More Stimulations for MNC R

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More Stimulations for MNC RD Center, or for
Assoeted RD ActivitiesLeng Min
(Institute of Policy and Management, CAS)

• Global RD in China, May 28-29,2005

from personal observation and practice
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1. Chinese Governments Attitude towards MNC
Establishing RD Centers

• (1) earlier stage
• The founding of Microsoft Research China (1998)
  is an important event for the development of
  MNCs RD affiliates in China. From then on,
  proprietary RD Centers began to dominate
  Chinese-foreign equity or contractual joint
  venture types.
• Chinese official authority organized the second
  investigation, worrying about that intelligence
  outflows would hit the national RD system. 
• RD organizations and proprietary technology
  developing of our country are facing challenge
  and pressure with aspect of market and talents
  competition because foreign sponsored ones boast
  advantages of funds, equipments, technology,
  talents and management experience.(Wu,1999)

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• (2) Current stage 
• MOST shows a very positive attitude toward
  MNC establishing RD affiliates. 
• The National Development and Reform
  Commission and Department of Commerce list
• RD affiliates as favored item in the newly
  revised Industry guidelines for foreign
• direct investment (2004) .
• Provincial governments are soliciting MNCs to
  site their RD affiliates and regional
• headquarters there by offering supports in
  land, utilities construction, taxation and funds. 

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2. bystanders foreign RD facilities in
Chinese National Innovation System

• (1) Brain Drains between CAS and MNCs
• The expected Brain drains between AI of CAS and
  Microsoft Research China didnt happen. Microsoft
  Research China cooperated with universities and
  institutes and recruited talent graduated
  doctors.
• ThinkIT laboratory The mass employee resignation
  from the MNC and joining CAS is an exception and
  not typical for future trend.
• I got some information that MNCs rarely
  participated in programs either sponsored by
  National Natural Science Fund or planned By the
  MOST.

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• (2) MNCs cooperations in industry
  technology development of China.
• Chinese Industry Technology Standardstheir
  participation and contribution are not much in
  AVS , TD-SCDMA and IGRS.
• RD partnerships co-founded with Chinese
  communication enterprises such as Huawei and
  Zhongxing are basically insignificant.

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(3)Spillover effect.

• Its not as well as expected for FDI enterprises
  to promote technology association(Wang,2004).
• Non-state enterprises managers training directly
  from FDI enterprises is not obvious(Yuan and Lu,
  2005).

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(4)Summary

• MNCs and their RD affiliates are in a
  self-dependent and close state in Chinese
  National Innovation System.
• Players from Taiwan are just alike.

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3. Is cost the determining factor in
MNCsdecision making for siting of their RD
Centers

• (1)Taxation Policies oriented toward RD centers
  may not be effective.
• The decision-making is controlled by their global
  headquarters.Marketing strategies rather than
  overheads takes priority in their considerations.
• Conclusion from McKinseyGoverments all over the
  world are trying to attract FDI through costly
  taxation and tariff reducing and land and power
  subsidy.But according to our investigation, its
  unfruitful.
• Regions are competing to promote FDI and policies
  are imitated. With integration of domestic and
  foreign taxation, local government manipulation
  is less possible.
• Points from personal review with Dr. Wenke and my
  personal experience in Ningbo when I was
  responsible for introduce RD Centers and Hi-tech
  projects to the citys ST Campus can support the
  idea .I successfully introduced a IC design
  center but failed in introducing any MNC RD
  Centers.

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• (2) Is the Salary level in RD Centers
  reflecting Chinas labor cost advantage?
• A Graduate from Peking University received very
  high monthly salary after his internship in the
  Microsoft institute, exceeding the level of
  employees of Chinese universities, institutes and
  high-tech companies.
• Wuhan, Xian and Chengdu where salary expectaion
  is far lower have not clustered more MNCs RD
  affiliates.

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4. Conclusions and policy implications

• (1) Three judgements
• MNCs choose regional economy center to site their
  RD Centers. The number of RD Centers ranks
  according to the citys economic position in the
  nation.
• Investments or headquarters in some regional
  economy center will help an RD affiliate
  establishing there.
• Policies given by local government are not as
  attractive compared with the size of the industry
  sector and RD advantage of that region. Local
  peer enterprise with size of economy and
  competent RD will attract MNCs cooperation and
  help the establishment of RD Centers.

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• (2) some policy implications for Nanjing
• To build a more open and more active social and
  economical environment. Investment environment
  improving, internalization and high level of
  education envrionment will be important..
• Clustering effect of RD activities suggest that
  to attract peer MNCs must rely on own industry
  advantage and RD competence.
• Its urgent for government to stimulate
  enterprises of all types to undertake RD
  activities rather than weigh one type more than
  others.