Determinants of Location in Global Sourcing of Innovation

A Comparative Analysis of the Choice of Location in India's Automotive Sector

[Background] [Objectives] [Proposed Methodology] [References]

A project of:

• Institute of Technology and Innovation Management (TIM @TUHH)

Project work by: Mahipat Ranwat

Project framework: The project work outlined in this proposal aims to contribute to the main study "The Role of Offshore R&D in Strengthening Competitive Advantage: Chances and Challenges in India"

Project supervision: Rajnish Tiwari

Duration: October 2007 - March 2008

Proposed duration: Three months

Background

More and more firms today are exploring opportunities in countries around the world to strengthen their competitive advantage, which in developed countries can often only be achieved by being innovative (owing to location-related cost disadvantages). Pardoxically, the high costs of innovation (especially of R&D) in developed countries - along with the pressure to reduce time-to-market - have made firms internationalize their R&D operations, as discussed in some recent publications of our institute; see for instance Working Papers 49 and 50.

The advance of information and communication technologies coupled with economic development in economically emerging countries has made available a multitude of global partners. While going global, a firm has to consider a number of factors ranging from vision and strategic objectives to the availability of academic partners in the target country for instance.

Objectives

In an ever more globalizing and, thus, ever more competitive world, the effort to attract FDI in general, and in R&D in particular, cannot be left to chance. The objectives of the present study are to identify India’s policies and practices in order to attract FDI in the field of R&D. More specific, this study aims to identify:

1. The importance of R&D investment for the Indian government
2. Whether specific industries are preferred, e.g. IT, telecommunications, energy sector etc.
3. Whether specific sizes of companies are preferred, e.g. multinationals to small and medium enterprises
4. Whether specific modes of entering the Indian market are preferred, e.g. obligatory partnerships with local companies
5. Specific policies and practices to attract FDI in R&D, e.g. tax incentives, special economic zones, regulatory incentives, subsidies, deregulation of labour laws, land marketing, protection of IP rights, bilateral agreements, WTO agreements etc. ; and to
6. Assess the impact of FDI in R&D, e.g. yearly investment, number of scientists working in the field, patents filled, patents awarded, clusters built, success stories of companies etc.
7. Come up with suggestions for policy improvement, if/where applicable.

This study is a part of the project India's Innovation System: Exploring the Strengths, currently being carried out at TIM/TUHH within the framework of Research Project Global Innovation. A major objective of this research is to identify policies employed by the Indian governemnt to deal with FDI issues in the R&D sector. It would also seek to make policy recommendation to overcome any shortcomings identified during the study. Another major advantage of this study would be that it could serve as a benchmark for other countries.

Proposed Methodology

In order to collect the necessary information to meet the objectives, it is proposed to split the research process into two sections:

1. Desk research in order to obtain general (preliminary) information about the status quo of FDI in R&D in India, policies employed, industries preferred etc. To do so, the following means are proposed:
   1. Internet sites of the Indian government, e.g. Ministry of Commerce and Industry
   2. Information and statistics provided by Indian institutions such as India Brand Equity Foundation, The Council of Scientific & Industrial Research, National Association of Software and Service Companies (NASSCOM), Federation of Indian Chambers of Commerce and Industry (FICCI), etc.
   3. Information and statistics provided by international organizations, e.g. World Trade Organisation; World Bank; United Nations Conference on Trade and Development etc.
   4. Other institutions – mostly from Universities – specializing in studying India, e.g. IndiaKnowledge@Wharton; Indian Institutes of Technology; Center for the Advanced Study of India etc.
   5. Relevant academic articles and Books about India
2. Once the preliminary results from the desk research are obtained, direct contact to the closely related parties, such as ministries, organizations, firms etc, for further information and answers to specific questions is proposed.

The results of the above research will be used to meet the targets mentioned in the section Objectives and help to better understand India’s innovation system.

References

1. Steven Brakman, Harry Garretsen, Charles Van Marrewijk, Arjen Van Witteloostuijn, "Nations and Firms in the Global Economy: An Introduction to International Economics and Business", Cambridge University Press, pg 140
2. United Nations Conference on Trade and Development, "2004; Development and Globalization: Facts and Figures", chapter 2.
3. The Economist, "Survey: Business in India; If in doubt, farm it out"
4. The Economist, "Survey: Business in India; Now for the hard part"
5. Technology Information, Forecasting and Assessment Council (TIFAC), "FDI in the R&D Sector, Study for the pattern 1998-2003", New Delhi, 2006.

[ For further enquiries, please contact Rajnish Tiwari ]