Strategic R & D by TNCs in Developing Countries TNCs have had long units

1. International BusinessDr. Aravind Banakar9901366442 – 9902787224

2. International Business CASE (20 Marks) Strategic R & D by TNCs in Developing Countries TNCs have had long units in developing host countries for adapting products and processes to the local conditions, and in a few cases, to products for local markets. Since the min1980s, however, they have also started locating strategic R & D centres in some developing countries, for developing generic technologies and products for regional or global markets. The main incentives for this are : (a) access to highly qualified scientists as shortages of research personnel emerge in certain fields in industrialised countries, (b) Cost differentials in research salaries between developing and industrialized countries, and (c) rationalisation of operations, assigning particular affiliates the responsibility for developing, manufacturing, and marketing particular products worldwide.

3. The new trends are more visible in industries dealing with new technologies, such as microelectronics, biotechnology, and new materials. In these technologies, the location of R & D can be geographically delinked more easily from the location of manufacturing. It is also possible to separate R & D in core activities from that in noncore activities. Consequently, countries like India, Israel, Singapore, Malaysia or Brazil serve TNCs as good locations for strategic R & D. For instance, Sony Corporation of Japan has around nine R & D units in Asian developing countries. It has three units in Singapore conducting R & D on core components such as optical data shortage devices, integrated chip design for audio products and CDROM drives, and multimedia and microchip software. It has three units in Malaysia working on video design, derivative models and circuit blocks for new TV chases, radio cassettes, discman and hifi receiver designs. It has one unit in Republic of Korea focusing on the design of compact discs, radio cassettes, tape recorders, and car stereos. It has one in Taiwan designing and developing video taperecorders, minidisk players, video CDs, and duplicators.

4. Finally, it has one unit in Indonesia focusing on the design of audio products. Such units often work in collaboration with science and technology institutes in the host country. For instance, Daimler Benz has established such a unit in Bangalore, India, in collaboration with the Indian Institute of Science to work on projects related to its vehicles and avionics business. Current work includes interface design of avionics landing systems and smart GPS sensors for use by the group’s business worldwide. Source: World Investment Report 1999.

5. Answer the following question. Q1. Explain why MNCs have located R & D centres in developing countries? Q2. Mention the areas where R & D activities can easily be decentralized

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