Globalization of TechnologyDr Henry Loewendahl

VP North America, fDi Intelligence, Financial Times Ltd

Managing Director, WAVTEQ Ltd

INSME Annual Meeting“The Governance of Innovation"

9:50-11:00 23 May 2013, Izmir, Turkey

No part of this material may be copied, distributed or used without the prior written permission of Henry Loewendahl

1. Trends in R&D investment2. Corporate strategies and competitiveness factors3. Policy implications

Contents

Foreign Direct Investment Trends in R&D

Date range: 2003-2013Definition: Job-creating greenfield FDI projects in R&DSource: fDi Markets database, fDi Intelligence, Financial Times Ltd

Global trends in R&D FDI

• Over 7,600 R&D projects creating >1m direct jobs tracked• R&D more resilient to global conditions • Increased its share of global FDI to a record 6.2% 2013 YTD

Global market shares of R&D

Top Countries1. USA (44%)2. Germany (9%)3. Japan (7%)4. France (5%)

Top States1. California (13%)2. New York (5%)3. Kanto (5%)4. South East UK (5%)

Top Regions1. North America (46%)2. Western Europe (35%)3. Asia Pacific (16%)4. Other Regions (3%)

ORIGIN

Top Countries1. India (17%)2. China (15%)3. USA (8%)4. UK (6%)

Top Cities1. Bangalore (6%)2. Shanghai (5%)3. Singapore (4%)4. Beijing (3%)

Top Regions1. Asia Pacific (47%)2. Europe (33%)3. North America (11%)4. Latin America (5%)

LOCATION

Industries and Companies

Top Clusters1. ICT & Electronics (43%)2. Life Sciences (14%)3. Transport Equipment (11%)4. Industrial (6%)5. Creative Industries (5%)

CLUSTERS

Top Sub-Sectors1. Software Publishers (15%)2. Custom Programming (9%)3. Semiconductors (7%)4. Pharma Preparations (6%)5. Telecom Equipment (4%)

SUB-SECTORSTop Companies1. Microsoft2. Henkel3. Du Pont4. IBM / Samsung / Blackberry5. Tata / Intel / Honeywell

COMPANIES 2012

Top Companies1. IBM2. Microsoft3. Intel4. Siemens / HP / GE5. Du Pont

COMPANIES 2003-12

Two-thirds of investing companies had turnover >$1 bn. 10% had turnover <$25m

Corporate Strategies & Competitiveness Factors

Date range: 2003-2012Definition: Job-creating greenfield FDI projects in R&DSource: fDi Markets & fDi Benchmark, fDi Intelligence, Financial Times Ltd

Globalization or Regionalization?

Source: fDi Markets database, fDi Intelligence, from Financial Times Ltd, based on information on 2516 projects

• Companies primarily establish regional R&D centres• Nearly ¼ of centres are for domestic markets• Especially R&D in China and USA• Nearly one-fifth are global centres

Location determinants

Source: fDi Markets database, fDi Intelligence, from Financial Times Ltd, based on 1,648 projects with motives specified

• Search for skills• Meeting market and customer needs• Accessing specialist industry clusters • University/researcher knowledge and talent pool

FDI #1 location determinantSize of R&D labour force

Source: Dr Henry Loewendahl analysis based on fDi Markets and fDi Benchmark databases for Canada cities

FDI #2/3 location determinantsMarkets

Source: Dr Henry Loewendahl analysis based on fDi Markets and fDi Benchmark databases for Canada cities

FDI #3 location determinantSize of R&D cluster

Source: Dr Henry Loewendahl analysis based on fDi Markets and fDi Benchmark databases for Canada cities

FDI #4 location determinantSize of talent pool and research

Source: Dr Henry Loewendahl analysis based on fDi Markets and fDi Benchmark databases for Canada cities

FDI #9 location determinantCosts are negatively correlated!!

Source: Dr Henry Loewendahl analysis based on fDi Markets and fDi Benchmark databases for Canada cities

Policy Implications

• R&D projects account for over 6% of global FDI so have become a very important source of investment – especially for emerging markets

• Companies typically have a regional R&D strategy, so understanding your competitive position regionally is key

• Innovation-driven investors can have a major impact on the economy. Microsoft estimates 1 job it creates leads to 30 spin-off jobs compared to a 1:3 ratio typical in manufacturing

• To attract R&D investors requires a combination of available skills, markets, clusters, and universities

• Most investment still comes from the developed economies, although major EM companies are playing a bigger role

• Major corporations dominate R&D investment, but still 1 in 10 R&D projects come from SMEs often linked to new VC

Implications

Contacts

Dr Henry LoewendahlVP North America, Representing fDi Intelligence, Financial Times Ltd Managing Director, WAVTEQ LtdE-mail: henry.loewendahl@wavteq.comSkype/MSN: hloewendahlLinkedin: Henry LoewendahlTwitter: @hloewendahlSkype: +44 (0) 203 239 3224 (redirects to my current phone)W: www.fdiintelligence.com / www.wavteq.com