R & D by TNCs

Topics: Developing country, Developed country, Research Pages: 66 (16630 words) Published: May 25, 2014




New York and Geneva, 2006

Case studies

Features and impacts of the internationalization of
R&D by transnational corporations: China’s case
Zhou Yuan1
In recent years, an increasing number of TNCs have
established R&D laboratories and increased their R&D
spending in China. This paper suggests that this
internationalization of R&D by TNCs can benefit developing
countries such as China, although it cannot automatically
upgrade the local S&T capabilities. Therefore, China must
upgrade, in parallel to FDI in R&D, its S&T competitiveness by strengthening its national innovatory capacities.
1. R&D laboratories of TNCs in China
Since Nortel Networks Corporation and Beijing
University of Posts and Telecommunications jointly set up an R&D centre in 1994, the number of TNCs’ R&D laboratories in China has been growing steadily. This tendency was especially pronounced in recent years. Statistics collected by the Ministry of Science and Technology show that in 2002, more than 100

R&D laboratories were established by TNCs in China, and by
the end of June, 2004, over 600 of the world’s best-known
TNCs had set up their R&D laboratories in China.
In 2002, the Beijing Municipal Science and Technology
Commission carried out a sample survey among 82 R&D
laboratories of TNCs. That survey (China, MOST 2002)
concluded that:
• many large and well-known TNCs had set up R&D
laboratories in China. Of the 82 sample laboratories, 55 had been set up by Fortune Global 500 TNCs;

The views expressed in this study are those of the author and do not necessarily reflect the views of the United Nations, its Member States, or the Institutions to which the author is affiliated.

Globalization of R&D and Developing Countries

TNCs’ R&D laboratories in China were unevenly
distributed: metropolises with relatively strong R&D
capacities, such as Beijing, Shanghai, Guangzhou,
Shenzhen, Xian and Chengdu, were by far the most
attractive locations for R&D. According to the survey, 60%
of the R&D laboratories of foreign TNCs were located in
Beijing, 18% in Shanghai and 6% in Shenzhen;
TNCs’ R&D laboratories were active mostly in hightechnology industries, such as information technologies, software and computers (58 laboratories), the chemical
industry (9), pharmaceuticals (7) and the automotive
industry (5);
the majority of the parent companies of the 82 R&D
laboratories were headquartered in the United States (32),
Europe (20) and Japan (18); these three locations together
accounted for 85% of the headquarters. The Republic of
Korea, Hong Kong (China) and Taiwan Province of China
were found to be additional important sources of R&D by

TNCs invest increasing amounts of financial resources
into R&D in China. In 1999, of the 10 TNCs in Pudong,
Shanghai, whose output was in the range of RMB 1 to 6 billion, only four spent more than RMB 100 million on R&D. By 2004,
Motorola alone had invested about RMB 1.3 billion in R&D.
R&D activities supported by foreign investment are playing an increasingly important role in China. In 2000, the proportion of foreign investment to overall R&D expenditure surpassed that of Germany and Japan; the ratio in China is relatively high in manufacturing (OECD 2003 and China, MOST 2002).

2. Reasons to invest in R&D in China
The boom of R&D is driven largely by the abundant
S&T human resources of China. Some TNCs like IBM and
Microsoft Research evaluate their R&D laboratories as a

R&D by TNCs in China

fundamental part of their global R&D activities. The mission of these R&D laboratories is to become an international R&D
centre, rather than a support laboratory serving the local market. These R&D laboratories value not only the Chinese market, but also available talents and...

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