Recent Research: International University Strength Moving R&D Offshore, In Addition to Cost

Contrary to popular belief, intellectual capital and university collaboration - not just lower costs - primarily attract companies to locate R&D activities in locations away from their home country, according to a new study sponsored by the Ewing Marion Kauffman Foundation.

Dr. Marie Thursby, professor of strategic management, Georgia Tech College of Management, and Jerry Thursby, chair of the Department of Economics, Emory University, surveyed more than 200 multinational companies across 15 industries, mostly headquartered in the U.S. and Western Europe. Their findings indicate that emerging countries such as China and India will continue to be major beneficiaries of R&D expansion over the next three years as companies seek new market opportunities, access to top scientists and engineers, and collaborative research relationships with leading universities.

To identify and rank the importance of different factors feeding into the corporate decision-making process on locating R&D facilities, the study tracked R&D work coming into the U.S. from abroad and R&D work going in the reverse direction; addressed favored countries for locating R&D work and why; and outlined trends industry expects for R&D expansion in the future.

Among the top factors going into new R&D siting decisions in both developed and emerging countries are market growth potential, quality of R&D talent, collaboration with universities and IP protection. How these factors influence the decision, however, depend on whether the site is in a developed or emerging country. In neither emerging nor developed countries was cost consideration the most important factor, which runs contrary to what has been reported by the media.

Among the study's more surprising findings, according to the researchers, was the role university collaboration plays in the decision-making process for locating R&D facilities. In fact, collaboration with universities was particularly prevalent as a factor for expanding to emerging countries, even though these countries provide lesser degrees of IP protection.

More than half of the corporate respondents who identify the U.S. as their home country report that they have either recently expanded or planned to locate R&D facilities in China and India vs. other developed countries. Of 63 Western European companies responding, 13 plan on expanding or locating new R&D facilities to the U.S.

The issue of collaborative research between universities and corporations has been a growing concern within the U.S., with some observers saying legal wrangling over intellectual property rights is not only slowing the pace of innovation but also prompting companies to seek university research partners in other countries.

The study indicates, however, that while the trend toward R&D offshoring to Asia will continue despite concerns over IP protection, companies are keeping their most cutting-edge research in developed countries where IP protection is the strongest. According to the study, only 22 percent of the R&D effort in emerging countries is for new science.

Another public policy implication of the findings, say the researchers, is that the U.S. must focus on highly skilled worker immigration.

"We are educating the best and the brightest, but make it impossible for them to stay in America and immigrate," Dr. Marie Thursby said. "We need major immigration reform that welcomes, instead of pushes out, highly skilled workers."

Further information about the study can be downloaded at www.kauffman.org .

Links to this paper and more than 3,000 additional TBED-related research reports, strategic plans and other papers can be found at the Tech-based Economic Development (TBED) Resource Center, jointly developed by the Technology Administration and SSTI, at http://www.tbedresourcecenter.org/.