater the degree of complementarity between home country and host country, the greater will be the degrees of globalization and integration (Reddy, 2000).

2. Globalization of R&D - actor network (Reddy, 2000) Transnational Corporation degree of globalization degree of integration R&D Home Country Host Country degree of complementarity

3. 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 (Reddy and Sigurdson, 1994).

4. Corporate R&D - prior to the 1960s Home Country-based R&D Demand side forces: - need for coordination between manufacturing, R&D, finance & marketing, - R&D scale economies. Supply-side forces - sophisticated and advanced home markets, - technologically advanced home economies. (Reddy, 2000)

5. Corporate R&D in the 1960s • Demand side forces: • need for coordination between manufacturing, R&D, finance & marketing • R&D scale economies - Supply side forces: -sophisticated & advanced home markets -technologically advanced home economies Corporate R&D in Home Countries

6. Evolution of Globalization of R&D - 1960s The beginnings of internationalization of R&D - first wave TTUs (adaptation R&D) - Demand side forces: - need to tap markets abroad, - technology transfer for cost effective production. Supply-side forces - large local markets, - proximity to production facilities. Category of industries - mechanical, electrical, and engineering, including automobiles. Host country effects: products and processes better suited to local conditions, Technical training of local staff. (Reddy, 2000)

7. Evolution of Globalization of R&D - 1970s The growth of internationalization of R&D - second wave ITUs Demand side forces: - to enhance market share in local markets abroad, - need to understand sensitivity of local consumer, - host country government policies. Supply-side forces - large and protected markets with unique characteristics, - proximity to market and production. Category of Industries - branded packaged consumer goods, chemicals and allied products. Host country effects: products better suited to local needs and tastes, better use of local materials, potential links to local innovation system.

8. Internationalization of corporate R&D in the 1970s Demand -side forces: -need for tapping markets abroad -technology transfer abroad for cost -effective production Supply -side forces: -large local markets -proximity to production facilities - - Host country effects: -products & processes better suited to local conditions -technical training of local staff Corporate R&D Internationalization of production & R&D to adapt products and processes to local conditions (TTU) Demand -side forces: -to enhance market share in local market abroad -host government’s policies Supply -side forces: -large and protected markets with unique characteristics -proximity to market & production Host country effects: -products better suited to local needs and tastes -better use of local materials -potential linkages to local S&T system Internationalization of R&D to develop products exclusively for the local market abroad (ITU)

9. 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, - increasing global competition, - 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

10. Evolution of Globalization of R&D - 1980s (2) From internationalization to globalization of R&D - third wave GTUs/RTUs/CTUs Demand side forces: - need for monitoring and learning the new trends worldwide, - need for multi-sourcing of technology inputs. Supply-side forces - 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. Host country effects: strong links with local innovation system widening its capabilities, international specialization of S&T capabilities. (Reddy, 2000)

11. Globalization of Corporate R&D : Since the 1980s Supply-side forces : External forces in business environment : - improved information and communicationtechnologies - liberalization of economies worldwide - homogenization of consumer preferences worldwide - flexibility of new technologies that allows delinking of manufacturing and R&D - emergence of regional markets - increasing global competition - comparative advantages of host countries - science-base of new technologies Demand-side forces : Internal forces : - need for monitoring & learning the new trends worldwide - rationalization of TNCs' operations leading to specialization of affiliates - need for multi-sourcing of technology inputs Globalization of R&D into industrialized countries to develop products for the regional/global markets and to carry out research in generic technologies (RTU/GTU and CTU)

12. Evolution of Globalization of R&D - 1990s Evolving patterns globalization of R&D - fourth wave GTUs/RTUs/CTUs (location of R&D outside the industrialized world) Demand side forces: - shortage of R&D personnel in industrialized world, - increasing demand for R&D personnel, - increasing R&D costs. Supply-side forces - availability of R&D personnel in some developing countries, - low-level of wages of personnel, - 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. Host country effects: diffusion of knowledge into local innovation system through strong links with TNCs global R&D network, inculcation of commercial culture among scientists, technology transfer and emergence of spin-off firms.

13. Globalization of Corporate R&D : Since the 1990s Globalization of R&D into industrialized countries to develop products for the regional/global markets and to carry out research in generic technologies (RTU/GTU and CTU) Demand-side forces: -shortage of R&D personnel in industrialized countries -increasing demand for R&D personnel -increasing R&D costs Host country effects: -strong linkages with the local S&T system widening its capabilities -international specialization of S&T capabilities Supply-side forces: -Availability of R&D personnel in some developing countries -low-level of wages of personnel -divisibility of R&D into core & non-core activities -changes in policy regimes, including IPR, in host countries Globalization of some of the RTU/GTU and CTU types of R&D into some developing countries Host country effects: -diffusion of knowledge into local S&T system through strong linkages with TNC’s global R&D network -inculcation of commercial culture among the scientific community -technology transfer and emergence of spin-off firms