Description
This is a presentation about
Presented by: Ruzbeh Billimoria(208) JayPrakash(209) Awanish Chandra (210) AshishChoudhury (211) Payal Chugh(212) Shantanu Daga(213)
Contents
? TNCs – An Overview
? Global trends
? R&D Internationalization and Evolution ? Global R&D trends
? R&D in sectors/industries
? Cost-Benefit Analysis ? Role of policies
? Conclusion
Transnational Corporations (TNCs)
? A transnational corporation
is generally regarded as an enterprise comprising entities in more than one country which operate under a system of decision-making that permits coherent policies and a common strategy.
? “Transnational corporations (TNCs) are incorporated or
unincorporated enterprises comprising parent enterprises and their foreign affiliates.” (UNCTAD)
? A parent enterprise is defined as an enterprise that
controls assets of other entities in countries other than its home country, usually by owning a certain equity capital stake. An equity capital stake of 10% or more is normally considered as the threshold for the control of assets.
? A foreign affiliate is an incorporated or unincorporated
enterprise in which an investor, who is a resident in another economy, owns a stake that permits a lasting interest in the management of that enterprise.
FDI
? Foreign direct investment (FDI) is defined as
“the category of international investment that reflects the objective of obtaining a lasting interest by a resident entity in one economy in an enterprise resident in another economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence by the investor on the management of the enterprise.”(IMF )
As per international bodies like IMF, UNCTAD and OECD, FDI is calculated with three components:
? Equity capital
? Reinvested earnings ? Intra-company loans.
Global Trends
? Developed country TNCs remain the leading sources
of FDI (84% of global outflows). ? Emergence of more TNCs from developing world ? FDI inflows to developing economies is at highest level ? FDI outflows from developing economies gaining ground ? Increased cross-border Merger & Acquisitions ? Marked increase in natural resources related FDI ? Increasing role of developing countries in Bilateral Investment treaties and Double Taxation treaties
What is R&D?
? According to international guidelines by OECD, R&D comprises creative work “undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications”.
? 3 kinds – Basic Research, Applied Research &
Development
Reasons for encouraging R&D
? Innovative activity and capabilities are essential for
? ? ? ? ? ? ?
economic growth and sustainable development. Here, R&D is one source of innovation To introduce new products or processes To link up to the global technology and innovation networks led by firms. To access foreign pools of research talent Reduce R&D costs and Speed up the process of technology development. Better infrastructure Information and communications technologies.
R&D – An investment for the future
? Competence ? New knowledge ? New business models ? Networking ? Innovations: products and services, methods and processes, organisational innovations ? Start-ups, new business areas and services ? Growth and globalisation of companies ? Productivity ? Renewing business structures ? Affluence ? Regional vitality ? Employment ? Environment and health ? Security and safety ? Social well-being
? R&D investments
Investments
Results
Direct effects
Impact on national economy and society
Role of TNCs in R&D
? Transnational corporations alone can engage in
international generation of innovations by:? R&D and other innovative activities both in home and
host countries. ? Acquisitions of existing R&D units ? Greenfield R&D investment in host countries.
R&D Internationalization
• R&D internationalization includes the global allocation of
R&D resources and the international diffusion of R&D achievements. • In terms of the flows of R&D resources and achievements, it includes the outflow from host country to overseas as well as the inflow from foreign countries to home country.
The beginning (1960s)
First wave – Adaptive R&D
1970s
Second wave
1980s
Global, corporate, Regional technology units
1990s
Location outside industrialized world
Global R&D now
The 3 largest R&D sectors globally are :
? IT and electronics ? Automotives ? Pharmaceuticals
R&D is concentrated in the Triad – US, EU and Japan
Source: Booz Allen Hamilton
Source: Booz Allen Hamilton
Gross Domestic Expenditure (bn$ PPP), 1981-2006
Japan United States EU-15 China
on
Germany
R&D
350
300
250
200
150
100
50
0
Gross expenditure R&D($bn)
on
R&D
and
business
enterprise
Source: UNCTAD
Industry composition of R&D by majority-owned foreign affiliates of United States TNCs, 2002
Source: UNCTAD
R&D by sectors
Source: International R&D scoreboard
Patents-to-R&D by sectors
Source: International R&D scoreboard
R&D by companies
Company Pfizer Ford Motor Johnson & Johnson Microsoft DaimlerChrysler Toyota Motor GlaxoSmithKline Siemens General Motors Samsung Electronics Intel Sanofi-Aventis Country USA USA USA USA Germany Japan UK Germany USA South Korea USA France Rank 1 2 3 4 5 6 7 8 9 10 11 12 £m 3,882.59 3,678.73 3,640.41 3,638.36 3,526.48 3,484.71 3,457.00 3,384.99 3,372.16 3,139.72 3,000.72 2,967.26
IBM
Volkswagen Roche Novartis Nokia Merck Matsushita Electric Robert Bosch
USA
Germany Switzerland Switzerland Finland USA Japan Germany
13
14 15 16 17 18 19 20
2,899.55
2,856.76 2,757.94 2,740.65 2,501.01 2,443.75 2,421.83 2,289.45
Source: BERR
R&D by industry
R&D in Manufacturing Industry. Manufacturing firms have
made the majority contribution in R&D.
Examples of TNCs in mfg.R&D
? General Electric –the largest TNC in the world – employ
2,400 people in areas as diverse as aircraft engines, consumer durables and medical equipment. ? Pharmaceutical companies such as Astra-Zeneca,Eli Lilly, GlaxoSmithKline, Novartis, Pfizer and Sanofi-Aventis all run clinical research activities in India. ? General Motors (GM) in Brazil competes with other GM affiliates in the United States, Europe and Asia for the right to design and build new vehicles. ? 700 R&D units in China. Companies include Motorola,Cisco.
• For R&D purposes mfg. industry is decided into 4 groups:
R&D in services
? Traditional assumption that services do not innovate ? The trend today is changing. Services are innovating today in
the broader sense in both processes (organizational change) and products (new services).
? With the advent of ICTs the R&D in services is significantly
increasing at a rate of 29% appx. every year.
? Financial services have seen a significant rise in R&D with the
introduction of exotic financial products.
? Data on services R&D is patchy but on a majority they suggest
that R&D in services is rising in most economies
R&D-Business performance link 1.IT Software
2. IT Hardware
3. Other sectors
Types of R&D in developing countries
? The foreign affiliates undertake: ? Adaptive R&D ? Innovative R&D linked to production for local or regional markets ? Global innovative R&D for new products/processes, or for basic research ? Technology-monitoring R&D.
R&D by TNCs in developing world
? Motorola’s 6 out of 19 R&D centers are in developing
countries ? Mexico – assembly work reliant on parent ? Brazil – adaptive R&D (auto parts) ? China – Microsoft, GE, Nokia, Siemens, GM ? Korea, Taiwan – Chip design ? India – Flextronics, Microsoft, Pfizer, Astra Zeneca, Novartis, GSK
National Policies
? The ability of companies to innovate is intrinsically
linked to the environment in which they operate.
? Particular policy attention is needed in four areas: ? availability, cost and quality of human resources ? role of public research ? intellectual property rights (IPRs) ? competition policy.
Human Capital
? Developing skilled resources ? Importing human resources
Public Research
? Basic research ? Enterprise R&D linked with public R&D efforts
IPRs
? Patents and trade secrets
Competition policy
? Empirical +ve correlation between competition and
innovation ? M&A
Examples
? In Singapore, a model of joint training institutions
developed in 1970 to fulfil skilled labour requirements and anticipate future needs of industry. Tata, Philips, ABB were some of the participants. ? Countries can involve foreign affiliates by encouraging them to participate in joint projects with universities and institutions. ? European countries have special programmes, tax rules and other measures to attract foreign skills. ? Industrial Technology Research Institute , Taiwan
Tools and measures
? Investment promotion Agencies ? Korean S&T ? Performance Requirements ? Chinese auto industry ? R& D incentives ? Fiscal ? Financial ? Science and Tech parks ? Strengthening of IPRs ? Reduced tariff on imported R&D equipments
International Conventions
? WTO commitments for member nations in the field of
R&D covers three areas:
? ?
?
Natural sciences Social sciences & Humanities Inter-disciplinary R&D
? TRIPS
?
Minimum standards and flexibilities
Potential benefits
Host country ? Improved structure and performance of the NIS ? Contribution to human resource development (R&D employment, training, support to higher education, reverse brain drain effects) ? Knowledge spillovers ? Contributions to industrial upgrading Home country ? Improved overall R&D efficiency ? Reverse technology transfers and spillovers ? Market expansion effects
Potential costs
Host Country
? ? ? ? ?
Downsizing of existing local R&D or losing control of technology Unfair compensation for locally developed intellectual property Crowding out in the labour market, potential harm to basic research Technology leakage Race to the bottom and unethical behavior
Home Country
? “Hollowing out” of domestic R&D base ? Disappearance of certain R&D jobs ? Technology leakage
R&D - India
? Over 100 MNCs with R&D centres in India
? ~70% set up since 2000 ? Concentrated in: Pharmaceuticals, Hardware,
Automotive, Industrial & Medical equipments, Aerospace, Consumer electronics ? R&D mainly in the government sector: defence, agriculture, space and infrastructure ? Key new areas: Biotechnology, Clinical research
Conclusion
? TNCs are dominant players in global R&D, and their R&D is being increasingly
internationalized.
? The internationalization of research and technology is still characterized by
“Triadisation”
? It has got important implication for developed countries as well as world economy
as a whole
? Benefits do not appear automatically but it depends on the absorptive capacity of
the host country
? In the short to medium term most developing countries are not in a position to
benefit from R&D internationalization
? Vital long-term policy issues that need to be addressed now.
References
? World Investment Report 2005 (UNCTAD)
? The Global Innovation 1000 (Booz Allen Hamilton
Inc.) ? www.berr.gov.uk ? www.unctad.org ? www.oecd.org ? www.ft.com
THANK YOU
doc_738550307.pptx
This is a presentation about
Presented by: Ruzbeh Billimoria(208) JayPrakash(209) Awanish Chandra (210) AshishChoudhury (211) Payal Chugh(212) Shantanu Daga(213)
Contents
? TNCs – An Overview
? Global trends
? R&D Internationalization and Evolution ? Global R&D trends
? R&D in sectors/industries
? Cost-Benefit Analysis ? Role of policies
? Conclusion
Transnational Corporations (TNCs)
? A transnational corporation
is generally regarded as an enterprise comprising entities in more than one country which operate under a system of decision-making that permits coherent policies and a common strategy.
? “Transnational corporations (TNCs) are incorporated or
unincorporated enterprises comprising parent enterprises and their foreign affiliates.” (UNCTAD)
? A parent enterprise is defined as an enterprise that
controls assets of other entities in countries other than its home country, usually by owning a certain equity capital stake. An equity capital stake of 10% or more is normally considered as the threshold for the control of assets.
? A foreign affiliate is an incorporated or unincorporated
enterprise in which an investor, who is a resident in another economy, owns a stake that permits a lasting interest in the management of that enterprise.
FDI
? Foreign direct investment (FDI) is defined as
“the category of international investment that reflects the objective of obtaining a lasting interest by a resident entity in one economy in an enterprise resident in another economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence by the investor on the management of the enterprise.”(IMF )
As per international bodies like IMF, UNCTAD and OECD, FDI is calculated with three components:
? Equity capital
? Reinvested earnings ? Intra-company loans.
Global Trends
? Developed country TNCs remain the leading sources
of FDI (84% of global outflows). ? Emergence of more TNCs from developing world ? FDI inflows to developing economies is at highest level ? FDI outflows from developing economies gaining ground ? Increased cross-border Merger & Acquisitions ? Marked increase in natural resources related FDI ? Increasing role of developing countries in Bilateral Investment treaties and Double Taxation treaties
What is R&D?
? According to international guidelines by OECD, R&D comprises creative work “undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications”.
? 3 kinds – Basic Research, Applied Research &
Development
Reasons for encouraging R&D
? Innovative activity and capabilities are essential for
? ? ? ? ? ? ?
economic growth and sustainable development. Here, R&D is one source of innovation To introduce new products or processes To link up to the global technology and innovation networks led by firms. To access foreign pools of research talent Reduce R&D costs and Speed up the process of technology development. Better infrastructure Information and communications technologies.
R&D – An investment for the future
? Competence ? New knowledge ? New business models ? Networking ? Innovations: products and services, methods and processes, organisational innovations ? Start-ups, new business areas and services ? Growth and globalisation of companies ? Productivity ? Renewing business structures ? Affluence ? Regional vitality ? Employment ? Environment and health ? Security and safety ? Social well-being
? R&D investments
Investments
Results
Direct effects
Impact on national economy and society
Role of TNCs in R&D
? Transnational corporations alone can engage in
international generation of innovations by:? R&D and other innovative activities both in home and
host countries. ? Acquisitions of existing R&D units ? Greenfield R&D investment in host countries.
R&D Internationalization
• R&D internationalization includes the global allocation of
R&D resources and the international diffusion of R&D achievements. • In terms of the flows of R&D resources and achievements, it includes the outflow from host country to overseas as well as the inflow from foreign countries to home country.
The beginning (1960s)
First wave – Adaptive R&D
1970s
Second wave
1980s
Global, corporate, Regional technology units
1990s
Location outside industrialized world
Global R&D now
The 3 largest R&D sectors globally are :
? IT and electronics ? Automotives ? Pharmaceuticals
R&D is concentrated in the Triad – US, EU and Japan
Source: Booz Allen Hamilton
Source: Booz Allen Hamilton
Gross Domestic Expenditure (bn$ PPP), 1981-2006
Japan United States EU-15 China
on
Germany
R&D
350
300
250
200
150
100
50
0
Gross expenditure R&D($bn)
on
R&D
and
business
enterprise
Source: UNCTAD
Industry composition of R&D by majority-owned foreign affiliates of United States TNCs, 2002
Source: UNCTAD
R&D by sectors
Source: International R&D scoreboard
Patents-to-R&D by sectors
Source: International R&D scoreboard
R&D by companies
Company Pfizer Ford Motor Johnson & Johnson Microsoft DaimlerChrysler Toyota Motor GlaxoSmithKline Siemens General Motors Samsung Electronics Intel Sanofi-Aventis Country USA USA USA USA Germany Japan UK Germany USA South Korea USA France Rank 1 2 3 4 5 6 7 8 9 10 11 12 £m 3,882.59 3,678.73 3,640.41 3,638.36 3,526.48 3,484.71 3,457.00 3,384.99 3,372.16 3,139.72 3,000.72 2,967.26
IBM
Volkswagen Roche Novartis Nokia Merck Matsushita Electric Robert Bosch
USA
Germany Switzerland Switzerland Finland USA Japan Germany
13
14 15 16 17 18 19 20
2,899.55
2,856.76 2,757.94 2,740.65 2,501.01 2,443.75 2,421.83 2,289.45
Source: BERR
R&D by industry
R&D in Manufacturing Industry. Manufacturing firms have
made the majority contribution in R&D.
Examples of TNCs in mfg.R&D
? General Electric –the largest TNC in the world – employ
2,400 people in areas as diverse as aircraft engines, consumer durables and medical equipment. ? Pharmaceutical companies such as Astra-Zeneca,Eli Lilly, GlaxoSmithKline, Novartis, Pfizer and Sanofi-Aventis all run clinical research activities in India. ? General Motors (GM) in Brazil competes with other GM affiliates in the United States, Europe and Asia for the right to design and build new vehicles. ? 700 R&D units in China. Companies include Motorola,Cisco.
• For R&D purposes mfg. industry is decided into 4 groups:
R&D in services
? Traditional assumption that services do not innovate ? The trend today is changing. Services are innovating today in
the broader sense in both processes (organizational change) and products (new services).
? With the advent of ICTs the R&D in services is significantly
increasing at a rate of 29% appx. every year.
? Financial services have seen a significant rise in R&D with the
introduction of exotic financial products.
? Data on services R&D is patchy but on a majority they suggest
that R&D in services is rising in most economies
R&D-Business performance link 1.IT Software
2. IT Hardware
3. Other sectors
Types of R&D in developing countries
? The foreign affiliates undertake: ? Adaptive R&D ? Innovative R&D linked to production for local or regional markets ? Global innovative R&D for new products/processes, or for basic research ? Technology-monitoring R&D.
R&D by TNCs in developing world
? Motorola’s 6 out of 19 R&D centers are in developing
countries ? Mexico – assembly work reliant on parent ? Brazil – adaptive R&D (auto parts) ? China – Microsoft, GE, Nokia, Siemens, GM ? Korea, Taiwan – Chip design ? India – Flextronics, Microsoft, Pfizer, Astra Zeneca, Novartis, GSK
National Policies
? The ability of companies to innovate is intrinsically
linked to the environment in which they operate.
? Particular policy attention is needed in four areas: ? availability, cost and quality of human resources ? role of public research ? intellectual property rights (IPRs) ? competition policy.
Human Capital
? Developing skilled resources ? Importing human resources
Public Research
? Basic research ? Enterprise R&D linked with public R&D efforts
IPRs
? Patents and trade secrets
Competition policy
? Empirical +ve correlation between competition and
innovation ? M&A
Examples
? In Singapore, a model of joint training institutions
developed in 1970 to fulfil skilled labour requirements and anticipate future needs of industry. Tata, Philips, ABB were some of the participants. ? Countries can involve foreign affiliates by encouraging them to participate in joint projects with universities and institutions. ? European countries have special programmes, tax rules and other measures to attract foreign skills. ? Industrial Technology Research Institute , Taiwan
Tools and measures
? Investment promotion Agencies ? Korean S&T ? Performance Requirements ? Chinese auto industry ? R& D incentives ? Fiscal ? Financial ? Science and Tech parks ? Strengthening of IPRs ? Reduced tariff on imported R&D equipments
International Conventions
? WTO commitments for member nations in the field of
R&D covers three areas:
? ?
?
Natural sciences Social sciences & Humanities Inter-disciplinary R&D
? TRIPS
?
Minimum standards and flexibilities
Potential benefits
Host country ? Improved structure and performance of the NIS ? Contribution to human resource development (R&D employment, training, support to higher education, reverse brain drain effects) ? Knowledge spillovers ? Contributions to industrial upgrading Home country ? Improved overall R&D efficiency ? Reverse technology transfers and spillovers ? Market expansion effects
Potential costs
Host Country
? ? ? ? ?
Downsizing of existing local R&D or losing control of technology Unfair compensation for locally developed intellectual property Crowding out in the labour market, potential harm to basic research Technology leakage Race to the bottom and unethical behavior
Home Country
? “Hollowing out” of domestic R&D base ? Disappearance of certain R&D jobs ? Technology leakage
R&D - India
? Over 100 MNCs with R&D centres in India
? ~70% set up since 2000 ? Concentrated in: Pharmaceuticals, Hardware,
Automotive, Industrial & Medical equipments, Aerospace, Consumer electronics ? R&D mainly in the government sector: defence, agriculture, space and infrastructure ? Key new areas: Biotechnology, Clinical research
Conclusion
? TNCs are dominant players in global R&D, and their R&D is being increasingly
internationalized.
? The internationalization of research and technology is still characterized by
“Triadisation”
? It has got important implication for developed countries as well as world economy
as a whole
? Benefits do not appear automatically but it depends on the absorptive capacity of
the host country
? In the short to medium term most developing countries are not in a position to
benefit from R&D internationalization
? Vital long-term policy issues that need to be addressed now.
References
? World Investment Report 2005 (UNCTAD)
? The Global Innovation 1000 (Booz Allen Hamilton
Inc.) ? www.berr.gov.uk ? www.unctad.org ? www.oecd.org ? www.ft.com
THANK YOU
doc_738550307.pptx