Keupp Rutgers China slides

Slide1: 

Foreign R&D in China – Results & Ideas for Future Work Dr. des. Marcus Matthias Keupp Rutgers University, May 1st, 2007

Slide2: 

Agenda 1. Special focus 1: Management of Chinese R&D staff 2. Special focus 2: Management of intellectual property rights 3. What I‘d like to do in the future

Location pattern of R&D in China: 

Location pattern of R&D in China Several possibilities for entry mode: wholly-owned labs, Chinese branch, JV, cooperation with universities Currently, most R&D labs are concentrated in Beijing and Shanghai areas Source: von Zedtwitz (2004)

Tomorrow‘s innovation lab China?: 

Tomorrow‘s innovation lab China? In 2002, China has been the biggest recipient of FDI worldwide, outpacing the US with US$ 53bn invested (Reuters, 2003) Chinese R&D intensity has increased to 1,3% in 2002, growing at an annual rate of 15.2% (1991-2002) Chinese government is heavily spending on education institutions, with many new universities and insitutes being founded Multinational firms start relocating their global R&D centres to China

Today‘s partner, tomorrow‘s competitor: 

Today‘s partner, tomorrow‘s competitor April 11th, 2005: China and India announce plans for common free trade area This will create the largest free trade area of the world: Targeted volume is US$ 20bn in 2008 and US$ 30bn in 20101 April 24th, 2005: EU shocked by massive increase in competitive Chinese textiles since the fall of WTO textile regulation (e.g. pullovers: +534%)2 April 21st, 2005: Zhonghua announce middle classe limousinse M1 ... to compete with VW and Mercedes in their home markets 2006: Chinese company Haier is 3rd biggest household applicances firm in US In 1976, there was no Chinese firm capable of producing cooling technology! 1 see faz.net, „Konjunktur und Weltwirtschaft“, Apr 11th, 2005 2 see Financial Times Deutschland, Apr 24th, 2005

R&D in China: A double-edged sword: 

R&D in China: A double-edged sword True, China offers a potentially large market... but there are as many risks as there are benefits to R&D in China The long-term effect of R&D in China is still unknown! Without a careful management approach, foreign firms may breed their future competitors in China!

The research gap I focussed on so far(Level of analysis: foreign R&D subsidiaries in China): 

The research gap I focussed on so far (Level of analysis: foreign R&D subsidiaries in China) We know WHY internationalisation of R&D to China is happening, however, the HOW has been explored little Research on R&D in China has mainly concentrated on state-owned enterprises (SOEs) and on the national S&T system Very little research has touched upon managerial aspects of managing R&D in China Despite general arguments, little is known as to how foreign R&D in China should be conducted

Two key areas of focus for academia and managers:Human resources and intellectual property rights: 

Two key areas of focus for academia and managers: Human resources and intellectual property rights Human Resources: Chinese employees have a reputation for disloyalty – whether justified or not. Average fluctuation rates of Chinese staff in foreign firms: 20 – 50% Intellectual Property Rights (IPR): Despite improvements in the legal framework, enforcement remains difficult Even if the lawsuit is won, compensation payments are ridiculous

Human resources: Exploratory empirical research(R&R from R&D Management): 

Human resources: Exploratory empirical research (R&R from R&D Management) We looked at the question: How do foreign R&D firms in China manage their Chinese R&D staff? Control (agency theory) or trust (relations theory) ? Continuum or dichotomous choice? Which management methods do firms use? Mixed methods approach: survey + case studies

Human resources: Findings: 

Human resources: Findings

Human resources: Findings: 

Human resources: Findings Firms use both control- and trust-related measures in varying degrees Not all have developed a special „China management“ Chinese R&D staff can be made loyal if they feel ‚integrated‘ in the firm‘s ‚family‘ Global transfer and exchange of Chinese and Western R&D staff is benefical to R&D quality Still, need to be vigilant with respect to IPR

Intellectual property rights: Strategy studies(R&R from Long Range Planning): 

Intellectual property rights: Strategy studies (R&R from Long Range Planning) Commonly known fact: Given China‘s weak appropriability regime, ‚Western‘ methods of IPR protection are hardly enforceable Therefore: Presumption that firms have developed „factual“ strategies that work „differently“ 13 in-depth case studies Exploration: Which strategies do foreign firms doing R&D in China use, and how do they work?

Intellectual property rights: Findings: 

Intellectual property rights: Findings

Intellectual property rights: Findings: 

Intellectual property rights: Findings We identified five „factual“ protection strategies: Technological specialisation De-facto secrecy Internal guanxi External guanxi Educate the customer

Next steps 1: Hygiene factors: 

Next steps 1: Hygiene factors February 2007: awarded a two-year $160,000 grant from the Swiss National Fund to conduct basic research on international R&D May 2007: submitted EU project proposal on how Eastern Europe may or may not benefit from China’s S&T policy to attract R&D FDI

Next steps 2: What I’d like to do in the future: 

Next steps 2: What I’d like to do in the future Analyse China in terms of a knowledge competitor / studying ‘reverse’ internationalisation Looking at foreign patent applications in China (‘patent paradox’, qualitative working paper in progress) Looking at Chinese patents (cross-citation analyses, reverse transfer effects to the West) Analysing the exchange relationships of Chinese R&D units with other global R&D units inside MNCs Looking at commonalities and differences between R&D in China and R&D in Eastern Europe (esp. regarding S&T policy)