Challenges of Organizing International Research & Development

Global R&D and innovation is mostly a matter of multinational companies (MNCs). With the exception of a few highly international SMEs (small and medium-sized enterprises) and so-called “born-global” start-ups, MNCs define the landscape of global innovation. Multinational companies determine the international division of labor with their production, R&D, marketing, and sourcing strategies; they transfer technologies and management skills, and they influence regional growth through foreign direct investments. Specifically:

In 2002, the 700 largest R&D spending firms of the world accounted for 46% of the worldwide total R&D expenditure, and 69% of worldwide business R&D expenditure (UNCTAD, 2005).

Some MNCs such as Ford, Toyota, DaimlerChrysler, Siemens, General Motors, or Pfizer spent more than US$ 5 billion on R&D in 2002 alone — each of them more than Brazil, Spain, Russia, or India. In fact, Ford (with US$ 6.8 billion in 2002) would be the tenth largest business R&D investor in a list including countries, ranked just behind Sweden (US$ 7.3 billion) but ahead of Italy (US$ 6.6 billion).

MNCs increased their foreign R&D from an average of 15% in 1995 to 18% in 1998 (Roberts, 2001); an UNCTAD survey found that in 2003, firms spent an average of 28% of their R&D budget abroad (UNCTAD, 2005).

At the country-level, foreign R&D is also growing: For instance, in the 1990s, German firms set up more overseas R&D sites than in the previous fifty years combines (Ambos, 2005), and Japanese overseas R&D increased more than tenfold from 0.3% of total Japanese R&D spending in 1986 to 4% in 2002 (UNCTAD, based on METI data).