Executive Summary

This document presents results from a survey of over 200 multinational companies across 15 industries regarding the factors that influence decisions on where to conduct research and development (R&D). The survey was originally proposed by the Government-University-Industry Research Roundtable (GUIRR) of the U.S. National Academies out of a concern that policy discussions be informed by data rather than anecdote.

Respondents to the survey were high-level R&D personnel of companies who had been involved with R&D location decisions. The majority of companies responding have home offices in the United States or Western Europe. Most are also truly multinational, with almost 90 percent having some R&D facilities outside the home country. For roughly 20 percent of the companies, more than half of their technical employees in R&D are outside the home country.

In asking about location, questions were in terms of employees rather than dollar investment. Further, the questions on the types of R&D these employees conduct, as well as factors in choosing location, were tied to specific R&D facilities the company had established or was in the process of establishing. Finally, respondents were asked first about a site outside the home country and then about a site within the home country. In each case respondents were instructed to pick the site most central to their firm’s R&D strategy; thus, results are most relevant to important sites rather than necessarily to all sites.



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Here or There? A Survey of Factors in Multinational R&D Location Executive Summary This document presents results from a survey of over 200 multinational companies across 15 industries regarding the factors that influence decisions on where to conduct research and development (R&D). The survey was originally proposed by the Government-University-Industry Research Roundtable (GUIRR) of the U.S. National Academies out of a concern that policy discussions be informed by data rather than anecdote. Respondents to the survey were high-level R&D personnel of companies who had been involved with R&D location decisions. The majority of companies responding have home offices in the United States or Western Europe. Most are also truly multinational, with almost 90 percent having some R&D facilities outside the home country. For roughly 20 percent of the companies, more than half of their technical employees in R&D are outside the home country. In asking about location, questions were in terms of employees rather than dollar investment. Further, the questions on the types of R&D these employees conduct, as well as factors in choosing location, were tied to specific R&D facilities the company had established or was in the process of establishing. Finally, respondents were asked first about a site outside the home country and then about a site within the home country. In each case respondents were instructed to pick the site most central to their firm’s R&D strategy; thus, results are most relevant to important sites rather than necessarily to all sites.

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Here or There? A Survey of Factors in Multinational R&D Location The results are striking in several ways. First, the decision to locate R&D is quite complex and influenced by a variety of factors. Second, they show that regardless of where companies locate R&D, four factors stand out: output market potential, quality of R&D personnel, university collaboration, and intellectual property protection. How these factors influenced decisions, however, varied depending on whether sites were in developed or emerging economies. For companies locating in emerging economies, the most important attraction was the growth potential in the market followed by the quality of R&D personnel. Tied for the third most important reason were costs (net of tax breaks), the expertise of university faculty, and the ease of collaborating with universities. For these economies, the quality of intellectual property protection was a detractor. When companies located R&D facilities either at home or in another developed economy, the most important factors were the quality of R&D personnel and the quality of intellectual property protection. Next in importance were the expertise of university faculty and the ease of collaborating with universities. Also important were market factors such as growth potential and the need to support sales of the company. Thus output and input market factors, as well as the intellectual property infrastructure, are all paramount. A critical point on R&D input factors is that the most important factor is the quality of the inputs. The implication of this is that although cost, net of tax breaks, is high in developed countries, these economies can still have a comparative advantage in R&D because of the quality of personnel, particularly given the intellectual property environment. Other striking results concern the ways in which companies protect and capitalize on intellectual property as well as the types of R&D they conduct in various locations. Respondents stated that over 45 percent of the effort in the home or developed economy sites is for new science, whereas roughly 22 percent of the effort in emerging countries is for new science. One of the most novel results to come out of the survey is the important role of universities in the global innovation system. Note that university factors are as important as costs in emerging economies and more important in developed economies. Finally, it is important to note that over 75 percent of the respondents

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Here or There? A Survey of Factors in Multinational R&D Location said the R&D facility under discussion was part of an expansion in R&D. Less than 30 percent of the sites were characterized as relocation. In addition, there was more relocation within the home country than toward other countries.1 1 Note that these results cover only the facilities discussed. If facilities not discussed had different characteristics and constituted a high proportion of the total for the sample companies, this would alter the results.

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