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Story URL: http://www.silicon.com/research/specialreports/offshoring/0,3800003026,39123951,00.htm

China top spot for offshore R&D
Businesses aim to tap new markets with cheap research skills…

By Andy McCue

Published: Tuesday 14 September 2004

Businesses are increasingly looking to invest R&D funding overseas in emerging markets such as China and India, according to new research.

The Economist Intelligence Unit study, sponsored by Scottish Development International, found that over half of companies plan to increase their overseas investment in R&D in the next three years.

China was identified as the top location by 39 per cent of respondents, closely followed by the US, India and then the UK.

Exploiting vast pools of cheap skilled labour was cited as the key driver for overseas R&D by 70 per cent of executives. Businesses looking to develop new markets in countries such as China and India said it is increasingly important to conduct R&D there. Cheaper R&D was also cited as an important factor for doing R&D in emerging markets and developing countries.

But businesses still feel safer doing high-end R&D in developed Western countries such as the US, UK and Germany because of the sophisticated research infrastructure and robust legal protection for intellectual property.

Developing countries, are slowly breaking down these barriers. The report, Scattering the seeds of invention: The globalisation of research and development, says China is already an important location for ground-breaking R&D into things such as mobile technology.

Daniel Franklin, editorial director for the Economist Intelligence Unit, said in the report: "Corporate R&D is increasingly becoming an international effort, with different countries excelling at different parts of the innovation cycle."

The global survey questioned 104 senior executives, with 37 per cent from US-based companies, 34 per cent from European companies and 16 per cent from Asia-based companies.

A separate economic trends report out today from the UK government's Office of National Statistics found that the level of public and private sector spending on R&D was £19.6bn – although these latest figures are only for 2002. According to the research, over two-thirds of UK R&D was undertaken by businesses, 22.6 per cent by the higher education sector and 5.4 per cent by government.