R&D Strategies of MNCs in India

R&D Strategies of MNCs in India

Isolation or Integration?

N Mrinalini, Pradosh Nath, G D Sandhya

would also determine the extent of the penetration of these centres through their linkages in the host country innovation system. A highly innovative industry in the host country would attract an MNC to link up with local ﬁ rms to leverage beneﬁts for new product or

India has emerged as one of the major destinations for foreign direct investment in research and development. As a host country, does India gain from the FDI inﬂ ow into R&D? Does it help build its innovation capabilities? It appears that the R&D centres of the MNCs operate in isolation and use India as a human resource hub for the MNCs’ global R&D activities.

N Mrinalini (nmrinalini@nistads.res.in), Pradosh Nath (pradoshnath@nistads.res.in) and G D Sandhya (gdsandhya@nistads.res.in) are scientists at the National Institute of Science Technology and Development Studies, New Delhi.

Economic & Political Weekly

march 31, 2012

esearch and development (R&D) was traditionally considered to be a centralised core activity of a ﬁrm. The disintegration of R&D and its spread to various locations opened up several issues related to the changes in the strategies of multinational corporations’ (MNCs) R&D activities.

R&D internationalisation is not a new phenomenon. As early as in the 1970s, Ronstadt (1977) and Mansﬁeld et al (1979) had looked at the nature of R&D activities undertaken by United States (US) MNCs in their foreign locations: “In early 1970s about one-half of the industrial R&D performed in Canada and about one-seventh of the industrial R&D performed in the United Kingdom and Germany were done by US-based ﬁ rms” (Mansﬁeld et al 1979). With an increasing need for innovation to keep pace with growing competition coupled with a human resource crunch in the home country, MNCs, especially from Sweden, initially looked for the scope for expansion of R&D activities in other developed countries for leveraging both skilled manpower and R&D infrastructure in the developed economies. It has been observed that in addition to the cost advantage and availability of highly skilled scientiﬁc and technological manpower, the research strength at the universities and research institutions has been one of the major attractions for MNCs seeking a particular location in the developed countries to gain knowledge from a similar or more advanced scientiﬁc and technological knowledge base. Cantwell observed that a highly innovative environment leads to knowledge competition, which, in turn, results in undertaking high-end R&D (Cantwell 1987). The nature and type of R&D activity that MNC R&D centres would undertake in a particular location

vol xlviI no 13

process development (Chen 2007; Ernst 2006). Hakanson and Nobel (1993) have observed:

Supply conditions in the market for engineers and technical knowledge may in some foreign countries be so favourable that they induce companies to set up local research establishments to ‘tap into’ the local scientiﬁc infrastructure, be it in terms of labour market for scientists and engineers, privileged access to local universities and research institutions, etc.

The choice of overseas location for R&D is, therefore, a strategic decision guided by expectations from locations and possibilities of leveraging the capabilities of the host countries (Ronstadt 1977; Terpstra 1977; Kuemmerle 1997, 1999).

During the ﬁrst phase of globalisation of R&D (mainly from one developed country to another), the concern was whether through the foreign R&D activities in foreign shores the home country’s knowledge advantage was getting transferred to the host country institutions. It was observed that most of the research activities undertaken were of an adaptive in nature and so the scope for transferring the knowledge advantage was limited. It was around the mid-1980s that the global spread of MNC R&D centres was growing and the nature of it was changing, i e, even core R&D activities and not just the adaptive research was being performed in other foreign locations (Cantwell 1989; Niosi 1999; Florida 1997; Hakanson 1981; Odagiri and Yasuda 1996).

This change and also the growing pattern of global foreign R&D investments drew greater attention from researchers, governments and policymakers to understand factors that drive R&D activities overseas and their implications for the host and home country innovation systems. Various studies have unveiled several dimensions of globalised R&D a ctivities focusing mainly on issues related to the organisation and coordination of R&D centres in different locations, the choice of location, factors that attract MNCs to a particular country/location, etc (Pearce 1988, 1989; Hakanson 1981; Hakanson and Nobel 1993; Granstrand et al 1992; Dunning 1992; Cantwell 1987). The strategy, however, changed course soon. By early 2000, MNCs were seeking new shores in the developing economies. MNCs from the US were the trendsetters in this regard. The US ﬁ rms’ overseas R&D activities had increased from 3% in 1994 to 10% by 2002 (UNCTAD 2005a).

The new trend has raised new concerns. What are the guiding factors behind this new-found advantage in the developing economies like China and India? Is it the access to the market, human resources and/or R&D infrastructure? What could be the possible gains of the developing host countries from the presence of the MNC R&D centres? How do the MNC R&D centres integrate or interact with the innovation systems of the d eveloping host countries? This article attempts to address some of these questions in the Indian context.

MNCs and Emerging Economies

As observed by the United Nations Conference on Trade and Development (UNCTAD 2005b), “the expansion of R&D into selected developing countries is a reaction to increased competition, which forces ﬁrms to innovate more at lower cost. TNCs are especially attracted to host countries that have the appealing combination of low wages and large pools of skilled workers”.

The emergence of information, communications technology (ICT)-based network technology that made distant communications possible in real time opened up the opportunities for accessing resources and management and monitoring of corporate activities from overseas (James 2002). Countries with reasonable ICT infrastructure were the best candidates for overseas operations of MNCs. First came the manufacturing set-ups in developing countries where the availability of skilled manpower and assurance of physical infrastructure like water, electricity and transport network were reasonably ensured. Manufacturing activities were followed by R&D activities through

Figure: Conceptual Model of Linkages and Outcome
Local R&D/Universities
Outcome • Move up the value chain • Global market for R&D capability • Access to global network • Human Resource • Spin-off firms	Modes • Contract research • Joint research programmes • New curriculum dev	Types of Linkages • Joint research labs • Special training centres • Centres of excellence Foreign R&D Types of Linkages • Joint product development • Contract for product development	Modes • Joint venture • Collaboration • Technology transfer	Outcome • Access to global market • Competitiveness • Spin-off firms • Skill dev
Local Production System

Source: Mrinalini and Wakdikar (2008).

setting up of R&D centres and establishing linkages with the R&D systems of the host countries. The enabling conditions for expanding R&D activities in developing countries, therefore, are the availability of R&D infrastructure and science and technology (S&T) resources that include manpower with skills to be employable in the R&D activities. It is this enabling condition that has made China and India to become the most favoured destinations of MNCs R&D activities overseas.

The literature on various issues related to MNCs locating their R&D centres in the emerging economies started appearing very recently. China is the main focus of these studies. In 1997, Reddy had dealt with MNCs in India and had observed that the linkages of MNCs with ﬁrms were negligible. At the same time, MNCs were setting up research centres for certain adaptive type of R&D activities. In addition, certain MNCs were also setting up their global R&D centres in India (Reddy 1997, 2000 and 2005). The studies on the dynamics of these R&D centres (both adaptive and global R&D), however, are yet to become popular. In a conceptual paper, Mrinalini and Wakdikar (2008) and Mrinalini (2009) have suggested a framework for looking at the linkages and their impact on Indian system. Their concern was to understand the ways MNCs R&D can have a discernible impact on local technology generation and production systems. The methodological focus of the paper was linkages between the production and technology systems of the host country

march 31, 2012

and the MNCs R&D activities (as shown in the Figure).

This was in consonance with several studies on China that had studied the impact of the presence of MNC R&D centres on China’s innovation system by looking at the linkages between the MNC R&D centres and China’s R&D and production system and indicated that impacts or outcomes depend on the modes of linkages and also on the types of the host country actors (universities, R&D organisations, ﬁrms, etc) (Chen 2006, 2008; Quan 2010; Sun et al 2006, 2008; Sun 2010). The study by Quan (2010) examines the linkages between China’s university system and the MNCs to understand the process of expected knowledge diffusion.

For the present study, we have used the linkage approach to understand the principal dynamics of the MNC R&D activities in India. The methodological details of the study are elaborated in the following section.

Data and Methodology

This article is based on a primary survey conducted during 2008-09 as a part of a Technology Information, Forecasting and Assessment Council (TIFAC)-supported project on the impact of the presence of MNC R&D centres on the Indian R&D and production system. The study has identiﬁed 706 foreign ﬁrms investing in R&D in India. Our preliminary details of the 706 ﬁrms show that 117 (16.57%) ﬁ rms have various forms of linkages with the actors in Indian innovation and technology/knowledge generation system,

vol xlviI no 13

Economic & Political Weekly

NOTES

namely, educational institutions, R&D institutions and domestic ﬁrms. We arrived at this number of 117 by scanning through all business news, company reports, India Business Insight Database (IBID), company websites and also through

Table 2: Investment Size-wise Classification of MNCs Having Linkages with Indian Institutions

Investment Range (in $ billion) IT PH AU Total

Above 1 bn 1 1 2

Less than 1 bn to 500 mn 2 x 1 3

Less than 500 mn to 100 mn 11 2 2 15

Less than 100 mn to 50 mn 9 3 x 12

For selection of ﬁrms for the study, instead of any sampling method, we tried to include as many ﬁ rms as possible from the high investment size groups in each cluster and each segment. The result was the numbers of ﬁrms in each cluster

personal visits and interactions with Less than 50 mn to 10 mn 28 8 1 37 and sector as shown in Table 4. We have

industry people, research institutions and educational institutions. The rest of the 706 ﬁrms, grouped as not having linkages with any Indian actors, are those which have their interactions with the Indian systems limited to recruitment of manpower from various educational institutions. Table 1 presents the broad overview of the linkages that these 117 MNCs have with various Indian institutions.

Table 1: Linkages of MNCs with Indian Actors

Less 10 mn 11 15 1 27

Total 62 29 5 96

Source: The study, collated and constructed from various business news, IBID, company websites.

institutions formed the population for the survey. Since we expect that ﬁ rms having larger R&D investment will r equire more extensive and intensive linkages with the Indian institutions, we try to draw our sample as much as studied total 38 MNCs: 26 from software and IT industry, 10 from pharma and biotechnology industry and two from the auto industry. There are 73 ﬁ rms with less than $100 mn investment. Our study has covered 22(30%) of the 73 ﬁrms in this investment group. There are 20 ﬁ rms above $100 mn investment, and of that the study covered 16 (80%) ﬁ rms. Given the small size of the population, the large percentage of coverage was essential for

Sector Educational Institutions Research Institutions Indian Firms Total

fair representation of the population.

Aerospace -2 2 4

Besides MNCs, we have also included

Auto industry (AU) 2 1 5 8

Indian institutions/ﬁrms having con-

Chemicals -2 2

tract research or joint research arrange-

Electronic components -1 1 Machine and equipment -1 1 2

ments with MNCs. The selection of such

Others 2 2 ﬁrms was based on the feedback about

Pharma and biotech (PH) 1 3 27 31 such arrangement from the MNCs that Software and IT services (IT) 43 8 47 98

we visited for the purpose of the study.

Total 46 18 84 148

The study also covered the spin-off

The number 148, in the above table refers to the total number of linkages by 117 MNCs. It also means that some MNCs have more than one type of linkage with more than one entity. ﬁ rms/start-up ﬁrms from the group of Source: The study*, collated and constructed from various business news, IBID Database, company websites.

ﬁrms having collaboration with MNCs.

The size-wise classiﬁ cation of MNCs possible from the ﬁrms in the higher Such ﬁrms are not many in number and reveals interesting features. Foreign investment size groups. Firms for the are mostly observed in the software and direct investment (FDI) in R&D in India study were also chosen to have fair rep-IT industry group. Table 5 (p 76) presents has a typical feature that can be described resentations of the clusters. Table 3 gives sector-wise types of the ﬁ rms studied. as a large number of small investments the cluster-wise and investment size-Table 6 (p 76) gives the cluster-wise and a small number of large investments. wise number of ﬁrms for the study. details of the ﬁrms studied. Total 63

Most of the investments are below $50 Table 3: Cluster-wise Distribution of the MNCs Having Linkages with Indian Institutions

million (mn). The intuitive understand-	Cluster	Bangalore	Chennai	Hyderabad	NCR	Mumbai/Pune	Total
ing is that the large number of small investments in R&D is actually for lowend R&D activities that neither require	Investment (in $) 1 bn and above <1 bn-1/2 bn <500 mn-100 mn	IT x 1 3	PH 1 x x	AU X 1 1	IT x x 1	PH X X X	AU x x x	IT x x 4	PH x x x	AU x x x	IT 1 x 2	PH x x x	AU x x x	IT x 1 1	PH x x 2	AU x x 1	2 3 15
high-skilled manpower nor require link	<100 mn-50 mn	6	2	X	1	X	x	1	x	x	1	x	x	x	1	x	12
ages with institutions of the high standard	<50 mn-10 mn	9	3	X	4	X	x	6	3	x	2	x	x	6	2	1	36
R&D infrastructure.	<10 mn	5	2	X	1	2	x	1	3	x	3	1	x	2	4	1	25
Out of 117 ﬁ rms 96 (82.05%) are from	Total	24	8	2	7	2	x	12	6	x	9	1	x	10	9	3	93
the three sectors, i e, software and information technology (IT) industry (62, 13.84% of the total FDI in R&D ﬁ rms), pharma and biotech (PH) (29, 33.72% of	Out of 96 we have total 93 firms in the clusters. Source: The study, collated and constructed from various business news, IBID, company websites. Table 4: Cluster-wise and Sector-wise Distribution of the Studied Firms Cluster Bangalore Chennai Hyderabad NCR Investment (in $) IT PH AU IT PH AU IT PH AU IT PH AU	Mumbai/Pune IT PH AU	Total
total FDI in R&D ﬁrms) and auto industry	1 bn and above	x	1	X	x	X	x	X	x	x	x	x	x	x	x	x	1

sector (AU) (ﬁ ve, 19.23% of the total FDI in R&D ﬁ rms). Table 2 presents investment size-wise classiﬁcation of 117 ﬁ rms that have various types of linkages with Indian institutions.

These 96 ﬁrms in the selected sectors having linkages with the Indian

Economic & Political Weekly

march 31, 2012

<1 bn-1/2 bn 1 x 1 x X x X x x x x x 1 x x 3 <500 mn-100 mn 7 x X 2 X x 1 x x 1 x x x 1 x 12 <100 mn-50 mn 4 1 X x X 1 X 1 x 1 x x x 1 x 9 <50 mn-10 mn 2 1 X x X x X x x 1 x x 1 x x 5 <10 mn 2 2 X 1 X x 1 x 2 x x x x 8 Total 16 5 1 3 x 1 2 1 x 3 2 x 2 2 x 38

Source: Based on the study, collated and constructed from various business news, IBID, company websites, Part 1, Tables 1

and 2.

vol xlviI no 13 75

ﬁrms were included: 38 MNCs, 21 Indian	projected manpower requirement as de
ﬁrms with various types of collaborations	clared by the company along with the
with MNCs, and four spin-off ﬁ rms. Again	declaration of the investment in a parti
37 ﬁrms were from the software and IT	cular project in India. The data on jobs
sector, with seven Indian ﬁ rms having	created, therefore, is in most of the
collaborative arrangements with MNCs,	cases, an estimate. In reality, in some
and four spin-off ﬁrms. Pharma and	cases, jobs created are more than what
Table 5: Sample Firms and Types of Firms Studied	was estimated, as in the case of GE
Firm Type Sector Total	which has expanded its R&D centre
IT PH AU MNCs 26 10 2 38	much beyond its initial declaration. Sim-
Indian contract research	ilarly, Hyundai in 2009 declared a $500
organisations (CROs) and firms	mn R&D set-up in Hyderabad. This was
with collaborative research 6 10 4 20	in addition to their existing set-up in
Indian spin-off/start-ups 5 5 Total 37 20 6 63	Chennai. The Hyderabad centre is to become their global R&D hub and will
biotechnology sector had 10 MNCs and 10	create more employment.
Indian ﬁrms in the study. Six ﬁ rms from	Total job creation during 2003-09 was
the auto industry were included, of which	2,47,403 on an investment of $29.23 bn.
two were MNCs and four Indian ﬁ rms.	Software and IT sector had a share of
As we have mentioned earlier, MNCs	74.17% of the total employment created.
having extensive and intensive R&D	Among other sectors, the auto industry
linkages with Indian actors have special	had a share of 5.29% and pharma bio
preference for some centres of excellenc	technology a share of 3.31%. The soft
es in India. Those are Indian Institutes	ware and IT sector has a share of 50.30%
of Technology (IITs), International Insti	of the total FDI in R&D, followed by
tutes of Information Technology (IIITs),	the auto industry 9.88% and pharma
and the Indian Institute of Science (IISc).	biotechnology sector 9.24%. Employment
Such linkages are most visible in case of	created per million US dollar invested
the software and the IT sector. Of the	shows that the software and IT sector is
IITs, IIT Kharagpur has a large number of	the highest employment generator at
R&D collaborations with MNCs, and were	(12.83), whereas the pharma and bio
therefore covered in the study. IIITs in	technology sector (2.97) and auto
Hyderabad and Bangalore and IISc	i ndustry sector (4.55) are more capital-
Bangalore also have close interactions	intensive investments.
with MNCs and were covered.
	MNCs Collaboration with
Job Creation	Indian Institutions
The information on jobs created has	A detailed investigation of the sample
been collated from various sources. The	ﬁrms has been done to understand the
main source, however, has been the	pattern of the linkages, their sectoral

Table 6: Cluster-wise Distribution of Types of Firms Studied

Types of Firms	Bangalore		Chennai		Hyderabad		NCR		Mumbai/Pune	Total
	IT	PH	AU	IT	PH	AU	IT	PH	AU	IT	PH	AU	IT	PH	AU
MNC	16	5	1	3		1	2	1		3	2		2	2		38

variation and their impact on Indian institutions. The sample ﬁrms have been analysed to delineate the nature, type and extent of linkages. MNCs’ linkages have been examined separately for R&D purposes and for human resources needs of the MNCs. While for the former linkages are essentially for research activities of various types, and mainly with the premier institutions having considerable R&D infrastructure, the need for human resources requires altogether different nature of linkages with the educational institutions. Table 7 shows the various modes of linkages initiated by the MNCs with the educational institutions in India.

All the MNCs have linkages with educational institutions; recruitment of manpower remains the most visible reason. The ﬁrms in software and IT services sector have more intensive interactions with educational institutions in comparison to pharma-biotech and auto i ndustry sector.

MNCs in Software and IT Services: They have formal collaborations with premier educational institutions for students’ capability enhancement, collaborative research work, internships and fellowships to meritorious students, handson experience with toolkits, joint centres for research work and students’ training, curriculum development, and professorial chairs. With local educational institutions (mainly engineering colleges), these MNCs have linkages for curriculum development, training programmes for both teachers and students, setting up of certain specialised courses, distribution of tools and kits to students for hands on experience. Their collaboration with R&D institutions is few and short

CRO 3 4 1 1 2 2 3 1 1 2 20 term in nature where again it is with Indian spin-off/

students and professors for encouraging

start-up 4 1 5

PhD programmes.

Total 23 9 1 4 1 3 5 4 3 3 2 3 2 63

Table 7: Nature of Linkages in	Premier Educ	a	tutions in	Various Sec	tors with t	he MNCs	MNCs in Pharma and Biotech: They
Sector	Merit Scholarship/	Imparting tional Insti	New	Professors	Recruitment	Providing	have collaboration for research projects
	Internships to	Training	Curriculum	Chairs		Toolkits/Practice	with premier educational institutions,
Software and IT services Pharma and biotech Auto industry sector Total	Student 18 2 – 20	5 – – 5	3 – 1 4	3 1 1 5	20 – 2 22	School 4 1 1 6	and also collaboration with universities for research projects. They have collaborative projects with research institutions and national laboratories and other
Source: Primary survey.							research institutions. With the Indian
76						march 31, 2012	vol xlviI no 13 Economic & Political Weekly

Source: Based on survey.

NOTES

ﬁrms, they have collaborative research setups and also contract research.

Auto Industry: Not much collaborative work with premier or other educational institutions. There are, however, cases of collaborations with research institutions for joint product development.

Linkage for R&D Collaboration

For R&D collaboration modes of interactions are different. As shown in Table 8, apart from funding research projects, there are cases of MNCs investing in R&D institutions for upgradation of research infrastructure and in some cases jointly

Table 8: Types of Linkages for MNC R&D Activities

Source: Based on primary survey.

developing research labs for deﬁ ned purposes. As expected, the software and IT sector is most active in R&D collaborations. In the cases of pharma-biotech and auto sectors it is mostly limited to joint research projects.

Table 9 presents an overview of the Indian ﬁrms’ linkages with the MNC R&D set-up. It is evident that the MNC R&D system has insigniﬁ cant linkages with the Indian production system. Contract research is the most prominent in which India has much softer norms compared to many developed countries. Table 10 shows the collaboration with the national laboratories.

Table 10: MNCs with National Labs and Research Institutions
Sector	Collaborative Research
Software and IT services (IT)	3
Pharma and biotech (PH)	4
Auto industry sector (AU)	1

Source: Based on Primary Survey.

It is clear from Table 10 that the MNCs hardly have linkages with the r esearch institutions and they also emerged from the discussions that the academic institutions are preferred for research collaborations. The national labs are well

equipped both in human

resources and infrastruc-

Sector Project Joint Research Joint

Funding/ Project/ Infra-Research

ture. The national labs are

Sponsorship Research Work structure Lab

into R&D activities in vari-

Software and IT services (IT) 6 6 4 8

ous areas in which many of

Pharma and biotech (PH) 1 2 -

the MNC R&D centres in

Auto industry sector (AU) -2 -1 Total 7 10 4 9 India are operating. The

Source: Based on primary survey. MNCs R&D presence can be

l everaged by the national

Table 9: Indian Firms’ Linkages with MNC R&D Centres

Sector Centres Contract Contract Indianlabs through more focused withMNCs Research/ Research Spin-offs

collaborations and part-

Collaborative for MNCs and Research Start-ups nerships. Linkages be

for MNCs

tween the National Chemi-

Software and IT services (IT) 3 3 -5

cal Laboratory (NCL) and

Pharma and biotech (PH) 1 3 6

DuPont as well as National

Auto industry sector (AU) -4 --

Institute of Oceanography

(NIO) and Biogenus, the Colorado-based biotechnology company are some of the examples of the linkages.

The other side of the impact of the R&D activities of the MNCs is through the R&D output generated by these centres in the host country. Expected spillover effect on host countries’ innovation system is generated through the host country manpower that is engaged in the R&D activities in these centres. If the MNC R&D centres are engaged in high-end R&D activities, it is expected to be reﬂected in the patenting activities of the respective MNCs. A comparison between the MNCs’ patenting activities as reﬂ ected in global patenting on the one hand, and patents generated through the R&D activities in India, on the other, will indicate the importance of the R&D activities undertaken in India in the overall R&D value chain. Table 11 presents patentrelated information on the MNCs’ Indian and global operations. It is to be noted that out of 706 companies investing in India, only 74 companies have patents from India. Again the software and IT sector has the major share (54 companies). These 74 companies together have 2,14,686 global patents. And only 1,166 of those patents are from India. Again software and IT sector shares 749 of 1,166 patents from India. Another interesting revelation from Table 11 is that 63 ﬁrms out of 74 have less than 5% share of patents from India vis-á-vis their global patents.

Conclusions

The interesting dimension that is emerging from this study is that the MNCs do not have much linkages with the Indian institutions. Absence of linkage is more pronounced in the case of collaborations with research institutions. This means that for a new product development or any scientiﬁc or technological research input, they are not looking towards Indian production and R&D system. There is some sectoral variation observed with the IT sector linking more with the university system and this is the sector which is investing almost around 50% of total investment in R&D, followed by the pharmaceutical and auto sector. Employment created per million dollars invested shows that the software and IT sector is the highest employment generator. The linkages with the Indian systems show that the software and IT sector, being more dependent on human resources, has a wide variety of interactions with educational and R&D institutions, whereas in the pharma and biotech sector it is more with the Indian ﬁrms, and to some extent, with the research institutions. In the auto industry sector, again it is more with the Indian ﬁrms. In all the three sectors, the linkages with research institutions are not very prominent. The patent information indicates that the R&D activities undertaken by MNCs in India in comparison to their global R&D activities do not reﬂect much importance of their Indian set-ups, or their interest in highend R&D initiatives. The patent data analysis also clearly shows that the ﬁ rms are not into high-end R&D. The other interesting feature is that the MNCs, especially in the IT sector, have linkages with the university system, where again their emphasis is on creating human resources for their requirement by providing training, etc. The IT industry, in particular, faces a severe crunch of quality manpower. They try to overcome the problem by introducing new curriculum, encouraging students to take up specialised courses, familiarising the students in speciﬁc toolkits at the teaching level, etc. They also provide incentives through scholarships, internships, and also through creating special faculty positions at the university/institution levels. From the study it emerge that the MNCs are not looking for knowledge advancement as their linkage with the educational institutions is for having access to human resources and to enhance the capability of human resources for their future requirement. So, MNCs are drawn to India to access human resources, which has been stated by Reddy and UNCTAD for doing their R&D activities which are not the high-end R&D (Reddy 2000: 202; UNCTAD 2005a). At the same time, they are collaborating with the university system for training them for their R&D requirements for the future, which could be a resource in the future for high-end R&D. It looks like India is emerging as a human resource hub for the MNCs for their global activities.

Table 11: Patenting Behaviour of Firms Bringing in FDI for R&D
Sectors	No of R&D FDI	Patent from India	Global Patent	No of Companies Having % Share of Patent from
mode among a few collaborations be-	Companies			India in Respective Total Global Patent
tween the two sides. However, in the					<1	1<5	5<10	10<50	>50
software industry, there are a few cases	Software and IT (IT)	54	749	1,29,385	22	21	4	3	4
of spin-off ﬁrms, which can be claimed	Pharma and bio (PH)	4	19	3,413	3	1
as the direct effect of the MNCs’ linkages	Auto industry sector (AU)	3	5	12,460	3
with the Indian actors in the R&D systems.	Machine and equipment	5	47	12,583	4	1
It is evident from Table 9 that the	Electronic compts	1	1	338	1
	Metals and minerals	1	5	1,992	1
MNCs need, the Indian ﬁrms for some sort	Chemical	3	4	6,285	3
of contract research. In case of pharma-	Others	3	336	48,230	2	1
biotechnology sector such association is	Total	74	1,166	2,14,686	39	24	4	3	4
becoming important for clinical research,	Source: Delphion Database.
Economic & Political Weekly		march 31, 2012	vol xlviI no 13				77

[This article is based on a study, “Impact of FDI in R&D on Indian R&D and Production System”, by the National Institute for Science Technology and Development Studies, and supported by the Technology Information, Forecasting and Assessment Council. The primary survey was completed in 2010. The study covers the period 2003-09. Authors acknowledge the support from Kiran Zacharia; Abhishek Kumar ungrudgingly helped in processing and tabulation of the data. The authors also acknowledge the assistance provided by Rammi Kapoor in project work. Observations and suggestions from anonymous reviewers of the review committee constituted by TIFAC helped in conceptualising the article.]

References

Cantwell, J A (1987): “The Reorganisation of European Industries after Integration: Selected Evidence on the Role of Multinational Enterprise Activities”, Journal of Common Market Studies, 26 (2), 127-51.

– (1989): Technological Innovation and Multinational Corporations (New York: Blackwell).

Chen, Y C (2006): “Changing the Shanghai Innovation Systems: The Role of Multinational Corporations R&D Centers”, Science, Technology & Society, 11(1), pp 167-07.

– (2008): “Why Do Multinational Corporations Locate Their Advanced R&D Centres in Beijing?” Journal of Development Studies, 44 (5), pp 622-44.

Chen Shin-Horng (2007): “The National Innovation System and Foreign R&D: The Case of Taiwan”, R&D Management, 37(5), pp 441-53.

Dunning, J H (1992): “Multinational Enterprises and the Globalisation of Innovatory Capacity” in O Granstrand, L Hakanson and S Sjolander (ed.), Technology Management and International Business: Internationalisation of R&D and Technology (Chichester: John Wiley and Sons), pp 19-51.

Ernst, D (2006): “Innovation Offshoring: Asia’s Emerging Role in Global Innovation Networks”, a special report prepared for the East-West Centre and the US-Asia-Paciﬁ c.

Florida, R (1997): “The Globalisation of R&D: Results of a Survey of Foreign-afﬁ liated R&D Laboratories in the USA”, Research Policy 26, pp 85-103.

Granstrand, O, L Hakanson and S Sjolander, ed. (1992): Technology Management and International Business: Internationalisation of R&D and Technology (The UK: John Wiley and Sons).

Hakanson, L and R Nobel (1993): “Foreign Research and Development in Swedish Multinationals”, Research Policy, 22, (5-6), pp 373-96.

Håkanson, Lars (1981): “Organisation and Evolution of Foreign R&D in Swedish Multinationals”, Geograﬁska Annaler, Series B, Human Geography, 63(1), pp 47-56.

James, J (2002): Technology, Globalisation and Poverty (Cheltenham, UK: Edward Elgar).

Kuemmerle, Walter (1997): “Building Effective R&D Capabilities Abroad”, Harvard Business Review, March-April, pp 61-70.

– (1999): “The Drivers of Foreign Direct Investment into Research and Development: An Empirical Investigation”, Journal of International Business Studies, 30(1), pp 1-24.

march 31, 2012

Mansﬁeld, E, D Teece and A Romeo (1979): “Overseas Research and Development by US-Based Firms”, Economica, 46, pp 187-96.

Mrinalini, N and Sandhya Wakdikar (2008): “Foreign R&D Centre in India: Is There Any Positive Impact?”, Current Science, Vol 94, (4), pp 452-58.

Mrinalini, N (2009): “Changing Innovation Dynamics in India: The Role of the Foreign Direct Investment in Research and Development Activities”, International Journal of Indian Culture and Business Management”, Vol 2, (1), pp 95-110.

Niosi, J (1999): “The Internationalisation of Industrial R&D From Technology Transfer to the Learning Organisation”, Research Policy, 28(2-30), pp 107-17.

Odagiri, H and H Yasuda (1996): “The Determinants of Overseas R&D by Japanese Firms: An Empirical Study at the Industry and Company Levels”, Research Policy, 25, pp 1059-79.

Pearce, R D (1988): “The Determinants of Overseas R&D by US MNEs: An Analysis of Industry Level Data”, University of Reading, Department of Economics, Discussion Papers in International Investment and Business Studies, No 119.

– (1989): The Internationalisation of Research and Development by Multinational Enterprises

(London: Macmillan).

Quan, Xiaohong (2010): “Knowledge Diffusion from MNC R&D Labs in Developing Countries: Evidence from Interaction between MNC R&D Labs and Local Universities in Beijing”, International Journal of Technology Management,

Volume 51, Issues 2/3/4, pp 364-86.

Reddy, P (1997): “New Trends in Globalisation of Corporate R&D and Implications for Innovations Capability in Host Countries: A Survey for India”, World Development, Vol 25, No 11, pp 1821-37.

– (2000): Globalisation of Corporate R&D, Implications for Innovation System in Host Countries

(London: Routledge).

– (2005): “R&D Related FDI in Developing Countries: Implications for Host Countries”, pp 89-105, in Globalisation of R&D and Developing Countries – Proceedings of the Expert Meeting, Geneva.

Ronstadt, R C (1977): R&D Abroad by US Multinationals (New York: Praeger).

Sun, Y et al (2006): “Foreign R&D in Developing Countries: Empirical Evidence from Shanghai China”, China Review, 6 (1), pp 67-91.

– (2008): “Globalisation of R&D and China: An Introduction” in Y Sun M V Zedtwitz and D F Simon (ed.), Global R&D in China (New York: Routledge).

Sun, Y (2010): “Foreign Research and Development in China: A Sectoral Approach”, Inernational Journal of Technology Management, Volume 51, Issues 2/3/4, pp 342-63.

Terpstra, V (1977): “International Product Policy: The Role of Foreign R&D”, Columbia Journal of World Business, 12(4), pp 24-32.

UNCTAD (2005a): World Investment Report, United Nations Conference on Trade and Development, United Nations, New York.

– (2005b): Press Release, dated 29 September 2005, UNCTAD/Press/PR/2005/033.

available at

Uniquality

83, Janapath, Bapujee Bazar Bhubaneshwar 751 009, Orissa Ph: 2530064, 2530024

vol xlviI no 13

Economic & Political Weekly