Future Now
The IFTF Blog
How to Attract US R&D Outsourcing
A recent article in Research Policy landed on my desk today, titled "The Maturation of Global Corporate R&D: Evidence From the Activity of U.S. Foreign Subsidiaries", by Deepak Hegde and Diana Hicks.
This review turned a lot of my assumptions about the globalization of R&D, and how poorly the current debate about offshoring of R&D in the US is based on fact.
They note:
Indeed Singh’s (2004) analysis of patent and citations data suggests that the ?ow of knowledge
between MNC headquarters and their overseas subsidiaries is intensifying, and that MNCs may be gaining more new knowledge from, than they are contributing to, their foreign locales.
You'd be hard-pressed to find anyone inside the Capital Beltway who would concede that for American companies, they probably are getting more innovation back from their overseas R&D investments than they are giving up. But why else would they do it?
The most significant finding of the paper though, is that while market size is the main predictor of why US firms establish R&D new locations like China and India, its actually indigenous science and engineering capability (measured by publishing activity) that determines the long-term intensity of innovation in these offshore hubs.
The authors conclude, that "nations that seek to attract high-end foreign R&D investment may be better served by investing in their public S&E institutions rather than by priming foreign manufacturing activity." Instead of giving away land and labor, and hoping that technology transfer will inevitably accompany manufacturing, long-term investments in basic institutions and human capital will create capacity for sustained innovation productivity.
Go figure.