Is the R&D outsourcing boom by Western companies in China and India over?
If we're talking simply about outsourcing for lower-cost R&D talent, then I wouldn't say it is totally over, but it will be increasingly difficult for Western companies to justify solely on cost advantages. However, R&D driven by the unique markets and market access requirements will continue and expand for the foreseeable future, since they likely have a different cost model.
With wage costs up sharply in China, is local brainpower still cheap enough for international firms?
Currently, the cost advantage within China for R&D talent still exists and will for a number of years. However, given the time it takes to set up active and engaged research programs, at the rate at which China's wage costs are increasing it becomes more and more difficult for new entrants. Those firms that have already sunk the start-up costs will likely take advantage of the lower wage costs until they truly compare with US or other developed-country costs.
What about the R&D track record of Chinese-owned companies?
Most recent patents seem to cover minor changes on existing designs. A lot is made regarding the level of Chinese innovation and its incremental nature. However, its overall innovation quality is rapidly improving. These improvements are coming from a better understanding of the global innovation landscape and direct government efforts to enhance their intellectual property and patent processes as well as the rigor of their academic research. Not surprisingly, it will take some time for its innovation infrastructure to match the size of its research investments. But as their internal innovation infrastructure is being enhanced to more global standards, their recent growth in measurable innovation shouldn't be dismissed. For example, in 2000 there were 274 patents registered to Chinese inventors by the US Patent and Trademark Office. Sixty-six of them were assigned to purely Chinese companies. In 2011, the number of US patents registered to a Chinese inventor was 5,003, with 51 percent of these assigned to a Chinese company or organization. While these numbers are extremely small compared to the total number of US patents, it is spectacular growth with a lot of "incremental change" being captured by Chinese companies.
Does the slowdown in R&D spending in the United States mean Asia now has the keys to the future?
Not at all. We show that at current growth rates China's level of R&D investment will equal that of the US in about 2022. But a lot can happen over the next decade in terms of the global economy, R&D, and technology in general. While the growth in China is significant for many reasons, the US R&D engine is still more than twice the size of China's, and is more than that of China, Japan, and South Korea combined.
What are the strongest R&D growth areas in emerging economies?
In the near future, ICT will continue to be the strongest area for growth, especially as it continues to move to evenlower-cost areas. China will also continue to gain traction in the life sciences with increasing government and multinational investment. One potential R&D niche for these emerging countries is supplying technologies needed to meet their dramatic economic and consumer growth which also have future applicability in Africa and other developing economies. For example, pushing the envelope on wireless communications, low-cost biopharmaceuticals, distributed power, and even desalination technologies. These technologies help grow and sustain their own consumer economies, while positioning them extremely well in other developing countries.