Managing global research and development in China: Patterns of R&D configuration and evolution

Abstract

The growing internationalization of R&D activities challenges multinational corporations (MNCs) to formulate technology strategies and manage increasingly diffuse and diverse networks of R&D laboratories and alliances in the context of disparate national institutions. This paper examines the evolutionary processes of MNCs' R&D strategies in China in terms of two principal dimensions, i.e. geographic dispersion and functional focus. Based on a study of 378 international R&D centers and alliances established in China over the 1995–2001 period, we investigate the evolution of managing international R&D configurations in an emerging economy. The model is further illustrated with key findings from case studies of three leading high-tech MNCs in managing their global R&D operations in China over 1996–2004, specifically Fujitsu, Motorola and Nokia. This study contributes to the existing literature by exploring the globalization of R&D through foreign centers of scientific and technological excellence, which enables MNCs to innovate closer to their product markets and manufacturing facilities in emerging markets.

Acknowledgement

We gratefully acknowledge support from Hong Kong's Research Grants Committee through Competitive Earmarked Grants HKUST6150/02H and HKUST6196/04H, and grant DAG03/04.BM48.

Notes

1. E.g. Y. Doz & G. Hamel, Alliance Advantage (Boston, MA, Harvard Business School Press, 1998); J. Hagedoorn, Inter-firm R&D partnerships: an overview of major trends and patterns since 1960, Research Policy, 31, 2002, pp. 477–492; W. Kuemmerle, The drivers of foreign direct investment into research and development: an empirical investigation, Journal of International Business Studies, 30(1), 1999a, pp. 1–24; J. Li & J. Zhong, Explaining the growth of international R&D alliances in China, Managerial and Decision Economics, 24, 2003, pp. 101–115; R. Pearce & M. Papanastassiou, R&D networks and innovation: decentralized product development in multinational enterprises, R&D Management, 26(4), 1996, pp. 315–33; M. von Zedtwitz & O. Gassmann, Market versus technology drive in R&D internationalization: four different patterns of managing research and development, Research Policy, 31(4), 2002, pp. 569–588.

2. L. J. C. Cheng & D. Bolon, The management of multinational R&D: a neglected topic in international business research, Journal of International Business Studies, 24(1), 1993, pp. 1–18; J. H. Dunning, Re-appraising the eclectic paradigm in an age of alliance capitalism, Journal of International Business Studies, 26, 1995, pp. 461–491; R. D. Pearce, Decentralised R&D and strategic competitiveness: globalised approaches to generation and use of technology in multinational enterprises, Research Policy, 28, 1999, pp. 157–178; J. D. Penner-Hahn, Firm and environmental influences on mode and sequence of foreign research and development activities, Strategic Management Journal, 19, 1998, pp. 149–168.

3. O. Gassmann & M. von Zedtwitz, New concepts and trends in international R&D organization, Research Policy, 28, 1999, pp. 231–250; OECD, Internationalization of Industrial R&D: Pattern and Trends (Paris, OECD, 1998).

4. Li & Zhong, op. cit., Ref. 1; M. von Zedtwitz, Foreign R&D laboratories in China, R&D Management, 34(4), 2004, pp. 439–442.

5. Li & Zhong, op. cit., Ref. 1.

6. OECD, OECD Science, Technology and Industry Scoreboard 2003 (Paris, OECD, 2003).

7. Von Zedtwitz, op. cit., Ref. 4.

8. Li & Zhong, op. cit., Ref. 1.

9. Pearce, op. cit., Ref. 2.

10. Von Zedtwitz, op. cit., Ref. 4.

11. A. Gerybadze & G. Reger, Globalization of R&D: recent changes in the management of innovation in transnational corporations, Research Policy, 28(2–3), 1999, pp. 251–274.

12. 12.Von Zedtwitz & Gassmann, op. cit., Ref. 1.

13. E.g. C. A. Bartlett & S. Ghoshal, Managing innovation in the transnational corporation, in: C.A. Bartlett, Y. Doz & G. Hedlund (Eds) Managing the Global Firm (London, Routledge, 1990); L. Håkanson, International decentralization of R&D—the organizational challenges, in: Bartlett et al., ibid.; W. Kuemmerle, ‘Foreign direct iinvestment in industrial research in the pharmaceutical and electronics industries—results from a survey of multinational firms, Research Policy, 28(2–3), 1999a, pp. 179–194; J. W. Medcof, A taxonomy of internationally dispersed technology units and its application to management issues, R&D Management, 27(4), 1997, pp. 301–318; R. C. Ronstadt, International R&D: the establishment and evolution of research and development abroad by seven US multinationals, Journal for International Business Studies, 9, 1978, pp. 7–24; von Zedtwitz & Gassmann, op. cit., Ref. 1.

14. Bartlett & Ghoshal, op. cit., Ref. 13; J. Niosi, The internationalization of industrial R&D: from the technology transfer to the learning organization, Research Policy, 28, 1999, pp. 107–117.

15. E.g. A. De Meyer & A. Mizushima, Global R&D management, R&D Management, 19(2), 1989, pp. 135–146; O. Gassmann & M. von Zedtwitz, Organizing virtual R&D teams: towards a contingency approach, in: D. F. Kocaoglu (Ed.), Proceedings of PICMET on Technology and Innovation Management, Portland, July, 1999, pp. 25–29; von Zedtwitz and Gassmann, op. cit., Ref. 1.

16. Håkanson, op. cit., Ref. 13.

17. Medcof, op. cit., Ref. 13.

18. W. Kuemmerle, Building effective R&D capabilities abroad, Harvard Business Review, March–April, 75(2), 1997, pp. 61–70; V. Chiesa, Managing the internationalization of R&D activities, IEEE Transactions on Engineering Management, 43(1), 1996, pp. 7–23.

19. W. Kuemmerle, Home base and foreign direct investment in research and development, Unpublished Doctoral Dissertation, Harvard University, Boston, 1996.

20. Ibid.

21. Chiesa, op. cit., Ref. 18.

22. Von Zedtwitz & Gassmann, op. cit., Ref. 1.

23. Ibid.

24. R. C. Ronstadt, Research and Development Abroad by U.S. Multinationals (New York, Praeger, 1977); R. Voelker & R. Stead, New technologies and international locational choice for research and development units: evidence from Europe, Technology Analysis & Strategic Management, 11(2), 1999, pp. 199–209.

25. R. Nobel & J. Birkinshaw, Innovation in multinational corporations: control and communication patterns in international R&D operations, Strategic Management Journal, 19, 1998, pp. 479–496; Penner-Hahn, op. cit., Ref. 1; Voelker & Stead, op. cit., Ref. 24.

26. Nobel & Birkinshaw, op. cit., Ref. 25.

27. D. Creamer, Overseas Research and Development by United States Multinationals, 1966–1975 (New York, The Conference Board, 1976); Nobel & Birkinshaw, op. cit., Ref. 25; R. D. Pearce, The Internationalization of Research and Development by Multinational Enterprises (New York, St. Martin's Press, 1989); von Zedtwitz & Gassmann, op. cit., Ref. 1.

28. R. W. Schmitt, The strategic measure of R&D, Research Technology Management, 34, 1991, pp. 13–17; von Zedtwitz & Gassmann, op. cit., Ref. 1.

29. O. Gassmann & M. von Zedtwitz, Organization of industrial R&D on a global scale, R&D Management, 28(3), 1998, pp. 147–161 (abstract—INSPEC); Gassmann & von Zedtwitz, op. cit., Ref. 3; Gassmann & von Zedtwitz, op. cit., Ref. 15; D. Jansen, Convergence of basic and applied research: research orientations in German high-temperature superconductor research, Science, Technology, & Human, 20, 1995, pp. 197–233; G. K. Jones & H. J. Davis, National culture and innovation: implications for locating global R&D operations, Management International Review, 40(1), 2000, pp. 11–39.

30. T. S. Frost, The geographic sources of foreign subsidiaries' innovations, Strategic Management Journal, 22, 2001, pp. 101–123; J. G. March, Exploration and exploitation in organizational learning, Organization Science, 2(1), 1991, pp. 71–87.

31. March, op. cit., Ref. 30.

32. Kuemmerle, op. cit., Ref. 18.

33. C. Gelb, Software research in and for China: Microsoft's basic research facility takes global R&D a step further, The Chinese Business Review, 27(4), 2000, pp. 40–43.

34. J. H. Dunning, The eclectic paradigm of international production: a restatement and some possible extensions, Journal of International Business Studies, 19, 1988, pp. 1–31.

35. Von Zedtwitz, op. cit., Ref. 4.

36. Von Zedtwitz and Gassmann, op. cit., Ref. 1.

37. E.g. Kuemmerle, op. cit., Ref. 1 or 13; H. Odagiri & H. Yasuda, The determinants of overseas R&D by Japanese firms: an empirical study at the industry and company levels, Research Policy, 25, 1996, pp. 1059–1079; M. G. Serapio & D. H. Dalton, Globalization of industrial R&D: an examination of foreign direct investments in R&D in the United States, Research Policy, 28(2–3), 1999b, pp. 303–316.

38. K. Asakawa, External–internal linkages and overseas autonomy-control tension: the management dilemma of the Japanese R&D in Europe, IEEE Transactions on Engineering Management, 43(1), 1996, pp. 24–32; N. Hood & St. Young, The Globalization of Multinational Enterprise Activity and Economic Development (New York: St. Martin's Press, 2000); J. Howells, The location and organisation of research and development: new horizons, Research Policy, 19, 1990, pp. 133–146; Pearce, op. cit., Ref. 27.

39. Asakawa, op. cit., Ref. 38.

40. Y. Luo, Partner selection and venturing success: the case of joint ventures in China, Organization Science, 8, 1997, pp. 648–662.

41. Nikkei Weekly, 26 June 2000.

42. E.g. M. Y. Hu & H. Chen, Foreign ownership in Chinese joint ventures: a transaction cost analysis, Journal of Business Research, 26, 1993, pp. 149–160; Y. Pan & D. Tse, The hierarchical model of market entry modes, Journal of International Business Studies, 31(4), 2000, pp. 535–554.

43. Doz & Hamel, op. cit., Ref. 1.

44. Insight on MNCs' establishing R&D centers in China, People's Daily, 21 September 2000.

45. Gelb, op. cit., Ref. 33.

46. Ibid.

47. China Social Statistics, Statistics of the Number and Percentage of Persons Engaged in Science and Technology Activities in China In 1999 (China Social Statistics, 2000).

48. China Statistics Abstract, Statistics of China's Science and Technology in 2000 (China Statistics Abstract, 2001).

49. Public announcement of main statistics of China's R&D resources survey in 2000, Guangming Daily, 15 October 2001.

50. MOFTEC, Notice issued by the Foreign Economic and Trading Department of related problems about foreign investment research and developing center (MOFTEC, Beijing, 2000).

51. Von Zedtwitz & Gassmann, op. cit., Ref. 1.

52. Cheng & Bolon, op. cit., Ref. 2; Niosi, op. cit., Ref. 14

53. Von Zedtwitz & Gassmann, op. cit., Ref. 1.

54. E.g. S. Chang, International expansion strategy of Japanese firms: capability building through sequential entry, Academy of Management Journal, 38, 1995, pp. 383–407; J. Johanson & J. E. Vahlne, The internationalization process of the firm—a model of knowledge development and increasing foreign market commitments, Journal of International Business Studies, 8(1), 1977, pp. 23–32; B. Kogut, Foreign direct investment as a sequential process, in: C. P. Kindleberger & D. Audretsch (Eds) The Multinational Corporation in the 1980s (Cambridge, MA, MIT Press, 1983), pp. 38–56; M. J. Shaver, W. Mitchell & B. Yeung, The effect of own-firm and other-firm experience on the foreign direct investment survival in the United States, 1987–1992, Strategic Management Journal, 18, 1997, pp. 811–824.

55. Johanson & Vahlne, op. cit., Ref. 54.

56. Shaver et al., op. cit., Ref. 54; J. Song, Firm capabilities and technology ladders: sequential foreign direct investments of Japanese electronics firms in East Asia, Strategic Management Journal, 23, 2002, pp. 191–210.

57. Von Zedtwitz & Gassmann, op. cit., Ref. 1.

58. E.g. Odagiri & Yasuda, op. cit., Ref. 37; Pearce, op. cit., Ref. 2.

59. A. C. Perrino & J. W. Tipping, Global management of technology, Research Technology Management, 32 (3), 1989, pp. 12–19, see pp. 14–15)

60. OECD, OECD Organises Events in China on Intellectual Property Rights Protection, (Paris, OECD, 2004).