The document discusses trends in MNC R&D expenditures and activities in China's electronics industry. Regression analysis was conducted using firm-level data to examine the impact of MNC R&D on industry performance, local R&D, and local firm performance. The results show MNC R&D has a positive impact on total industry profit and new products, and positively influences local R&D. MNC R&D's effect is limited at the local firm level. This suggests China's electronics industry is in the development stage of R&D evolution.
3. Trend of MNC R&D (Expenditure Pattern) R&D expenditure by foreign affiliates, based on a sample of 30 economies, values and share in business R&D, 1993-2002 - (Billions of dollars and per cent) Source: UNCTAD, World Investment Report 2005
4. Trend of MNC R&D in China Most attractive prospective R&D locations Source: UNCTAD, World Investment Report 2005 R&D Labs in China, 1987 - 2003
14. β0 = 0.6076 (0.72) S = 0.455647 R-Sq = 92.8% R-Sq(adj) = 91.7% (1) Regression Analysis – Results (Profit) 1. MNC R&D to Whole Industry 2. MNC R&D to Local R&D 3. MNC R&D to Local Firms Independent Variables Description Coefficients LN_MNC_RND Value of MNC R&D Expenditure 0.14633 (3.45***) LN_LOCAL_RND Value of Local R&D Expenditure 0.14057(2.28**) LN_TOTAL_ASSET Value of Total Asset -0.00980 (-0.19) LN_EMPLOYEES Number of Employees 0.04415(0.48) LN_FIXED_ASSETS Value of Fixed Assets 0.5191(3.97***) LN_HK_MAC_TW_CAP Hong Kong, Macau and Taiwan Capital Share -0.08542(-2.44**) LN_FOREIGN_CAP Foreign Capital Share (Except Hong Kong, Macau and Taiwan) 0.11055(1.56) LN_EMPLOY_BENE Value of Employee Benefit 0.1736(1.33) LN_STATE_CAP State Owned Capital Share -0.03787(-1.20)
15. β0 = -1.019 (-0.99) S = 0.560753 R-Sq = 91.6% R-Sq(adj) = 90.4% (1) Regression Analysis – Results (New Product) 1. MNC R&D to Whole Industry 2. MNC R&D to Local R&D 3. MNC R&D to Local Firms Independent Variables Description Coefficients LN_MNC_RND Value of MNC R&D Expenditure 0.10636 (2.04**) LN_LOCAL_RND Value of Local R&D Expenditure 0.33418 (4.45***) LN_TOTAL_ASSET Value of Total Asset -0.00980 (-0.19) LN_EMPLOYEES Number of Employees 0.04415 (0.48) LN_FIXED_ASSETS Value of Fixed Assets 0.6029 (3.80***) LN_HK_MAC_TW_CAP Hong Kong, Macau and Taiwan Capital Share -0.07135 (-1.66*) LN_FOREIGN_CAP Foreign Capital Share (Except Hong Kong, Macau and Taiwan) 0.03268 (0.37) LN_EMPLOY_BENE Value of Employee Benefit 0.1968 (1.23) LN_STATE_CAP State Owned Capital Share -0.03865 ( -1.00)
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17. β0 = -7.554 (-5.85) S = 0.577459 R-Sq = 89.0% R-Sq(adj) = 87.3% (2) Regression Analysis - Results 1. MNC R&D to Whole Industry 2. MNC R&D to Local R&D 3. MNC R&D to Local Firms Independent Variables Description Coefficient LN_L_MNC_RND Value of MNC R&D Expenditure 0.12054 (2.48** ) LN_L_TOTAL_ASSET Value of Local Firm Total Asset 2.4983 ( 7.11*** ) LN_L_EMPLOYEES Number of Employees in Local Firm -0.6664 ( 3.06 ***) LN_L_FIXED_ASSETS Value of Local Firm Fixed Assets -0.6992 (-2.20 **) LN_L_HK_MAC_TW_CAP Hong Kong, Macau and Taiwan Capital Ownership of Local Firm -0.08080 (-1.75 *) LN_L_FOREIGN_CAP Foreign Capital Ownership of Local Firm (Except HK, Macau and Taiwan) -0.07826 (-1.08 ) LN_L_EMPLOY_BENE Value of Local Firm Employee Benefit -0.03233 (-0.76 ) LN_L_VALUE_ADDED Value of Local Value Added -0.2519 (-1.10) LN_L_EXP_VALUE Value of Local Export Value 0.06664 (1.24 )
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19. β0 = 4.399 (0.66) S = 2.65415 R-Sq = 34.9% R-Sq(adj) = 26.4% (3) Regression Analysis – Results (Profit) 1. MNC R&D to Whole Industry 2. MNC R&D to Local R&D 3. MNC R&D to Local Firms Independent Variables Description Coefficient LN_MNC_RND Value of MNC R&D Expenditure 0.5394 ( 2.28 **) LN_LOCAL_RND Value of Local R&D Expenditure -0.0261 (-0.04 ) LN_TOTAL_ASSET Value of Total Asset -0.631 (-0.33 ) LN_EMPLOYEES Number of Employees 2.529 ( 2.47 **) LN_FIXED_ASSETS Value of Fixed Assets 0.668 (0.44 ) LN_HK_MAC_TW_CAP Hong Kong, Macau and Taiwan Capital Share -0.2210 (-1.08) LN_FOREIGN_CAP Foreign Capital Share (Except Hong Kong, Macau and Taiwan) -0.653 ( -1.94 *) LN_EMPLOY_BENE Value of Employee Benefit -0.9631 (-1.20)
20. β0 = -1.696 (-1.25) S = 0.535723 R-Sq = 91.0% R-Sq(adj) = 89.8% (3) Regression Analysis – Results (New Product) 1. MNC R&D to Whole Industry 2. MNC R&D to Local R&D 3. MNC R&D to Local Firms Independent Variables Description Coefficient LN_MNC_RND Value of MNC R&D Expenditure 0.05007 ( 1.05 ) LN_LOCAL_RND Value of Local R&D Expenditure 0.3898 ( 3.31 ***) LN_TOTAL_ASSET Value of Total Asset 0.7497 ( 1.96 **) LN_EMPLOYEES Number of Employees 0.2725 (1.32) LN_FIXED_ASSETS Value of Fixed Assets -0.0901 (0.30 ) LN_HK_MAC_TW_CAP Hong Kong, Macau and Taiwan Capital Share -0.03418 (-0.83 ) LN_FOREIGN_CAP Foreign Capital Share (Except Hong Kong, Macau and Taiwan) 0.02227 (0.33) LN_EMPLOY_BENE Value of Employee Benefit -0.2109 (-1.31 )
AccordingtoUNCTAD(2005)survey,by2004Chinawasthethirdbiggestglobaldestinationof R&Dactivities.Thishashoweverchanged;itisnowtheNo1mostattractiveR&Dinvestmentplaceintheworld(UNCTAD,2005). A total of 69 companies responded to the questionnaire, representing a response rate of 22 per cent.3 The relatively low response rates are not uncommon for R&D-related surveys as many firms consider information concerning their R&D activities as too sensitive to be disclosed. The 69 participating firms accounted for 34 per cent of total R&D expenditure by the 316 firms in the overall population. Thus, there is a fairly good representation of some of the very largest R&D spenders. However, some potential shortcomings should be borne in mind: the reporting of R&D may not always be done in the same way due to different notions of what R&D entails, and some respondents may have omitted smaller R&D activities. Ministry of Commerce’s data for 2001 was less than 200; • In 2005, government revealed that there are over 750 MNC R&D centers in China; • Till the end of October,2006, 980 (MOFCOM: The Ministry of Commerce ) • Till the end of 2007, 1160 (MOFCOM) • Till the end of July, 2009, 1250 (MOFCOM)
1.) understand the trends of technology development in time and learn the advanced technology from developed countries 2.) accumulate strategic assets and improve technological capability + develop oversea market 3.) for Chinese firms, and the corporate R&D activities will be aimed at global markets directly. The companies will make use of global innovation resources to increase their potential technology capacities, and expand their shares in global market by reciprocity of the globalization of technological innovation and market expansion. To gain worldwide competitive advantages, a company will decentralize its resources. Thus, global-linked R&D network is shaped gradually Foreign R&D centres can contribute to the host country’s innovation system through their linkages with the host country’s institu-tions8,15,23. The positive effect is basically in terms of cer-tain spillover effects, competitiveness among the local firms, contract research work to host country’s R&D orga-nizations, and local firms having access to high techno-logy through partnership/collaboration. How the presence of MNCs would affect the host country depends upon many factors, like the level of technological advancement of the host country, conducive policy measures, local inno-vation system, S&T infrastructure, etc. (a) The extent and nature of outcomes; (b) Extent and nature of spillover in the production and R&D systems so that the outcomes do not remain restricted to the formal linkages, and (c) Adequacy of the modes of linkages and alternative desirable modes for better out-comes and spillover.
There are also concerns in developing countries about potential talent loss for local companies and the “crowding out” of local markets. This phenomenon raises a number of questions:
Internationalization of R&D has entered a new phase, with MNCs overseas investments increasing in the Asian region. China and India are emerging as the most preferred destinations for MNCs for setting-up their dedicated R&D centers (Ernst, D (2007)).
Between 1993 and 2002, sales generated from China's electronics industry (mainly from the manufacture of electronics products) increased by 30.9%, and profits rose by 32.7% ( see Table ). These growth rates were higher than the 9.1% growth rate of China's GDP, and the 14.2% growth rate of its other 40 major industries. Since 1998, the electronics industry has led the other industries in terms of gross industrial value and sales volume. The combined value of the electronics industry has risen steadily - from 0.87% of GDP in 1997 to 2.98% in 2002.
Internationalization of R&D has entered a new phase, with MNCs overseas investments increasing in the Asian region. China and India are emerging as the most preferred destinations for MNCs for setting-up their dedicated R&D centers (Ernst, D (2007)).
