Drivers and organization of R&D location in wireless telecom A case for non-globalization?

Transcription

1 Drivers and organization of R&D location in wireless telecom A case for non-globalization? International Network seminar, Hotel Arthur Alberto Di Minin & Christopher Palmberg* Berkeley Roundtable on the International Economy (BRIE), University of California & In-Sat Lab, Scuola Superiore Sant Anna (Pisa, Italy) *Etlatieto/ETLA, the Research Institute of the Finnish Economy

2 Etlatieto Ltd. / ETLA 2

3 Structure of presentation 1. The broader issue: globalization of R&D? 2. The research setting: location of inventive activity in the wireless telecom industry 3. The empirical analysis (qualitative and quantitative) 4. Conclusions Etlatieto Ltd. / ETLA 3

4 Our definition of globalization The high and increasing interdependency and interrelatedness among different and geographically dispersed actors. (Archibugi & Iammarino, 2002) [ in our interpretation, researchers and inventors involved in R&D increasingly tend to be located outside the domestic HQ country of firms ] Etlatieto Ltd. / ETLA 4

5 The case for R&D globalization Etlatieto Ltd. / ETLA 5

6 Changing division of labour in manufacturing will R&D follow? Asia (China, India, Japan) 50% Share of Global Manufacturing Output Europe (8 countries) N. America (Canada & US) Source: Bairoch 1982 (updates: ETLA) Etlatieto Ltd. / ETLA 6

7 Foreign locations of R&D (UNCTAD World Investment Report -05) Current Prospective US UK China France Japan India Canada Germany Singapore Italy Brazil Spain Belgium Sweden Switzerland Australia Finland China US India Japan UK Russia France Germany Ne the rlands Canada Singapore Taiwan Belgium Italy Malaysia Korea Thailand % of respondents % of respondents Etlatieto Ltd. / ETLA 7

8 UNCTAD 2005 report concludes: R&D still among the least internationalized functions of MNEs but R&D globalization is a recent phenomenon and appears to be increasing over time Limitations of UNCTAD report Limited number of obs. (returned survey from CTOs of 68 companies) R&D is treated as a black box, an ON or OFF activity A finer-grained analysis by type of R&D activity, country or company probably gives a different picture! Etlatieto Ltd. / ETLA 8

9 Three drivers of R&D globalization ( based on extant research) Demand factors Adapting R&D, products and processes to local demand Providing technological support to off-shored mfc. plants Supply factors Monitoring scientific and technological developments Obtaining access to scientists, engineers and designers Generating entirely new products and core technologies Intermediating factors Facilitating the efficient coupling of demand and supply factors Aligning activities with local cultures and norms Source: Ali-Yrkkö & Palmberg, Etlatieto Ltd. / ETLA 9

10 The case for R&D non-globalization? [in wireless telecom ] Etlatieto Ltd. / ETLA 10

11 [These large companies] have a long way to go before their technology activities become anywhere nearly globalized. Patel, P & Pavitt, P Large Firms in the Production of the World s Technology: An Important Case for Non-globalization Journal of International Business Strategy Etlatieto Ltd. / ETLA 11

12 We expect to see greater internationalization of large firms technological activities in the future Patel, P & Pavitt, P ibid Etlatieto Ltd. / ETLA 12

13 Wireless Telecom as an interesting case: all signs of globalization Demand factors Deregulation and break-up of national monopolies, new regional markets with local players demand and tastes Supply factors Technological convergence, emerging/new centers of excellence (Eastern Europe, China, India etc.), supply of both high skilled and low cost engineers Intermediating factors? Interoperability and modularization, integration of technologies developed worldwide, but home country efficiencies might still be superior Etlatieto Ltd. / ETLA 13

14 Empirical analysis Etlatieto Ltd. / ETLA 14

15 Patent data as an indicator for location of inventive actitvity Discrepancy of assignee and inventor addresses as a proxy ETSI system of notification of patents as an analytical lens to single out more significant inventive activity The 4 largest assignees of ETSI essential patents: Ericsson, Qualcomm, Motorola, Nokia: 64% of all essential patents SAMPLE (ES): 537 USPTO PATENTS USPTO (US) Patents Assigned to the 4 Companies* Essential Patents Int. Prot. Patents in the same technology classes CONTROL GROUP (CG): 4,358 USPTO PATENTS * For US companies solely US patent families excluded from analysis Etlatieto Ltd. / ETLA 15

16 Types of ETSI Standards mainly covered by the empirical analysis DVB V5 Interface DECT GSM GPRS UMTS GSM/AMR-NB 3GPP/AMR-WB TETRA Etlatieto Ltd. / ETLA 16

17 Distribution of patents across the 4 companies Total Patents (assigned between ) Ericsson Nokia Motorola Qualcomm Essential Patents Control Group Patents Years Fwd Citations / Patents 4.02 (ES) 2.31 (CG) 3.31 (ES) 2.12 (CG) 3.36 (ES) 2.15 (CG) 3.01 (ES) 2.47 (CG) 6.21 (ES) 3.03 (CG) Etlatieto Ltd. / ETLA 17

18 Domestic Collaborative Foreign Patents DO (Domestic) patents: all inventors located in H.Q. country CO (International Collaboration) patents: at least one inventor in H.Q. country and at least one inventor in foreign country FO (Foreign) patents: all inventors located in foreign countries Etlatieto Ltd. / ETLA 18

19 FO-CO-DO distribution of Control Group patents (n=4 358) No. of granted US patents FO CO DO Etlatieto Ltd. / ETLA 19

20 FO-CO-DO distribution of patents Essential Patents Control Group CO 11% FO 11% FO 29% DO 78% CO 7% DO 64% Pearson Chi-Square for DO * Essential : 41.5 (.01 significant) Pearson Chi-Square for FO * Essential : 77.5 (.01 significant) Etlatieto Ltd. / ETLA 20

21 Where are the offshore inventive activities located? Essential Patents Control Group SEA_INV 0.0% JP_INV 3.3% R.O.W. Canada 3.3% 15% EU_INV 25% R.O.W. 3.3% SEA_INV 1.2% Canada 14% EU_INV 23% JP_INV 0.9% US_INV 54% US_INV 58% Etlatieto Ltd. / ETLA 21

22 ERICSSON Essential Patents Company level NOKIA Essential Patents FO 19% CO 8% FO 6% CO 18% DO 63% DO 86% Control Group Patents FO 54% DO 37% Pearson Chi- Square for DO * Essential : 59.4 (.01 significant) Pearson Chi- Square for DO * Essential : 6.4 (.01 significant) CO % Etlatieto Ltd. / ETLA 22 CO 7% FO 21% DO 72%

23 MOTOROLA Essential Patents CO 7.1% CO 4.4% FO 8.2% FO 7.9% DO 84.7% TX 10.3% DO 87.7% FL 4.6% MA 2.3% OTH_US 2.3% MA OTH_U 4.3% S AZ 5.7% 10.5% NC 0.1% FL 18.8% TX 12.8% IL 80.5% CA 3.1% CA 88.7% CO 2.2% CO 6.9% FO 2.2% FO 3.2% Etlatieto Ltd. / ETLA 23 AZ 0.7% MA 2.4% IL 44.6% Other 10.6% Other 9.8% QUALCOMM Essential Patents P Chi-Square P Chi-Square P Chi-Square DO * Essential : N.S. (.01) IL_st * Ess : 39.6 CA_st * Ess : N.S. P Chi-Square DO * Essential : 4.48 * Control Group Patents Company level CA 87.6% DO 95.7% DO 89.9%

24 Findings and limitations so far The paradox remains! In a very globalized industry we still see strongly homebound inventive activities once R&D is dissected by economic/technological/strategic content Limitations of the analysis Well-known objections to using patent data as an indicator Patent data lags behind in this dynamic industry Upstream vs. downstream R&D (e.g. alliance capitalism)? Generalization of the results beyond wireless telecom? Etlatieto Ltd. / ETLA 24

25 Why R&D non-globalization? - Insights from the company interviews Demand and supply factors highlighted for offshored (FO patents) inventive activity In-house R&D (DO patents) still remains important due to intermediating factors : Accumulated sticky knowledge at HQ, organizational inertia Maturation effect and steep learning curves in R&D internationalization Importance of centralized IP management in this particular industry (or is this a selection bias ) Etlatieto Ltd. / ETLA 25