Barriers for Foreign R&D in China

1. Barriers for Foreign R&D in China Wenke, Ph.D Institute of Policy and Management Chinese Academy of Sciences

2. Outline • Introduction • Research methodology and data collection • Three types of barriers for foreign R&D in China • Several interesting patterns • Conclusion

3. 1.Introduction • Cooperating with Dr. Sun yifei, one part of the project “Foreign R&D Investment in China”(founded by NSF, BCS-0214042 ) • Focusing on the barriers for foreign R&D in china

4. 2.Research methodology and data collection • The results are primarily based on 29 interviews with managers of foreign R&D in China. The empirical sample consisted of 27 multinational corporations.

5. Parent Company Establishment Year Location Industry Parent Country or Regions Location in global top500 Alcatel 2002 Shanghai Electronics France 385 Bayer 2000 Shanghai Chemist Germany 129 DaimlerChrysler 1999 Shanghai Automobile Germany 7 Epson 1995 Shanghai Electronics Japan 435 Honeywell 2003 Shanghai Special Materials America Infeneon 2003 Shanghai Telecommunication Germany Jiaoda-Ormron 1989 Shanghai Software Japan a joint venture Sharp 2003 Shanghai Electronics Japan 249 Unilever 1996 Shanghai Cosmetic British 70 AVL 2003 Shanghai Engine Austria AMD 2003 Beijing Electronics America Bell 1997 Beijing Communication America France TeleCom 2004 Beijing Telecommunication France 59 Fujisu 1998 Beijing Electronics Japan 90 IBM 1995 Beijing Software America 19 Microsoft 1996 Beijing Software America 130 Motorola 1998 Beijing Electronics America 171 NEC 2003 Beijing Electronics Japan 85 Nortel 1994 Beijing Communication Canada Nova Nordisk 2001 Beijing Pharmacy Denmark Sun 2001 Beijing Software America 478 Toshiba 2001 Beijing Electronics Japan 65 BenQ 2002 Nanjing Electronics Taiwan Lucent 2003 Nanjing Wireless America Phoenix 2003 Nanjing Electronics Germany Siemens Program and System Engineering 2004 Nanjing Telecommunication Austria CoreTek 2000 Chengdu Telecommunication America

6. 3. Three types of barriers • Barriers from policy environment • Strong and bureaucratic government • Import limitation • Imperfect IPR protect system • Difficulty for traveling to taiwan • Barriers from local market • Increasing operation cost • Imperfect infrastructure • Barriers with Human Resource Management • Lack of innovative and experienced labors • High employee mobility • Difficulty in managing the diversified staff

7. 4.Several interesting patterns • Mainland-born managers and non Mainland-born managers mainland-born managers are more positive about the environment in China.

8. Mainland-born managers (15) Non mainland-born managers (13) Barriers from policy environment 8(44.4%) 13(46.4%) Strong and bureaucratic government 4 7 Import limitation 2 5 Imperfect IPR protect system 1 1 Difficulty for traveling to Taiwan 1 1 Barriers from local market 4(16.7%) 3(10.7%) High operation cost 3 1 Imperfect infrastructure 1 2 Barriers from human resource management 7(38.9%) 12(42.9%) High labor mobility 1 2 Lack of innovative talents 4 7 Difficulty in managing diversified staff 2 3 Total 19 29

9. 4.Several interesting patterns • Variations among different cities R&D managers in difficult cities felt different problems, though common problems do exist

10. Beijing (14) Shanghai (10) Nanjing (4) Barriers from policy environment 7(30.4%) 12(60%) 2(50%) Strong and bureaucratic government 4 5 2 Import limitation 3 4 0 Imperfect IPR protect system 1 1 0 Difficulty for traveling to Taiwan 0 2 0 Barriers from local market 2(8.7%) 4(20%) 1(25%) High operation cost 1 3 0 Imperfect infrastructure 1 1 1 Barriers from human resource management 14(60.9%) 4(20%) 1(25%) High labor mobility 0 3 0 Lack of innovative talents 9 1 1 Difficulty in managing diversified staff 5 0 0 Total 24 20 4

11. 4.several interesting patterns • Differences among Companies with Different Presence in China The size of foreign investment is negative correlation to the barriers they encounter. We conducted case studies of company A and company B.

12. A B Policy environment Strong and bureaucratic government Yes No Import limitation Not mentioned No Imperfect IPR protect system Yes No Local market High operation cost Not mentioned No Imperfect infrastructure Yes No Human resource management High labor mobility Acceptable Acceptable Lack of innovative talents Yes Yes Difficulty in managing diversified staff No No Total

13. 5.Conclusions and discussion • Policy environment is still the major barrier, and other problems include high labor mobility, lack of talents and so on. • the feelings of R&D managers depend on the location of the establishment. • more established foreign companies seem to have experienced more problems than smaller and less prominent foreign companies.

14. thank you!