INTERNATIONALIZATION OF TRANSNATIONAL

CORPORATIONS’ RESEARCH AND DEVELOPMENT:

ANALYSIS OF THE ROLE OF BRICS AFFILIATES

Célio Hiratuka

Fernando Sarti

Second International Workshop of the BRICS Project

25, 26 and 27, April, 2007 Hotel Glória, Rio de Janeiro, Brazil

Internationalization of TNCs technological activitiesTaxonomy of R&D laboratories

Purpose ScaleExploitation of

country advantage

Major Determinant of

Location

Adapting products and

processes to host country markets

Small Home country advantage

Size and growth of domestic

market

Monitoring scientific and technological

progress abroad

SmallHome and Host

country advantage

Quality of NSI in host and home

country

Generating new products and

core technologies

outside the home countries

Large Host country advantage

Quality of NSI in host country

Source: Patel e Vega, 1999

United States transnational corporations’ sales and R&D expenditures. Total and abroad. In US$ millions and %.

Source: NEIT/IE/UNICAMP, based on data from the Bureau of Economic Analysis

1989 1994 1999 2004R&D expendituresTotal 59.925 91.574 126.291 152.384Affiliates abroad 7.048 11.877 18.144 27.529Share of affiliates (%) 11,8 12,9 14,3 18,1

SalesTotal 3.329.443 3.990.013 5.975.478 6.948.995Affiliates abroad 1.019.966 1.435.901 2.218.945 3.238.471Share of affiliates (%) 30,6 36,0 37,1 46,6

R&D expenditures abroad by majority-owned foreign affiliates of U.S. parent companies. Developed and developing countries

Source: NEIT/IE/UNICAMP, based on data from the Bureau of Economic Analysis

Developed Developing DevelopedDeveloping

Countries Countries Countries Countries

1989 7.048 6.776 272 100 96,1 3,9

1994 11.877 10.941 936 100 92,1 7,9

1999 18.144 16.027 2.117 100 88,3 11,7

2004 27.529 23.758 3.771 100 86,3 13,7

Δ% p.a. 1989-2004

9,5% 8,7% 19,2%

US$ millions %

YearAll

CountriesAll

Countries

R&D expenditures in developing countries by majority-owned foreign affiliates of U.S. parent companies: Latin America and

Asia.

Source: NEIT/IE/UNICAMP, based on data from the Bureau of Economic Analysis

Developing DevelopingCountries Countries

1989 272 153 77 100 56,3 28,31994 936 477 408 100 51,0 43,61999 2.117 613 1.400 100 29,0 66,12004 3.771 882 2.696 100 23,4 71,5

US$ millions %

YearLatin

America Asia

Latin America

Asia

Majority-owned foreign affiliates of U.S. parent companies – Share

of selected developing countries in R&D expenditures abroad

* 2002Source: NEIT/IE/UNICAMP, based on data from the Bureau of Economic Analysis

Region/Countries1989 1994 1999 2004

Latin America 2,2 4 3,4 3,2Argentina 0,1 0,2 0,1 0,1Brazil 1,3 2,0 1,6 1,2Chile 0,01 0,02 0,02 0,03Venezuela 0,1 0,1 0,2 0,1Mexico 0,5 1,5 1,3 1,3* Asia 1,1 3,4 7,7 9,8China 0 0,1 1,8 2,3Hong Kong 0,1 0,4 1,2 0,8India 0,03 0,04 0,1 0,6South Korea 0,1 0,1 0,6 0,9Malaysia 0,04 0,2 0,9 1,1Philippines 0,1 0,1 0,2 0,2Singapore 0,4 1,4 2,3 2,6Taiwan 0,3 0,9 0,7 1,3Thailand 0,01 0,03 0,04 0,1Russia 0,0 0,0 0,1South Africa 0,1 0,08 0,1BRICS 2,2 3,6 4,3

Share in R&D expenditures abroad

Majority-owned foreign affiliates of U.S. parent companies – Share of

selected developing countries in R&D expenditures and sales abroad, 2004

* 2002Source: NEIT/IE/UNICAMP, based on data from the Bureau of Economic Analysis

Share in total sales

Share in R&D expenditures

Share in R&D expenditures/ Share in sales

All countries 100 100 1Developed 71,2 86,3 1,2Developing 28,8 13,7 0,5Latin America 11,0 3,2 0,3Argentina 0,7 0,1 0,1Brazil 2,2 1,2 0,6Chile 0,3 0,0 0,1Venezuela 0,4 0,1 0,1Mexico* 3,9 1,3 0,3Asia 12,6 9,8 0,8China 1,9 2,3 1,2Hong Kong 1,9 0,8 0,4India 0,4 0,6 1,5South Korea 0,8 0,9 1,1Malaysia 1,1 1,1 1,0Philippines 0,4 0,2 0,5Singapore 3,8 2,6 0,7Taiwan 1,0 1,3 1,4Thailand 0,9 0,1 0,1Russia 0,3 0,1 0,2South Africa 0,5 0,1 0,2BRICS 5,3 4,3 0,8

U.S. TNCs – R&D expenditures/sales ratio, total and affiliates abroad

Source: NEIT/IE/UNICAMP, based on data from the Bureau of Economic Analysis

1989 1994 1999 2004

TNCs’ total 1,8 2,3 2,1 2,2

Affiliates’ total 0,7 0,8 0,8 0,9

Developed countries 0,8 1,0 1,0 1,0

Developing countries 0,2 0,3 0,4 0,4

Latin America 0,2 0,4 0,2 0,2

Argentina 0,2 0,2 0,1 0,1

Brazil 0,3 0,7 0,5 0,5Chile 0,1 0,0 0,0 0,1

Venezuela 0,3 0,3 0,4 0,1

Mexico 0,2 0,5 0,3 0,3* Asia 0,1 0,3 0,6 0,7

China 0,0 0,2 1,6 1,0Hong Kong 0,1 0,2 0,5 0,3

India 0,6 0,5 0,4 1,2South Korea 0,2 0,3 0,9 1,0

Malaysia 0,1 0,2 0,7 0,9

Philippines 0,2 0,3 0,4 0,4

Singapore 0,2 0,4 0,5 0,6

Taiwan 0,3 0,8 0,7 1,2

Thailand 0,0 0,0 0,1 0,1

Russia 0,0 0,0 0,2South Africa 0,4 0,2 0,2

Majority-owned foreign affiliates of U.S. parent companies – R&D expenditures by industry, 2004

Millions of dollars %27.529 100

Mining 8 0,0Utilities 2 0,0Manufacturing 23.288 84,6

Food 634 2,3Chemicals 6.254 22,7Primary and fabricated metals 197 0,7Machinery 791 2,9Computers and electronic products 5.283 19,2Electrical equip., appliances, and components 551 2,0Transportation equipment 7.741 28,1

Wholesale trade 1.205 4,4Information 843 3,1Finance (except banks) 1 0,0Professional, scientific, and technical services 2.120 7,7Other industries 64 0,2

All industries

Source: NEIT/IE/UNICAMP, based on data from the Bureau of Economic Analysis

Majority-owned foreign affiliates of U.S. parent companies – R&D expenditures by industry and coutry, 2004

All industriesNon-

ManufacturingManufacturing Chemicals

Computers and electronic

products

Transportation equipment

Millions of dollarsAll Countries 27.529 4.241 23.288 6.254 5.283 7.741 Brazil 340 12 328 67 61 144 China 622 84 538 18 468 5 India 163 118 45 6 25 6 Russia 17 - - - - - South Africa 30 6 24 5 - 16

ShareAll countries 100 100 100 100 100 100 Brazil 1,2 0,3 1,4 1,1 1,2 1,9 China 2,3 2,0 2,3 0,3 8,9 0,1 India 0,6 2,8 0,2 0,1 0,5 0,1 Russia 0,1 - - - - -South Africa 0,1 0,1 0,1 0,1 - 0,2

ShareAll countries 100 15,4 84,6 22,7 19,2 28,1 Brazil 100 3,5 96,5 19,7 17,9 42,4 China 100 13,5 86,5 2,9 75,2 0,8 India 100 72,4 27,6 3,7 15,3 3,7 Russia 100 - - - - - South Africa 100 20,0 80,0 16,7 - 53,3

Source: NEIT/IE/UNICAMP, based on data from the Bureau of Economic Analysis