R E S E A R C H A N D D E V E LO P M E NT
Where Is the New Science
most new science in developed rather thandeveloping economies for reasons that may not
in Corporate R&D?
always characterize the U.S. situation.
Jerry Thursby and Marie Thursby*
The idea that the United States domi- or currently planned R&D facility both views of corporate R&D. For example,
outside and inside the home country.
Respondents identified 145 facilities in devel-
reported that 4% of U.S. industry expenditure
U.S. share of patents and the growth of corpo-
oped economies (primarily the United States
on R&D was for basic research, 19% was for
rate spending on research and development
applied research, and 77% was for develop-
(R&D) in emerging countries like China and
economies (primarily China and India). They
). By contrast, in our taxonomy, 38.8%
). Because scientific discovery is
were asked to characterize the technological
of R&D at identified sites involves new sci-
critical to economic growth, these trends have
and market focus of R&D at the site. The tech-
ence, while 61.2% is familiar science.
sparked concerns as to what is driving compa-
nological focus was defined as either (i) a
The focus here is on the percent of effort
nies to conduct R&D in these countries and
novel application of science as an output of the
devoted to new science, regardless of whether
the implications for future competitiveness,
R&D (it could be patentable or not) or (ii)
it is for new or familiar markets. The his-
particularly given problems with the U.S.
of intellectual property (IP) in emerging
). Similar concerns pervade
European innovation policy initiatives (10
The popular press has fueled these concerns
with reports of R&D moving to emerging
countries in search of low costs (11
intensive companies headquartered primarily
revealed that respondents expect their R&D to
grow in emerging economies and to decline in
). Lower R&D cost in emerging eco-
new markets and (iv) as familiar markets.
tograms in the chart (p. 1548) give responses
factors, collaboration with university scien-
for the percent of effort devoted to new sci-
tists, and quality of R&D personnel were all at
R&D: new science to create new markets, new
ence in developed versus emerging economy
least as important as cost (12, 14
science to improve familiar markets, familiar
sites. The percent of effort devoted to new sci-
Here we focus on the type of R&D con-
science to create new markets, and familiar
ducted in different countries and argue that
science to improve familiar markets.
evenly distributed than it is for sites in emerg-
appropriate policies in the face of globaliza-
To clarify, when Pfizer developed Viagra,
ing economies. In the latter, almost 71% of the
tion should focus not only on the factors af-
it was a new molecular structure with applica-
sites conduct 25% or less new science. On
fecting location but also on the type of R&D
tion in a market not served by Pfizer. It was
average, 49.6% of R&D effort in developed
conducted. We categorize R&D according to a
new science for a new market. Cialis, based
economy sites is for new science; in emerging
taxonomy suggested by R&D executives as
on the same molecular structure, was later
economy sites, it is only 22%. The contrast is
one they use in tracking internal R&D. This
more striking when responses are weighted by
allows us to focus on the extent to which com-
for Lilly. It was familiar science for a new
the number of technical employees at each
panies use cutting-edge science and show that
market. Once-a-week versions developed by
facility: The weighted averages for new sci-
the type of industrial R&D differs substan-
either company would be familiar science for
ence are 56% in developed economy sites and
tially in developed versus emerging country
sites. An econometric model is used to relate
the type of R&D at various sites to country
effort at the site devoted to each of the four
science at a site, a logistic regression ap-
characteristics. In the survey, respondents
categories (see figure, above). The R&D exec-
proach for grouped data was used to relate the
were asked to identify a recently established
utives we interviewed claimed this classifica-
ratio of new to familiar science in the identi-
tion is more relevant to their R&D than
fied facilities to respondent views of a variety
the more “linear and sequential” taxonomy
of other country-specific characteristics (16
J. Thursby is at Emory University, Atlanta, GA 30322 and M.
Thursby is at Georgia Institute of Technology, Atlanta, GA
of basic or curiosity-driven research, applied
The model controls for industry, the firm’s
research designed for specific end use, or de-
total worldwide technical employment, and
velopment to improve products or processes
whether the country of the facility is developed
*Author for correspondence. E-mail: [email protected]
). The two taxonomies provide different
or emerging. Data for the other country char-
corporate sentiment. U.S. universities have
terms, enough so as to instigate policy discus-
university research agreements (18
research on university industry collaboration
in the European economies that have adopted
U.S. policies regarding university research
shows similar concerns (19
). This dynamic
will only be accentuated as the quality of uni-
versities in emerging economies improves.
the country in which thefacility is located. They
1. National Science Foundation, Science and Engineering
(NSF, Washington, DC, 2006).
2. J. Landefield, R. Mataloni, Working Paper 2004-06 (U.S.
New science in developed and emerging economy sites.
Bureau of Economic Analysis, Department of Commerce,
Washington, DC, 2004);www.bea.gov/bea/working_papers.htm.
facility. Responses on agreement and impor-
two IP factors were similar to those for quality
3. Economist Intelligence Unit, “Scattering the seeds of
tance were combined to create a measure of
of personnel, in that the IP factors were statis-
invention: The globalization of research and develop-
the extent to which a factor drove the location
tically important in location decisions, but
ment” (White paper, Economist, London, 2004).
decision. We then tested the hypotheses that
were not significantly related to the ratio of
4. R. Nelson, The Sources of Economic Growth
some of these factors are also central to the
new to familiar science. Thus IP protection
5. Committee on Prospering in the Global Economy, Rising
type of R&D conducted (see table below).
Above the Gathering Storm: Energizing and Employing
Because one would expect the availability
new and familiar science. In terms of the
America for a Brighter Economic Future
(NationalAcademies Press, Washington, DC, 2006).
of high-quality personnel to be important for
Viagra/Cialis example, it would not be sur-
6. R. Freeman, NBER Working Paper 11457 (National
any kind of scientific research, it is not clear
prising that Pfizer and Lilly consider IP pro-
Bureau of Economic Research, Cambridge, MA, July
how the ratio of new to familiar science would
tection equally important for both products,
7. A. Jaffe, J. Lerner, Innovation and Its Discontents: Our
vary (if at all) with the quality of personnel.
even though the former represents new sci-
Broken Patent System Is Endangering Innovation and
Our regression analysis showed that, although
(Princeton Univ. , Princeton, NJ, 2004).
quality of R&D personnel affects location
The most striking result is that the factors
8. N. Zamiska, WSJ
(3 June 2006), p. A3.
decisions, it is not significantly related to the
related to universities (presence of university
9. L. Branstetter, Q. J. Econ.
121, 321 (2006).
10. Aho Group report, Creating an Innovative Europe
type of science. Cost was significantly related
faculty with special expertise and ease of
(European Commission, Brussels, 2006); http://ec.
to the type of science with an increase in cost
decreasing the ratio of new to familiar science.
strongest impact on the type of science con-
11. Taken from 38 of 61 articles on R&D moving off-shore in
and New York Times
Growth potential and supporting sales were
ducted. Each is statistically significant in the
12. J. Thursby, M. Thursby, Here or There? A Survey on the
expected to be more important for familiar
Factors in Multinational R&D Location
than new science, because R&D in those
leads to a substantial increase in new relative
cases is likely to be product localization. An
13. The companies included are R&D-intensive firms large
enough feasibly to have multiple R&D facilities. Because
increase in market potential or a facility that
of confidentiality agreements that made this study possi-
supports sales is associated with a decreased
summarized in the table, left (17
). With regard
ble, firm-specific data are not available.
ratio of new to familiar science. Results for the
to government and university policy, these
14. For R&D facilities in developed economies, the same
factors are important, except cost is not important and IP
protection is important. Weak IP protection is a deterrent
15. J. Marburger, Science
308, 1087 (2005).
16. Details are in the supporting online material.
17. The most important factor has rank 1. The rank is based
on the absolute size of the elasticity showing the impact
of the factor on the type of science. The factors ranked as
“not important” are not statistically significantly related
19. F. Valentin, R. Jensen, Effects on Academia-Industry
cantly related to university factors.
Collaboration of Extending University Property Rights
20. Supported by the E. M. Kauffman Foundation and
Government University Industry Research Roundtable ofthe National Academies.
*Costs of R&D are exclusive of tax breaks and government
assistance; growth refers to market growth potential in that country,
Ease of ownership is the ease of negotiation for ownership of IP from
research relationships, and IP protection refers to its strength.
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