The Internationalization of Corporate R&D and the Automotive Industry R&D of East-Central Europe

Abstract

This article examines the development of corporate research and development (R&D) in the automotive industry of East-Central Europe (ECE) in the context of the internationalization of corporate R&D generally and the automotive industry R&D specifically. Driven by large inflows of foreign direct investment since the early 1990s, vehicle assembly and the production of automotive components grew significantly in ECE. In my study I investigated the extent to which these increases in production have also led to the development of automotive R&D as an example of a higher value-added function of the automotive value chain. I conducted a more detailed analysis of Czech automotive R&D because of its prominent position in ECE. Despite modest growth, my analysis uncovered inherent weaknesses of automotive R&D in ECE and strong barriers to its future development related to its peripheral position in the European and global automotive production networks.

Keywords:

• research and development
• internationalization
• automotive industry
• East-Central Europe
• Czechia

Acknowledgments

I thank Luděk Sýkora, the editor and especially the three anonymous reviewers for their helpful comments on an earlier version of this article. I am grateful to Pavla Žížlalová and Jan Ženka for their help with administering the company survey in 2009 and conducting company interviews in 2010 and 2011. Jan Ženka also helped obtain the Eurostat data and with the analysis of the Czech statistical data. The research and article preparation were supported by the European Commission (Grant Agreement No. PIRG03-GA-2008-230886), the Czech Science Foundation (Grant Agreement No. 205/09/0908), and the Czech Ministry of Education, Youth and Sport (Research Program No. MSM 0021620831).

Notes

1 I consider the following countries to constitute the traditional core of the global automotive industry: France, Germany, Italy, Japan, Sweden, the United Kingdom, and the United States. However, I consider the contemporary core of the global automotive industry to be composed of France, Germany, Italy, Japan, South Korea, and the United States. In 2008, the top 17 automotive transnational corporations (TNCs) in the world, each producing more than 1 million vehicles annually and collectively accounting for 85 percent of the total global vehicle production, were all based in these 5 countries (OICA 2011).

2 In this article, ECE denotes the region composed of 10 former state socialist countries, which are now EU members and are sometimes labeled as EU10; Bulgaria, the Czech Republic (hereafter Czechia), Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovakia, and Slovenia. Central and Eastern Europe denotes ECE and the non-EU European countries of the former Soviet Union (Belarus, Moldova, Russia, and Ukraine). Central Europe denotes the region composed of Czechia, Hungary, Poland, Slovakia, and Slovenia.

3 To compare automotive R&D in different EU countries, I used data provided by the Eurostat Structural Business Statistics database for the narrowly defined automotive industry (NACE 34). To ensure the compatibility of data in time series, I used the classification of industrial sectors based on the NACE 1.1 revision. During the data analysis, I found that stand-alone automotive R&D centers that are not attached to a particular plant are not classified as NACE 34 and thus are not included in the database (see also Table 4). I assume that they are classified the same way outside NACE 34 in all EU countries.

4 I am aware that too much proximity may negatively affect the innovation process (see Boschma 2005; Torre and Rallet 2005).

5 The differences in value-capture capabilities between the Czech-based Š koda Auto and the German-based VW and Audi were revealed during the distribution of 2010 bonuses. The bonus for Š koda Auto’s workers (EUR 129) was less than 2 percent of Audi’s workers (EUR 6,500) and 3.2 percent of VW’s workers (EUR 4,000), suggesting a disproportionate value capture at Audi and VW compared to Š koda. Audi accounted for about half VW Group’s profits, VW for about one-third, and Š koda for 6 percent in 2010. The main reason is the different value of cars assembled by these three assemblers. Audi’s luxury cars are 3 times as expensive as Š koda’s (Kaláb 2011).

6 SOR Libchavy, a small domestic bus maker, is the only notable exception to this general trend. SOR used to produce agricultural machines before 1990 but moved into assembling buses of its own design in the 1990s (intersectoral upgrading). SOR had 29 R&D workers and assembled 478 buses in 2010.