R&D investment heads for China and India

More than three-quarters of new research and development sites to be set up over the next three years will be in China and India, according to a new study by Booz Allen Hamilton and business school Insead

The survey of 186 companies worldwide found a general trend of innovation moving east and predicts that China and India are on the verge of overtaking Western Europe as the most important locations for foreign R&D for US businesses.

By the end of 2007 China and India combined will account for almost a third (31 per cent) of global R&D staff, up from 19 per cent in 2004.

R&D growth in the developing world is being driven by access to a low-cost skills base, and access to markets and customers.

Barry Jaruzelski, VP at Booz Allen Hamilton, said in the study: "Companies are increasingly looking abroad to spur innovation and build new markets. In today's competitive environment, business can't be held hostage by the 'not invented here' syndrome."

Technology companies are better at embracing this globalisation of innovation and offer career and financial rewards to encourage staff to work in different geographies and become more multicultural, according to the study.

Respondents came from 19 countries and 17 industry sectors with a combined annual R&D spend in 2004 of $76bn, representing nearly one-fifth of the global total for all corporations.

Just this week the EU warned that European technology investment lacks ambition and is harming future economic growth in the region.