GIS
What will influence the choice of R&D mode of governance?
....the uncertainty, complexity and how close the R&D activity is to the firms core competency => Hence firms must consider the 1) investment costs of the activity (large upfront non-deplyable assets) outsourcing might be rational from a cost perspective 2) risk of losing key competencies (unintended KW spillover) è Institutions can help reduce uncertainty and spillovers! => The most important aspect of the institutional framework is the national IPR regime bc. It governs the appropriation of the results of innovation STRONG/High IPR countries: MoG chosen based on factors ofther than IPR regime e.g. Suppliers, customers, employees etc. Weaker IPR Countries: Generally choose CAPTIVE OFFSHORING to protect KW. However, spillovers can still happen e.g. Reverse engineering, employee mobility, etc. => - mitigation e.g. IT security systesm, monitor workers, non-disclousre agreements with FTE - modulization of R&D across firm international network i.e. Take advantage of low cost innovation despite weak IPE regimes => institutional abitrage (Zhao) ==> but the knowledge is only useful when it is combined with other parts of the innovation process that is protected in other parts of the world with high IPR regimes. ALSO firm OUTSOURCE some activities to weak IPR regimes to reduce costs --> mostly seen when the activities are low knowledge generating -
What is the difference between contractual hazards in CT and outsourcing of other types of R&D activities?
Asset specificity + in the later, firms can locate where there is good institutions
Why would firms choose to locate R&D activities in a weak IPR country?
Firms can chose what types of innovation and parts (process) it can undertake in different countries Firms rely on their own internal mechanism of self-protection - innovation that rely on the knowledge it has produced in other countries with good / high IPR. . The firm produce innovation in a weak IPR regimes but the knowledge is only useful when it is combined with other parts of the innovation process that is protected in other parts of the world with high IPR regimes Firm do take advantage of low cost innovation
What has been the evolution of the geography of R&D locations gloablly? Where are/were different activities located and in which types of technologies? TODAY: What technologies/activities do advanced country firms source in non-traditional R&D locations?
Has gone from a Norht-noth phenomena to a truely global one => TRADITIONALLY à Countries placed sourced knowledge based on foreing countries comparative advantages in a particular technologies- e.g. Chemical / pharma, Metal / mechanism, Electrical & eletronic. And in temrs of the location of the R&D activities (R, D, A) these also followed in terms of which countries were most technological advanced within the triad who therefore had comparative advantages in wither R, D or A TODAY (enabled by ITC and KBV) à we are seeing more KW creation generated from R&D activities in non-traditional R&D locations (e.g. India, China, Iseal, S. Korea). These countries have gained comparative advantages in less complex R&D technologes, hence more activities are being located in them + specific conditions require development of cheap product, with selected features and are robust and portable. E.g. Laundry machina that can also wash vegetables / flash light in cellphones WHAT WE SEE NOW: high-income regions would have a comparative advantage in high-tech R&D, while emerging economies would have an advantage in medium/low R&D. Complementarity should obtain when the comparative advantages of the geographical areas are utilized.
What are the main strategic reasions for sourcing abroad? What does Chung and Yeaple find?
Literature, for instance, Chung and Yealple argue that firms knowledge sorucing is driven by three motives.. 1.tech catch-up: (weak initial condition) source KW aborad to offset home country technological weaknesses in specific industries/technologies. Seek target countries with relatively large knowledge stock in the industry/technology of interest. Ex: Xerox R&D labs in UK and France to learn certain industrial KW - telecommunication. Risks: country with more and stronger competition, greater protection of intangibles by incumbent firms (à link to home-based augmenting - competencie-creating) 2.sourcing tech. Diversity: Access to complementary knowledge -> explore novel recombinations. Seek host country with dissimilar knowledge / different nature. Ex: Philips in India, Germany, UK, etc. Focus on different areas of specialization in diff. Locations. Risk: need for pre-existing related knowledge / absorbtion capacity (à link to home-based augmenting - competencie-creating) 3.R&D sprinboard: (stong initial condition) reduce fixed costs - new generation of technology require substantial R&D fixed costs => seek target country with relatively large and similar knowledge stock. Ex. Shell R&D center in Amsterdam, texas, india, etc. To augment speed and reduce costs (à link to home-based exploiting - competencie-exploiting) These are not mutually exclusive e.g. NN 8x R&D centers, 1xR&D springboard in Boston + a transformational R&D center in other location Chung and Yeaple findings: suggest that an important explanation for firms investing abroad is not catching up or technologically diversifying but is using similar R&D efforts of others to overcome fixed R&D cost hurdles
Why are CT offshored to CROs in non-traditional locations?
Market related drivers: (not in focus) aka demand/supply driver: cost savings, large pool of participants and educated researchers, overcoming regulatory barriers on EM that are huge potential future markets. (+ LOCATION SPECIFIC ADVTANGES) Institutional drivers: - weak implementation and enforcement of laws e.g. ICH-GCP Harmonizing of requirements for registration of pharaceuticals for human use good clinical pratices guidelines -race to the bottom of regulation to attract FDI => lower costs + regulations lag behind. - Advanced country have increasingly expensive bureaucratic and expensive regulatory environments + time to market goes down
Why do EMNEs expand and aquire firms in the TRIADs ?
Motives for expansion: Many reasons but EMNEs tend to seek strategic asset-seeking (SAS) aquistitons to source knowledge àPrimarialy to aquire strategic resources e.g. Know-how, brands, technology, management practices àReverse transferred from the aquired operations to the parent organization (KBV / Home-base exploitation strategy / Catch-up strategy) e.g. Lenovo expansion The alternatives would be to buy the technology in the market or develop it internally => using the market will result in high costs due to information asymmetris and opportunistic behavior that characterize those market exchanges. The international development of the technology would also be time consuming and costly - instead the aqusition of valuabe target allow firms to internalize the valuable intangible and avoid risk risk asccoiated with market transaction and reduce the time to market - this reasoning is aligned with the KW view. Early SAS aquisition by EMNEs were driven by a rational to overcome challenges related to compensate for a weak NIS ß EMNEs FSA still related to their ability to navigate diff. Institutional environments + EMNEs CSA still strongly limited - home country knowledge infrastructure still underdeveloped and political reforms towards liberalization and openess just initated - hence limited oppr. For knowledge spillovers from western countries As more liberalization and development EMNEs more rececnt SAS aqusition by EMNEs is support by home-country NIS. EMNEs FSA are nore related to knowledge and technology development and CSA becomes more sophisticated with politcies amined at 1) development of institutions and knowledge infrastructure + leadership in specific sectors and industries e.g. Infosys in Inda and Huawai in China CSA: From low cost to production to advantages tailored by government investements aim at developing university and research center ans achieving leadership in specific sectors - e.g. Huwawai leadership in 5G technology
What are the different innovative activities?
There are two alternative perspectives to answer this from 1) the corporate center vs. Periphery knowledge and 2) R&D value chain 1. the corporate center vs. Periphery knowledge: depends on where the KW is first developed. Home-based exploitation (competencie-exploiting) à Subsidiaires exploit knowledge creates in the parent company or home-based augmenting (competencie-creating) à parent company exploits kw created in the subs 2. R&D value chain: Research: generation of innovative products LT (frontier tech, scientific, basic, fundamental) Development: entirely new commercial products and/or SPECIFIC PRODUCTS/PROCECSS CHARACTERISTICS (solutions or development towards market Adoptation: minor products or process adaptation in order to meet local tates and needs (adjustments to meet customer needs ●
Which location-specific advantages make it attractive to place R&D in non-traditional countries
placing R&D in emerging countries produces location-specific advantages: - An important advantage is that offshore locations offer specific high-quality R&D services at low cost. - Access to skilled labour at cheap prices => increased time to market e.g., India supply of engineers - Different comparative advantage technologies, often in medium/low technologies and within activities related to development and adaptation (tech diversification strategy) - overcoming barriers to huge future potential markets
