Globalisation of R&D and Technology Markets

On the threshold of the 21st century an intensive debate about globalisation of R&D and technology markets is of crucial importance. Globalisation will carry on changing the framework for company strategies and subsequently for public policies. It will, in fact, contribute to global prosperity. However, the winners in a closely interlinked world economy will probably be those locations which, owing to competence and openness, become centres of information, communication and knowledge application. It is the overall attractiveness of a location which is important. Future national innovation policy will have to increase this attractiveness, not only by encouraging individual breakthroughs, but also by supporting innovative networks, while at the same time optimising a number of other locational factors in order to facilitate leading edge markets. Policies are beginning to react to these challenges, however, there is still a considerable need for orientation in this area.

In the last decade of the 20th century, the global economy is undergoing profound changes, but it is also clearly on a growth path, caused primarily by a new stage of global economic integration: globalisation. Globalisation means more than extensive elimination of trade barriers following the Uruguay Round. The reactions of companies are of central importance in this context — especially the following:

The growing integration of many countries in a world-wide division of labour, the decline of trade barriers and national regulations, as well as an increasing mobility of production factors are described today in public and scientific discussions as „globalisation”, in order to pinpoint a new quality in the internationalisation of the economy. On this general level the globalisation of industry encompasses the cross-border operations of enterprises in organising their research and development, production, in the procurement of materials and services, and their marketing and corporate finance activities.¹ The distribution of various corporate activities among different countries is regarded as a crucial characteristic — or a new quality. This particular circumstance distinguishes globalisation from the previous form of inter-nationalisation, in which a company was active in different countries, but could still be unmistakably assigned to one state of origin.² Today, it is increasingly difficult to pin a national label on internationally (globally) active companies. Traditionally, the international expansion of enterprises took place in the field of foreign trade, followed under certain conditions by direct investments abroad.³ This internationalisation of production through direct investments has greatly increased since the 80s. Parallel to this, the traditional modi operandi adopted to carry out research and development (R&D) have changed and the generation of technological innovations is being increasingly influenced by the generally acknowledged trend towards globalisation. Multinational enterprises are now, after sales and production, also internationalising their R&D. What significance and what consequences this development will have, however, is and remains controversial.

The first three post-war decades saw an historically unprecedented rise in OECD living standards, resulting in no small measure from closer integration of Member countries’ economies. Growth in the OECD area has slowed in the last two decades and its revival will depend on further liberalisation of their economies, including through domestic regulatory reform and other structural adjustments. High on the agenda is an increase of the flexibility of OECD markets — to facilitate adjustment to changing word market conditions without jeopardising macro-economic stability -and continued international liberalisation of trade and capital flows — to expand and deepen the integration of world markets. To realise the growth potential associated with the process of globalisation will depend as much on economic policy reforms in the OECD region as on complementary reforms in developing and transition economies outside the OECD area (henceforth referred to as non-member countries). In recent years, a growing number of non-member countries have come to recognise the potential offered by market-oriented reforms — involving stronger links with the global economy — to promote rapid economic development and improved living standards for their people. As their reforms bear fruit in faster growth, their importance as trade and investment partners of the OECD countries will grow steadily in the coming decades.

Linkages among countries or the increasing integration of the global economy has proceeded in phases since the end of World War II. The “shallow integration” of the early post-war decades was focused mainly on border barriers to trade flows. Reducing these barriers through successive rounds of GATT negotiations clearly involved some degree of constraint on governmental freedom of action but it was limited. Indeed the original concept underlying the GATT was to maintain a balance between domestic priorities and international obligations.

Parallel to the process of economic integration, as it has taken place over the last twenty years and particularly within the framework of the creation of the large European “Single Market”, European economies have been confronted by a significant increase in the degree of structural change at the world level. The last ten years can indeed be described as a period of historic, major structural change at the world level: the collapse of the former socialist countries and their rapid opening up to market-led economic incentives; the shift in world market growth from the North Atlantic OECD area to the Pacific basin area with an increasing number of Asian economies outperforming the developed countries’ growth performance; the creation of new regional trading blocks in North and South America, in Asia, in the Middle East and in Southern Africa, with more rapid growth in trade within than between such integrating trade areas; the surge in foreign direct investment in these trade blocks with large global firms aiming at presence in each of these markets; and last but not least the dramatic reduction in the costs of information and communication processing, opening up an increasing number of sectors to international trade and giving at least the impression of a dramatic reduction in physical distances — the world as a village.

In a world that in economic affairs is oriented by the keyword ‘globalisation’, not only are economic conditions themselves undergoing changes, but also the conditions for education and research, especially with regard to the connection between education and research, that is, the system of academic education. It is a legitimate question whether this system is educating adequately if local education has to satisfy global needs and if at the same time work, including scientifically distinguished work is becoming scarce and professional profiles are changing under the influence of economic and technological developments.

Making innovations is far from being easy. No one denies this. Making innovations for making innovations easier to do thus sounds like an impossible task! Still, in order for a company to excel, taking this task seriously is something worth the effort.

This paper is focused to the Japanese perspective on global development of R&D. It will provide some insight as to how top management in Japan views the globalisation of R&D and what their expectations are for Sony’s R&D efforts in Europe. Sony cannot be seen as a traditional Japanese company. Sony does not belong to a “Keiretsu”. It is a relatively young company and just celebrated its 50th anniversary last year. If one looks at Sony’s world-wide sales figures, the Japanese market generates only 28% of its sales. This is comparatively less than other Japanese multinationals. The U.S., including Canada, makes up some 30% of the sales, while Europe accounts for 22% and the rest of the world accounts for 20%. It is safe to say that Sony is among the most international companies in business today.

This paper presents an overview of what it means to work in a global organisation, and how a global organisation affects the national industry in Germany. The case in point is Hoechst Marion Roussel, the pharmaceutical company of Hoechst.

One can divide companies into three categories: Mice are companies which will always stay small and never grow. Gazelles are companies venture capitalists are looking for: These companies start small but have the potential to grow and use their potential. Elephants are large established companies which are not as flexible as small ones. This paper would like to present how to create gazelles in Germany or in Europe.