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Update on Previous GUIRR-Sponsored Work



Corporate Investment in R&D: A Question of Here or There                                           

History

In July 2004, Jerry Thursby, Ernest Scheller, Jr. Chair in Innovation, Commercialization and Entrepreneurship, and Marie Thursby, Hal and John Smith Chair in Entrepreneurship, College of Management, Georgia Institute of Technology, outlined a project proposed by GUIRR and titled “Corporate Investment in R&D: A Question of Here or There”. The project objective was to provide survey evidence that would serve as the basis for informed policy discussions on the issue of research and development (R&D) facility location within and outside the contiguous United States. The goal was to “survey U.S. and European based companies in order to identify key factor in R&D siting decisions and to develop a framework to evaluate the relative importance of these factors.” 

Original Statement of Work

Objective

The goal of this project is to assign quantitative weights to the various factors that drive the siting of corporate R&D facilities/work in the U.S. vs. elsewhere. These data on the global migration of corporate R&D will clarify which policy initiatives must be undertaken to enable the U.S. to attract and retain the advanced technology sectors that drive job creation, positive balances of trade, high productivity, and economic growth.

Background

As increasing numbers of countries become technologically capable, the development of overseas research and development (R&D) capabilities becomes inevitable. The geographical location of industrial R&D investments, either virtual or "bricks and mortar," has a cascading and long-term effect on the economy of the region. Funding availability, identification of new basic research opportunities, identification of new research associated with commercialization of a given technology, opportunity for new R&D jobs, creation of goods tailored to the local market, and downstream enhancements to productivity, balance of trade, and economic growth all accrue to the geographic location of the R&D being performed. Thus, it is not surprising that U.S. policymakers view the outward migration of R&D work from the U.S. with some concern. A recent discussion within GUIRR revealed that nearly all of GUIRR’s corporate members were considering locating their next R&D facility or project abroad, primarily in Asia; thus, the leadership of GUIRR is concerned that we may be at the beginning of an accelerating migration curve for which there is currently no policy prescription.

Policy solutions for R&D migration are difficult to arrive at, however, due to the sheer number of factors involved. These include the presence of a pre-existing facility (typically a manufacturing plant), availability of a skilled but inexpensive workforce, less stringent regulatory requirements, closeness to market, local statutory requirements for R&D investment in exchange for market access, proximity to exceptional academic expertise, tax incentives and many others. With many factors to consider, and only qualitative information available, it is not clear which factors deserve focussed attention and policy changes. Thus, in an effort to guide policy solutions, the Government-University-Industry Research Roundtable (GUIRR) proposes to identify the most influential factors, and then assign weights to each, using a sophisticated statistical survey of CTO’s and CEO’s of R&D-performing companies. It is anticipated that the factors relevant to relocating research may be different than those for relocating development, and that the factoral weights may also differ depending on industry sector. Nevertheless, knowledge of the relative importance of different factors should help to guide policy-making in a more targeted way than knowledge of a long list of undifferentiated factors.

Approach

The focus of the proposed work is on the why behind R&D siting decisions. It addresses both the siting decisions of U.S.-based companies looking to move abroad, and overseas-based companies considering whether to perform R&D in the U.S. It addresses only the reasons behind the siting decisions, not the amount of R&D that has already been located in particular countries. A list of such facilities is covered by the Commerce Dept. in its series, “Globalizing Industrial Research and Development.“ An emerging cooperative project between NSF, the Census Bureau, and the Bureau of Economic Analysis will also share data on the total non-U.S. expenditures on R&D by U.S.-resident R&D performing companies, and U.S. R&D expenditures by foreign companies. We do not wish to replicate these and similar efforts. The project methodology will focus on a survey tool.

Product / Outcome

 At the October 11, 2006 GUIRR meeting, study authors Thursby and Thursby presented the results of their survey with the release of a published report entitled Here or There? A Survey of Factors in Multinational R&D Location.  Decision makers in over 200 European and U.S. multinational firms over 15 industries contributed to the effort by ranking a set of 13 factors considered important to R&D siting decisions. Importance of factors varies by the target location. In emerging economies, market growth potential and the quality of R&D personnel were the most important considerations. Surprisingly, labor costs were not the primary concern. In developed economies, quality of R&D personnel and intellectual property protection were the most important.

 Ongoing Work

Study authors Jerry and Marie Thursby continue their GUIRR-sponsored research.  In 2008 they split out results for the biopharmaceutical firms in their survey for two separate papers as noted below.

  •  Is the US a Target of R&D Globalization? Location, Type and Purpose of Biomedical Industry R&D in New Locations (prepared for the NIH Competitiveness Project, May 2008) 
     
  • Globalization of Healthcare Research: What Kind of Science is Conducted in New R&D Sites? (prepared for the NBER BioPharma Location Project, March 2008)