Presented By N.Mrinalini CSIR-NISTADS

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1 Νοε 2013 (πριν από 3 χρόνια και 9 μήνες)

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Presented

By

N.Mrinalini

CSIR
-
NISTADS




Flow of FDI for research and development (
R&D) activities

certain Issues and concerns


New trend since 90’s with emerging
economies like India and China attracting
more investment


What drives MNCs to invest in India and
China for their research and development
activities?


Implications on the host countries


Observations


R&D was traditionally considered to be core
activity of a firm. Its disintegration and its
spread to various locations brought in issues
related to MNCs strategies


Flow was initially from one developed country
to the other and more in highly innovative
sectors


Resource seeking or exploiting investments


Host country and Home country perspective



New trend since 90’s has been that India and
China are attracting more FDI and more
interesting is that the MNCs are investing for
their R&D activities in these two countries


Growth in number of R&D
centres

in India and
China


Investment concentrated in few cities and
selected few sectors

China

Euro

area

Japan

Russia

USA

UK

India

New

EU

entrants

Brazil

New
consumer
markets

49

9

2

5

7

2

9

15

4

Low
-
cost
Labour

50

2

0

3

1

0

29

12

3

New
partnership
possibilities

20

22

5

5

14

4

12

14

3

New

corporate

markets

23

22

3

5

17

3

7

15

4

Access

highly

skilled

labour

force

6

22

7

3

14

6

30

10

2

New

opportunitie
s

in

outsourcing

16

9

1

3

7

2

46

12

4

Acquisition

opportunities

15

20

2

5

13

5

8

22

9

Research

and

Developmen
t

activities

11

20

5

4

22

7

24

6

3

Greater

efficiency

in

supply

chain

17

26

6

2

22

5

10

9

3


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 industry sector.
MNCs in Software and IT services: Formal collaborations
with premier educational institutions for students’
capability enhancement, collaborative research work,
internships and fellowships to meritorious students, hand
on experience with tool kits, joint centres for research
work and students training, curriculum development,
professorial chair. With local educational institutions (
mainly engineering colleges), Curriculum development,
Training programmes to both the teachers and students,
setting up certain for specialised courses, distribution of
tools and kits to students for hand on experience.


Sectors

No. of R&D
FDI Cos

Patent from
India

Global patent

No. of Cos having % share of patent from India in respective total global
patent

<1

1<5

5<10

10<50

>50

SW and IT

54

749

129385

22

21

4

3

4

Pharma and
Bio

4

19

3413

3

1

Auto

3

5

12460

3

Mach and
Equip

5

47

12583

4

1

Electronic
compts

1

1

338

1

Metals and
minerals

1

5

1992

1

Chemical

3

4

6285

3

Others

3

336

48230

2

1

Total

74

1166

214686

39

24

4

3

4


In the patent scenario
It is
to be noted that out of 706
companies investing in
India, only 74 companies
have patents from India in
USA. Again the software and
IT sector has the major
share (54 companies).
These 74 companies
together have 214686
global patents. And only
1166 of those patents are
from India. Again software
and IT sector shares 749 of
1166 patents from India.
Another interesting
revelation from the table is
that 63 firms out of 74 have
less than 5% share of Indian
patents
vis
-
a
-
vis

their
global patents. Table
suggests that MNCs Indian
R&D initiatives till now do
not see much importance
given the scale of their
global activities.





Investment ($ mn)

Activities

No. of Firms

R&D

D&D

Mfg


Total Investment

R&D/D&D/Mfg

26


3,114.19


6,632.47


16,258.56


26,005.22

R&D/D&D

32


1,990.09


3,074.62




5,064.71

R&D/Mfg

37


1,605.80




13,744.11


15,349.91

D&D/Mfg

54




2,549.32


29,008.69


31,558.01

R&D

114


4,044.24






4,044.24

D&D

375




8,381.83




8,381.83

Total

639


10,754.32


20,638.25


59,011.36


90,403.93

4%

5%

6%

8%

18%

59%

0%

Percentage of firms investing in different
activities in India

R&D/D&D/Mfg
R&D/D&D
R&D/Mfg
D&D/Mfg
R&D
D&D




Investment ($ mn)

Activities

No. of Firms

R&D

D&D

Mfg


Total Investment

R&D/D&D/Mfg

38


5,649.57


4,606.04


77,372.32


87,627.93

R&D/D&D

13


1,111.53


2,157.51




3,269.04

R&D/Mfg

22


1,808.89




10,393.04


12,201.93

D&D/Mfg

20




1,599.97


29,299.44


30,899.41

R&D

17


1,128.59






1,128.59

D&D

34




2,311.00




2,311.00

Mfg

42






9,487.04


9,487.04

Total

186


9,698.58


10,674.52


1,26,551.84


1,46,924.94

20%

7%

12%

11%

9%

18%

23%

Percentage of Firms Investing in Different Activities
in China

R&D/D&D/Mfg
R&D/D&D
R&D/Mfg
D&D/Mfg
R&D
D&D
Mfg
Sector

Total
FDI
flow

R&D

Manufact
uring

Design and
Developme
nt

Auto
Components

Compara
ble

4 times
higher in
China

Comparab
le

6 times
higher in
India

Auto OEM

Higher
in China

Very high
in China

Higher in
China

Higher in
China

Semiconduct
ors

3 times
higher in
China

2 times
higher in
India

3 times
higher in
China

Comparable

Software + IT

2½ times
higher in
India

5 times
higher in
India

Higher in
China

2 times
higher in
India

Bio
-
tech

3 times
higher in
India

2 times
higher in
India

2 times
higher in
India

Marginally
higher in
India

Pharma

Compara
ble

2 times
higher in
India

2 times
higher in
China

Marginally
higher in
India


In

total

FDI

flow

in

the

various

sectors,

China

scores

over

India

in

Auto

and

Semiconductor

industry
.

Except

Bio
-
tech

and

Pharma

China

also

scores

over

India

in

FDI

flow

in

the

manufacturing

activities
.

India

appears

to

have

an

edge

in

Design

and

Development

activities
.

Except

in

Auto

sector,

India

also

has

an

edge

over

China

as

FDI

destination

for

R&D,

particularly

in

Semiconductor

and

SW&IT

sectors
.




MNCs R&D
centres

do not have much linkages with Indian institutions it is
more obvious
when especially
with research institutions


IT sector which attracts almost 50% of the investments is linked to the
university system, with emphasis on human resource creation


The patent data also indicates that R&D activity in India in comparison to
their global activity doe not reflect high end R&D


Stand alone R&D
centres

are more in India, whereas in China
Centres

with
R&D have manufacturing as well.


Both in India and China ( from literature), MNCs R&D
centres

are not linked
to local institutions for long
-
term R&D activities


MNCs R&D
centres

seem to work in isolation by only accessing the
resources, especially the human resource


No Systematic
datasource

on MNCs R&D
centres

and their activities is
available


Close monitoring of FDI in R&D is necessary to direct the inflow to desirable
sector and location and also to decide on the
pririties

of Indian industries
and innovation system