Companies Will Do More R&D Offshore

More R&D is headed offshore. Take a look at these facts.

Scattering the Seeds of Invention: The Globalisation of Research and Development is a new paper from the Economist Intelligence Unit on trends and challenges in the globalization of research and development (R&D).

In a global survey of 104 senior executives conducted for the report, 70 per cent reported that their companies (a mix of large and small to medium sized enterprises) already employ R&D staff overseas. A total of 52 per cent of companies plan to increase their overseas investment in R&D in the next three years, while a further 38 per cent will maintain current spending levels over the same period.

39 per cent of business leaders identify China as the top destination for future overseas R&D spending, followed by the USA (29 per cent), India (28 per cent), the UK (24 per cent) and Germany (19 per cent). New Zealand was chosen by four per cent of respondents, equaling Australia, Austria, Ireland, Israel, Norway, Poland and Slovakia.

Some of the main benefits of globalised R&D as identified in the paper include:

-The ability to exploit pools of skilled labour. 70 per cent of those surveyed cited this as a very important or critical benefit of conducting R&D globally.

-The opportunity to reduce R&D costs. According to the survey, companies weigh cost benefits in a range of areas, including lower-cost labour, cheaper land and office rental, and favourable tax regimes. Even so, cost considerations are still of lesser importance than the search for skills or expanding markets.

Key drivers for the globalisation of R&D identified in the paper include:

- The size of the local market, which was an important factor for 76 per cent of those surveyed.
Local R&D expertise in the respondent's industry (critically or very important for 65 per cent of respondents).

- Availability of R&D scientists with appropriate skills (critically or very important for 61 per cent of respondents).

Key challenges for the globalisation of R&D include:

- Protection of intellectual property (IP) - 38 per cent of executives cited protection of IP as a critically important challenge, a higher proportion than for any other issue. Countries where IP protection is strong have a significant advantage in attracting R&D investment.

- Compressing time to commercialise innovation (24 per cent).

- Enabling effective collaboration between international R&D teams (21 per cent).

- Aligning global research activity with business strategy (20 per cent).

- Attracting the best R&D talent (20 per cent).

The report is available from the Economist Intelligence Unit website.