Foreign R&D units in India and China: An empirical exploration


Among the many corporate functions of multinational enterprises (MNEs), their foreign R&D is considered to be the least mobilized. Firms usually keep their crucial R&D activities close to their home base. However, since the 1990s MNEs from developing countries are offshoring their R&D activities to developing Asian countries, particularly in India and China. With this recent trend, the foreign R&D by MNEs is becoming important and has attracted attention all over the globe. This study is an attempt to map this recent trend from an in-house developed database on the foreign R&D units in India and China. It also investigates the major motives of firms for choosing India and China as favourable R&D destinations. It is observed from this study that both ‘market-driven’ and ‘technology-driven’ factors are the major motives for MNEs to invest in R&D in these two emerging economies. Firms prefer R&D locations in India and China, where there are knowledge centres with an abundant supply of qualified and highly skilled human resources available at comparatively lower cost. As a result, MNEs’ foreign-based subsidiaries are now increasingly playing a greater role in the generation, use and transmission of knowledge.

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