Challenges Ahead For Corporate R&D

More than 75% of new R&D sites planned over the next three years will be established in China and India, according to a recent survey on global R&D networks conducted by international business school INSEAD and management consulting firm Booz Allen Hamilton.

However, while many companies are boosting their R&D networks and increasing the number of sites outside their home countries, few have the internal capabilities in place to run these networks efficiently and effectively, the study concludes.

The survey covers 186 companies in 19 countries and in 17 industry sectors, with combined 2004 R&D spending of $76 billion, nearly 20% of the global total for all corporations. It found that the share of R&D sites outside the companies??? headquarter markets increased from 45% in 1975 to 66% in 2004.

In 1990, R&D facilities in China and India accounted for a total of 3.4% of the firms' foreign sites, but this proportion increased to 13.9% by 2004. The survey respondents suggested that 77% of new R&D sites planned through 2007 are slated for either China or India; by the end of 2007, these two countries will account for 31% of global R&D staff, up from 19% in 2004.

Although companies are increasingly building international networks of R&D facilities, the survey indicates that few regularly review these networks to ensure they are efficient and integrated. Moreover, companies in the chemical and pharmaceutical sectors are less likely than the average to collaborate significantly with suppliers or alliance partners.