REPORT TO THE GOVERNMENT-UNIVERSITY-INDUSTRY RESEARCH ROUNDTABLE

HERE OR THERE ?

A SURVEY OF FACTORS IN MULTINATIONAL R&D LOCATION

Jerry Thursby, Emory University and

Marie Thursby, Georgia Institute of Technology and National Bureau of Economic Research

NATIONAL ACADEMY OF SCIENCES, NATIONAL ACADEMY OF ENGINEERING, AND INSTITUTE OF MEDICINE OF THE NATIONAL ACADEMIES

THE NATIONAL ACADEMIES PRESS

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Here or There? A Survey of Factors in Multinational R&D Location REPORT TO THE GOVERNMENT-UNIVERSITY-INDUSTRY RESEARCH ROUNDTABLE HERE OR THERE ? A SURVEY OF FACTORS IN MULTINATIONAL R&D LOCATION Jerry Thursby, Emory University and Marie Thursby, Georgia Institute of Technology and National Bureau of Economic Research NATIONAL ACADEMY OF SCIENCES, NATIONAL ACADEMY OF ENGINEERING, AND INSTITUTE OF MEDICINE OF THE NATIONAL ACADEMIES THE NATIONAL ACADEMIES PRESS Washington, D.C. www.nap.edu

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Here or There? A Survey of Factors in Multinational R&D Location THE NATIONAL ACADEMIES PRESS 500 Fifth Street, N.W. Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. This study was supported in part by Contract/Grant No. PGA-8769-04-001 between the National Academy of Sciences and the Georgia Tech Research Corporation. This work/research was also funded by the Ewing Marion Kauffman Foundation. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the authors and do not necessarily reflect the views of the Kauffman Foundation, the Government-University-Industry Research Roundtable, or the National Academies. International Standard Book Number 0-309-10184-0 Additional copies of this report are available from the National Academies Press, 500 Fifth Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu. Copyright 2006 by the National Academy of Sciences. All rights reserved. Printed in the United States of America

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Here or There? A Survey of Factors in Multinational R&D Location THE NATIONAL ACADEMIES Advisers to the Nation on Science, Engineering, and Medicine The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Wm. A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Wm. A. Wulf are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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Here or There? A Survey of Factors in Multinational R&D Location GOVERNMENT-UNIVERSITY-INDUSTRY RESEARCH ROUNDTABLE COUNCIL Marye Anne Fox, Co-Chair, Chancellor, University of California, San Diego Lydia Thomas, Co-Chair, President and Chief Executive Officer, Mitretek Systems, Inc. Norris Alderson, ex officio, Associate Commissioner for Science, Food and Drug Administration Gen. Sam Armstrong (retired), Former Senior Advisor to the Administrator, National Aeronautics and Space Administration Wanda Austin, Senior Vice President, National Systems Group, Aerospace Corporation Arden Bement, ex officio, Director, National Science Foundation Ralph Cicerone, ex officio, President, National Academy of Sciences Harvey Fineberg, ex officio, President, Institute of Medicine Robert Gates, President, Texas A&M University Joseph Jen, ex officio, Under Secretary for Research, Education, and Economics, U.S. Department of Agriculture Martin Jischke, President, Purdue University Conrad Lautenbacher, ex officio, Under Secretary of Commerce for Oceans and Atmosphere, National Oceanic and Atmospheric Administration Charles McQueary, ex officio, Under Secretary for Science and Technology, Department of Homeland Security John Marburger, ex officio, Director, Office of Science and Technology Policy Raymond Orbach, ex officio, Director, Office of Science, U.S. Department of Energy Lawrence Rhoades, President and CEO, Ex One Corporation Ron Sega, ex officio, Director, Defense Research and Engineering, Office of the Secretary of Defense Hratch Semerjian, ex officio, Acting Director, National Institute of Standards and Technology William Wulf, ex officio, President, National Academy of Engineering Elias Zerhouni, ex officio, Director, National Institutes of Health

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Here or There? A Survey of Factors in Multinational R&D Location GUIRR STAFF Merrilea J. Mayo, Director Tom Arrison, Project Director Denise Greene, Administrative Coordinator

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Here or There? A Survey of Factors in Multinational R&D Location Preface and Acknowledgments The Government-University-Industry Research Roundtable (GUIRR) of the National Academies has a long-standing interest in the globalization of science and engineering and the implications of globalization for the U.S. research enterprise. Since 2002, a GUIRR working group led by Harold H. Schmitz of Mars, Inc., and Robert L. Powell of the University of California at Davis has explored the trend of multinational corporations (MNCs) based in the United States and other developed countries launching research and development (R&D) facilities in emerging economies, primarily in Asia. To further inform its discussions, GUIRR asked Professor Jerry Thursby of Emory University and Professor Marie Thursby of the Georgia Institute of Technology to conduct a survey of MNCs to find out where they are planning to locate R&D facilities in the near future and the factors influencing those location decisions. Jerry and Marie Thursby are presenting their findings as a report to the Roundtable. The statements made in this paper are those of the authors and do not necessarily represent positions of the Roundtable or the National Academies. This project was conducted with generous support from the Ewing Marion Kauffman Foundation, as well as the industry partners of GUIRR, the Georgia Institute of Technology, and Emory University. Numerous individuals have aided in the design and implementation of this survey, but the authors are particularly indebted to Merrilea Mayo of GUIRR, Ross Armbrecht, former president of the Industrial Research Institute, Andrew Dearing of the European Industrial Research Management Association,

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Here or There? A Survey of Factors in Multinational R&D Location Harold Schmitz of Mars, Inc., Jean-Lou Chameau of the Georgia Institute of Technology, Tim Ryan of GFK Custom Research, Inc., Peter Kelly of the American Chemical Society, and Paul Roman and the staff of the Center for Research on Behavioral and Human Services Delivery of the University of Georgia. This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies’ Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the authors in making the published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the process. We wish to thank the following individuals for their review of this report: Lee Branstetter, Columbia University; Susan Butts, The Dow Chemical Company; Michael Storper, University of California, Los Angeles; and John Walsh, University of Illinois at Chicago. Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the content of the report, nor did they see the final draft of the report before its release. The review of this report was overseen by Robert Frosch, Harvard University. Appointed by the National Academies, he was responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authors and the institution. Marye Anne Fox Co-Chair, GUIRR Lydia Thomas Co-Chair, GUIRR

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Here or There? A Survey of Factors in Multinational R&D Location Contents     Executive Summary   1     Introduction   5     General Background   7     R&D Location Strategies   13     Location of Recent or Planned R&D Sites   15     Factors in the Selection of R&D Sites   21      Results for Sites Outside the Home Country: Emerging Economies,   23      Outside Home Country Destinations: Developed Economies,   25      Inside the Home Country,   26      Summary of Results,   27     Protecting and Capitalizing on Intellectual Property and the Types of Research Conducted   29     Concluding Remarks   35     Appendix: Respondent Pool, Statistical Tests, and Presentation of Results   37

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