Companies are organizing their operations on global scale, and best example of this trend is shifting of productions in low wage countries. Recently, globalization also affects R&D and innovation activities. Experts stated that these core activities are secured from the globalization, but reality is completely different, because organizations established their R&D labs in different countries and perform these activities through their international branches.
This development becomes possible because of the different factors such as technology modularization, open innovation, ICT infrastructures availability, trade barriers removal, and also the availability of well-educated workers in emerging economies. Globalization of research & development is not only considered as threat, but it also brings opportunities for different economies (Deuten, n.d.).
This paper mainly discuss “To what extent is R&D becoming globalized and in what ways may developing nations reap R&D advantages which could spill over into their domestic companies?” Structure of this report includes three sections, and all three sections contain discussion on different topics. Section 1 defines to what extent R&D is becoming globalized; Second section of this report defines those factors which result in globalization of R&D. Third and last section define the advantages get by developing countries in context of R&D globalization. Lastly, paper is concluded with the brief conclusion which not only contain summary of the key points but also state recommendations.
The main purpose of R&D is to improve the current technologies offered by the organizations, and also to develop innovations that not only strengthen the companies’ position in the market but also provide competitive advantage to the organization. Sector of R&D include various companies which mainly focus on particular area or work.
As stated by Sammons (2000), R&D is the terms which is used to refer the examination and redefining of products and process which exist, and it also includes development of new products. Lewis & Trevitt (2000) stated, R & D is a tool which is valuable in nature for the purpose of ensuring refining and development of business. It mainly helps the business to get competitive advantage over their competitors.
In other words, it is considered as process through which company can get new knowledge which can be used for the purpose of creating new technology products, services, or systems that it will either use or sell. The main aim of this philosophy is to add the company’s bottom line.
There are number of people who think that only pharmaceutical and technology companies conduct research and development program, but there are some other organizations also which produce consumer products, invest time & resources into R&D as well. This can be understood through example; organization which is engaged in food products can conduct R&D for examining their existing products or for developing new tastes and textures in their products.
Generally, R&D takes place in all sizes of companies and every type of business which manufacture or sell any product or service invest in some level of R&D. generally, organizations spends resources on particular investigative undertakings for the purpose of making discoveries that can help them in developing new products, process, and system. R&D is considered as important way through which organization ensure future growth and also maintain relevant product in the market (URDE, n.d.).
It must be noted that R&D was considered as old tradition in number of countries, but now this concept is globalized. Because of the fast growing economies in the developing countries and availability of different resources encourage the organizations to establish R&D centers outside their home country and also sell and produce their products and services outside the home country through international trading and foreign direct investments (FDI) (Mahdjoubi, 2009). It must be noted that R&D include different types of activities which are stated below:
Basic research: when research is conducted for the purpose of understanding the subject matter more completely and builds on the body of knowledge related to the subject, then such research falls under the category of basic research. Basic research is not useful for practical and commercial application. Results of basic research generally serve potential interest to the organization.
The main objective of basic research is to get complete knowledge and understanding of one particular subject, instead of practical application of this research. Basic research is considered as advancing scientific knowledge without having particular commercial goals. For the purpose of gaining benefits from this type of research, it is necessary to conduct this research consistently and on continuous basis.
It must be noted that this R&D provides wide knowledge which is necessary for understanding the big picture of one or different recognized practical issues in the organization. Basic research is considered as first most important step which allowed the person to find solutions and resolve these issues (Cleversim, n.d.).
Applied research: this research is considered as an investigation undertaken for the purpose of acquiring new knowledge with particular commercial application in context of both products and processes. This research is either conducted for the purpose of determining possible uses for the findings of basic research or for determining the new ways to achieve some particular and predefined goals.
Applied research help the organizations by providing such methods which address particular customers and industry needs or requirements. Therefore, applied research is referred as second step of the process which mainly allowed you to find solutions and resolve different issues, and it also allowed the organization to take advantage of detected trend (Inc, n.d.).
However, not like basic research, applied research mainly focuses on the results from scientific research and uses these results directly in the situations of real world. Those people who worked in this line of research are generally facing the concern of external validity of this research. External validity referred as use of research or scientific results for large number of populations instead of one group.
Product Development: development research is a systematic framework which using existing knowledge gained from basic and applied research for the purpose of creating new and improved product or process. This process allowed the engineer and manufacturing teams of the organization to gain the solid applicable knowledge, and with the help of this knowledge these teams are able to build and develop new designs and prototypes. Later, these designs and prototypes are converted in to new products which can be sold by the company in the market.
Product development is the framework which is used for creating new product with new or unlike characteristics that provide benefits to the customers (Madsen, 2016). As stated by Rouse (2016), development f product reformation of existing product or formulation of new product that never existed before. Product development is also known as product management, which include series of steps such as design of new product, conceptualization, development, and marketing. Additionally, to these steps there are also different subsets of strategies, and these subsets include diversification strategy.
Globalization is considered as the process of collaboration and combination among the people, corporations, and officials of different nations, and it is a process which is driven by international trade and investment and supported by international technology. This process mainly has impact on the environment, culture, political systems, economic development, etc. across the globe. It must be noted that globalization is not a new term, and this trend is conducted from historical times. It is the economy of the world which is actually globalized, which means complete world is behaving like as they were part of single market, with interdependent production, and dealing with the similar problems (Globalization, n.d.).
Globalization is considered as main driver of the progress of trade across the world, and as share of result (the ration in context of world imports to gross world product, GWP, has increased from some 7% in 1938 to about 10% in 1970 to over 18% in 1996). In context of foreign direct investment (FDI), in case of developing countries, FDI has increased from $2.2 billion in 1970 to $154 billion in 1997. It has resulted also in national capital markets becoming more combined to the point where some $1.3 trillion per day crosses the foreign exchange markets of the world, of which less than 2% is directly related to the transactions of trade (GPF, n.d.).
Because of the globalization, organization crosses their borders and conduct important operations of the business in another country, such as research and development which are generally conducted close to the headquarters are now carried out by organization through their international branches (IBP Inc, 2012). Reasons behind this change are sated below:
- Introduction of more advanced and modern technology.
- Availability of ICT infrastructure.
- Trade barriers are removed, and wealthy industries are attracting towards low-pay economies (Thomas, 2015).
Presently, there are number of emerging economies such as China, India, Russia and Brazil which are organizing their activities on an international basis.
From last few years, research and development results in the changes occurred in technology and innovation, are considered as most significant bases of growth in productivity and increase in welfare (Edquist, 2000). It must be noted that, there is a great association among the countries that have revealed important development in context of economic in the past, and those countries also that have contribute considerable speculation in R&D. Because of this reason it is imperious for the developing countries, which also includes smallest industrialized countries to build capabilities related to the research and development, if they fail to develop the capability then it might be possible that they miss the opportunity to upgrade their technologies, become a development leader and also catch up with the developed countries.
Few developing countries which have vigorous infrastructures, workforce which is extremely trained, protection in terms of intellectual property, and striking domestic markets, and all these factors attracted important FDI in R&D (UNCTAD, 2005). These developing countries get various benefits from the opportunities offered by the cumulative calls of TNCs such as less expensive talent and new developing markets. Policies framed by them mainly focus on measures for the purpose of maximizing the degree of technology spillovers from the FDI, and also to increase their capability by influencing the local businesses to involve in the research and development. On the other hand, there are number of developing countries which fail in grabbing the opportunities resulted from globalization because of their R&D efforts fails to arrange adequate fund and they are not linked with the private sector.
In 2002, almost 700 firms across the globe spent $311 billion on R&D, and more in the current global environment which is characterized by rapidly changing technologies and shorter product lifecycles. TNCs are offshoring maximum R&D activities in different parts of the world through both FDI and technology alliances. This pattern of R&D fluctuates radically from that of the past and challenges the traditional view that all the activities related to research and development are conducted in home countries. While in it, the expansion of R&D beyond the borders of the home countries of TNCs is not a new approach, because trend of offshoring is increasing and its geographical reach is spreading in context of developing countries. Spreading R&D activities in context of FDI to new host countries is considered as important part of broader approach, which is considered as new and rising trend. Within the range of offshore services, R&D represents the higher end of the value-added range (UNCTAD, 2006).
Conclusion
The offshoring of R&D in the locations of developing countries which has involved internationally known TNCs such as Ericsson, GE, IBM, Intel, Microsoft, Motorola, Nokia, Oracle, Texas Instruments and SAP. Data related to the activities of the partners of TNCs from the Triad such as United States, Japan and the European Union which confirm the rise of corporate R&D in developing countries, but at different speeds. Between the period of 1989 and 1999, R&D activities are performed by all the foreign partners of the United States TNCs in those countries which are developing increased up to nine times, to $2.4 billion, in comparison of three-fold increase worldwide, to $18 billion in 1999.
Reflection of the increased internationalization of R&D, it is assumed that foreign partners play important role in different host countries. Between the period of 1993 and 2002 the R&D expenditure of foreign partners increased from $30 billion to $67 billion. It must be noted that this increase was relatively modest in developed host countries, but it was quite important in developing countries. The share of R&D by foreign partners in different countries changed considerably. During the period of 2003, foreign partners accounted for more than half of all the business R&D in Ireland, Hungary and Singapore and almost 40% in Australia, Brazil, the Czech Republic, Sweden and the United Kingdom. However, it remains only 10% in Chile, Greece, India, Japan and the Republic of Korea (Armelle & Mischke, 2005).
As stated by Reddy (2000), internationalization of R&D has revealed a rising trend in context of R&D operations of MNCs in the developing world. In particular terms, MNC are already facing issue such as increase in need to monitor and learn the new global trends, requirement to engage in multi-sourcing of technology inputs just because of increase in R&D costs, increase in demand of personnel related to R&D, and shortage of R&D personal in the developed countries. All these issues turn the interest of MNCs in those countries which are under developed or developing because these countries provides necessary resources at low cost and also provide competitive advantage to the host countries and MNCs (OECD, 2002).
Globalization of R&D provides various benefits to the developing countries in context of countries economy, as well as growth of domestic industry. Some of these benefits are stated below:
- R&D provide various economic benefits to the developing countries such as it provide it boost up the GDP of the country by acquitted FDI in the country.
- Domestic business of the country gets various benefits and new opportunities such as chances of mergers and joint ventures with the international organizations.
- It increases the income of the company in form of tax advantage.
- People who reside in the developing countries get new advantage and opportunities such as job opportunities.
- It increases the standard of living of the developing countries (Beers, 2003).
Internationalization of R&D ensure various benefits for the domestic business also such as it enhance the systems integration capabilities of the local firms, product planning capabilities, market access advantages, and information and communication networks. All these advantages ensure development in the developing countries and also provide various other benefits to the local business and residents.
It can be said that developing countries also gain advantage by getting experience in advanced R&D activities and also develop its human resources. However, it is necessary for developing countries to rely on their own resources to upgrade this competitiveness. R&D activities conducted by TNCs not enough to provide adequate support to the development of national and business S&T competitiveness. It must be noted that, increase in competitiveness of developing countries in context of R&D relies first on their own government and local business (Lundin & Surger, 2008).
Conclusion:
After considering the above facts, it can be said that globalization of R&D activities not only provide benefits to the MNCs but also ensure advantages and development in the developing countries. These activities play major role in the development of any under-developed country. It must be noted that globalization also affects R&D and innovation activities. This development becomes possible because of the different factors such as technology modularization, open innovation, ICT infrastructures availability, trade barriers removal, and also the availability of well-educated workers in emerging economies. Globalization of research & development is not only considered as threat, but it also brings opportunities for different economies. Because of the globalization, organization crosses their borders and conduct important operations of the business in another country, such as research and development which are generally conducted close to the headquarters are now carried out by organization through their international branches
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