PhD proposal presentation The International R&D Strategies of Chinese Companies- Evidence from...

PhD proposal presentation

The International R&D Strategies of The International R&D Strategies of Chinese Companies- Evidence from EuropeChinese Companies- Evidence from Europe By Jieyin Zhang June, 2008


Why I choose this topic?1. Practical significance Along with the globalization of economic competition----the

new phenomenon of international R&D operations of the MNCs from emerging countries

In such a dynamic global competitive environment, how can the MNCs from emerging countries conduct their international R&D activities globally to obtain the resource and knowledge through their organization setting?

2. Theoretical significance Limited literatures are about the theoretical explanation of the

new phenomenon from the perspective of the organizational arrangement use the framework of double network theory cross-border

integration and coordination strategies of Chinese MNCs


What I want to do?• The purpose of this paper is to provide a “window”

on the following efforts:• Assess if the Chinese MNCs can pursue effective

catching up paths in the area of R&D;

• Examine Chinese MNCs’ international R&D activities in term of international R&D organizational arrangement (double network organization) to seek competitive competence (innovation capability);

• In a deeper level, I hope to give some suggestions of international R&D strategies for not only Chinese MNCs but also the MNCs from Emerging countries.


Agenda

1. Introduction: The background of global FDI

2. Literature Review

3. Putting forward research questions

4. Propositions

5. Data collection and research methodology


1. Introduction: The background of global FDI • Ⅰ.The development in global FDI: FDI from both developed and developing countries • (1) The global FDI situation• Both inward and outward global foreign investment (FDI) flows are increasing in developing countries. • WIR [2006]:• Inward FDI-‘Global FDI inflows rose by 29% to $916 billion in 2005, compared to a 27% increase in 2004, which still remained far below the 2000 peak of $1.4 trillion; Inward FDI in developed countries started to increase in 2004, after three years of

significant decline between 2000 and 2003, and Inward FDI in developing countries rose by another 22% to $334 billion, following a 57% growth in 2004.’ • Outward FDI-‘Global FDI outflows in 2005 showed a somewhat different picture than did inflows, declining by 4% to $779 billion. Developing countries are emerging sources of FDI strengthened their global position further in 2005, investing $117 billion

in 2005- 4% more than in the previous year.’

Source: UNCTAD


1. Introduction: The background of global FDI• Ⅱ. International R&D by MNCs • International R&D activities are the advanced stage of FDI

• MNCs play an important role in R&D internationalization and account for a major share of international R&D

• Figure-1 R&D expenditure by selected MNCs and economies, 2002 • (Billions of dollars)

Source: WIR, 2005, Figure IV.1.


1. Introduction: The background of global FDI• Ⅲ .The ODI of Chinese companies

Leading Chinese Companies Investing Overseas, January, 2003 to March, 2006


1. Introduction: The background of global FDI• Ⅳ .The innovation system revolution of China-The role of government • 1978: Open Door Policy-Deng Xiaoping committed China to adopting policies which

promote foreign trade and economic investment. [Fallon, Steve]• 1985: the first transformation of the innovation system of China- ‘highly systemic’

[Gu,2006]• 2005: the 11th National Economic and Social Development Program (2006-2010)-the

strategy of ‘endogenous innovation’ and ‘harmonious development’• 2006: Chinese government took strengthening innovation capacity and building up

innovation-typed state as an essential of National Medium and Long-Term Science and Technology Plan

• R&D expenditures of China (1999-2005)

R&D expendi tures

0

10002000

3000

4000

year

hu

nd

red

millio

n

(yu

an

)

R&D expendi tures

Source: http://www.sts.org.cn/

http://www.sts.org.cn/


1. Introduction: The background of global FDIUnder the support from government, Chinese corporations play a key role of

innovation in China.

The source of China’ R&D fund (2001-2005)

R&D f und source st ructure

0

20

40

60

80

2001 2003 2004 2005

year

perc

enta

ge government

cororat i on

other( i ncl udeoverseas)

Source: China Science and technology statistics (http://www.sts.org.cn/), summarized and calculated by author.

executive department distribution of R&D expenditures

0. 00%

20. 00%

40. 00%

60. 00%

80. 00%

1987 1990 1998 1999 2001 2002 2003 2004 2005

yearpe

rcen

tage

ScientificResearchInstitutesUniversities

Corporations

others

Implementing Sector of China’s R & D Expenditures

http://www.sts.org.cn/


2.Literature Review• Ⅰ. The theories evolution about multinationals from the third world

Two waves of MNCs from developing world [Mathews, 2006]

(1) The first wave of MNCs from developing countries(1970s-1980s): three basic theories to explain the growth of third world MNCs

• Investment Development Cycle theory [Dunning, 1981]• The theory of small-scale technology [Wells, 1977] • the theory of localized technological change [Lall, 1977]

(2) The second wave of MNCs from developing countries(1990s-21st century)

• The literatures are mainly follow two dimensions: to get the competitive advantages and organizational configuration:

• Asserts seeking theory [Deng, 2007; Child and Rodrigues, 2005]• Resource based view (RVB) [Gao, et al., 2006]• Dynamic capabilities perspective (DCP) [Hong and Sun, 2006]• DCP branch: Organizational learning theory [Fan, 2006; Hitt, et al., 2005]• Network theory [Zedtwitz, 2005; Chen and Tong, 2003]

2.Literature Review

• Ⅱ. The international organization of R&D: The evolution of network theory applied to MNCs

• Inter-organizational network (Ghoshal and Bartlett, 1990) “a network of intra-firm linkage” “integrated network model” (Hakanson, 1990) ,external network “double knowledge-based network” (Zanfei, 2000) “metanational corporation” (Doz et al., 2001);

• The role of subsidiary (Helble and Chong, 2004; Kuemmerle, 1999; Lehrer and Asakawa, 2002; Pagano, 2006; Piscitello and Rabbiosi, 2006); “The firm’s competitive advantage hinges exist at the subsidiary level” (O’Donnel, 2000;Hakanson and Zander, 1988)

• knowledge transfer units knowledge creation centers (Lehrer and Asakawa, 2002)



2.Literature Review• Ⅲ . International R&D strategies and organization of MNCs

Technology-driven vs. market-driventechnology exploration vs. technology exploitation

(1)Strategic motivation of international R&D

(3)International R&D entry mode choice

(4)R&D organizational structure centralization degree

(5) International R&D control mechanisms

(2) International organizational learning pattern

Centralization vs. Autonomy

Centralization vs. Formalization vs. Socialization (Informalization)

Greenfield investment vs. M&As vs. JVs (non-equity based cooperation vs. equity-based cooperation

Cooperation with local partners vs. Experiential accumulation

2.Literature Review• Ⅳ. The latecomer international R&D strategies of Chinese MNCs

• Three dimensions of studies: • (1) the internal and external factors that influence the international

strategy choice : • motivations [Hong and Sun, 2006; Chen and Tong, 2003; von Zedtwitz,

2005], institutional factor [Child and Rodrigues, 2005], opportunities for improvement in the development of technologies [Gao, et al., 2006]

• (2) Innovation capability development

• innovation capability development [Gao, et al., 2006; Fan, 2006; Mathews, 2006]

• (3) international R&D organization strategy of Chinese MNCs:

• Organization structure [Chen and Tong, 2003; Tong and Dai, 2003; von Zedtwitz, 2005], locations & paths [Chen and Tong, 2003] , control & communication mechanism [Chen, Tong and Jing, 2004] (Chinese)


2.Literature Review

• Ⅳ. The latecomer international R&D strategies of Chinese MNCs

• Limitations:• 1. The external network is still neglected• 2. The R&D subsidiary role in a double network:

• Knowledge transferor or Knowledge creator?

• 3. The R&D internationalization patterns of Chinese companies haven’t been investigated deeply (case studies/ interviews)

• 4. The control and communication mechanisms to coordinate the ever-dispersing R&D organization and transfer knowledge


2.Literature Review• The innovative issues:• A. Data advantages: Using the evidence from Europe to do a

integrated study on the international R&D strategies of Chinese companies.

• B. Research methodology advantages: A triangulation approach-both questionnaire and interview based multi-case study

• C. Research topic advantages: there are few studies concern the topic about international R&D strategies of emerging countries. I will deepen the research in three aspects: organizational learning, organizational configuration and organizational control and communication mechanisms. I will try to find the strategic differences of the MNCs from China, and bring forward some strategic suggestions for not only Chinese MNCs but also other emerging countries to pursue effective catch-up paths in term of R&D internationalization.


3.Putting forward research questions• Research questions will follow a double knowledge network-based

theoretical

•

• •


RQ1: Internalization patterns

RQ2: The international R&D organizational configuration

Double Network theory

Mapping the R&D units of Chinese companies in Europe

Motivations/learning process

Learning channels

Autonomy degree

Internal linkages vs. external linkages

organizational control and communication mechanisms


3.Putting forward research questions Q1: Q1:

Which are the main Which are the main international R&D international R&D patterns of Chinese MNCs patterns of Chinese MNCs in Europe? in Europe?

For this research question, three sub-questions would follow:

A. To what extent Chinese MNCs have set up R&D labs in Europe?

B. Which are the main motivations for the establishment of R&D labs by Chinese MNCs in Europe?

C. To what extent R&D labs by Chinese MNCs involve external actors in their activities?

Four patterns of international organizational learning


3.Putting forward research questionsFor this research question, two sub-questions would follow:

A. Which is the degree of R&D organizational centralization of Chinese MNCs? (in term of autonomy degree)

B. Which are the main control & communication mechanisms adopted by Chinese MNCs in the management of R&D labs in Europe?

C. To what extent Chinese MNCs appoint expatriates for the management of R&D labs?

Q2:

Which is the Which is the organizational organizational configuration of R&D configuration of R&D units set up by Chinese units set up by Chinese MNCs in Europe?MNCs in Europe?


5. Data collection and research methodology• Ⅰ. Research methodology

• This research would be multi-case studies based qualitative method combined with empirical analysis based quantitative method. The mixing methods would be from a quantitative pilot study to in-depth cases. Questionnaire and interviews would be used to collect data and test hypothesis.

• Reasons:

• 1. The international R&D activity of Chinese MNCs is a quite new phenomenon for academic research

• 2. The limited samples of R&D subsidiaries of Chinese MNCs in Europe

• 3. The consideration of a low cooperative rate of Chinese companies in academic research (Chen and Tong, 2003; von Zedtwitz, 2005)


5. Data collection and research methodology• Ⅰ. Research methodology• This research investigates the overseas R&D units of Chinese companies and the

international R&D strategies of Chinese companies. With regard to the cases selection, this research focuses on the overseas R&D units of Chinese multinationals in Europe.

• There is a two-fold reason to choose the R&D subsidiaries in Europe as the research samples. Firstly, Europe is deemed as one of most popular ODI destination by emerging countries, including China, and a lot of R&D subsidiaries of Chinese MNCs have conglomerated in Europe; secondly, there are many developed countries with diversified technological advantages concentrated in Europe to attract R&D investment of different industries.

• Considering the limited samples of R&D subsidiaries of Chinese MNCs in Europe and a low cooperative rate of Chinese companies in academic research [Chen and Tong, 2003; Von Zedtwitz, 2005], multi-case studies based qualitative method combined with empirical analysis based quantitative method would be used in this research.

• As an exploratory study, in-depth Interviews with R&D managers and an assistant questionnaire would be the main method to collect the necessary data.


5. Data collection and research methodology• Ⅱ. Data collection• Firstly, I draw the research samples from the database-locomonitorTM (LOCOmonitorTM contain

the data of investments projects for filter China in Europe from Jan. 2003 to Aug. 2007.) and open sources such as written documentation, newspapers, and internet.

• Secondly, I would contact the regional headquarters in Europe, subsidiaries in Italy and R&D units by fax, Email or telephone, and send them a cover letter with a description of the research project and a recommendation from Professor or university to make sure if the R&D units really existed and would accept my survey. At the same time I would fix the interviewees that are supposed to be the top managers in the R&D units. In this step, 16 R&D units established by Chinese companies in Europe are identified, 5 of which have accepted to cooperate with this research.

• Thirdly, I do face to face or telephone interviews interviewees, most of who are senior R&D managers of the R&D unit. Before the interview, I let the respondents to do a questionnaire for the quantified questions that is ‘used for pre-testing the survey instruments’ [Helble and Chong, 2004] and enhancing the validity of the interviews’ findings.

• Fourthly, I integrate the data and information from both questionnaire and interviews. With regard to the issues not be answered clearly, I contact the respondents again as follow-up research.

• Fifthly, With regard to the information and data that I can not get directly from some company, I also turn to secondary sources, such as LexisNexis®Academic (http://www.lexisnexis.com/), Factiva (http://www.factiva.com/) and official websites.

http://www.factiva.com/

International R&D units of Chinese companies in Europe


Preliminary evidence

Preliminary results in the course of interviews in Europe are suggesting that Chinese companies are planning their R&D subsidiaries in Europe driven by technology exploration and they try to achieve a good external cooperation. At the same time, through the interaction with local partners, the R&D units go through a maturation process, progressively increase the level of sophistication of the activities they perform. They are learning in both internal and external networks, and gradually becoming the independent knowledge creators.


Preliminary evidence

• According to two main dimensions: motivation/learning processes and learning channels, we identify four types of learning patterns: (1) Cooperative-exploratory learning; (2) Experiential-exploratory learning; (3) Cooperative-exploitative learning; (4) Experiential-exploitative learning, which are corresponded by four different roles of R&D subsidiaries: (1) “Observation outposts”; (2) “remote enters of excellence”; (3) “market gatekeepers”, and (4) “market colonizer”. In our cases, most of the R&D subsidiaries more close to the role of “Observation outposts”

• we find 3 possible R&D internationalization evolution paths of Chinese companies: (1) The traditional evolution path from HBE to HBA; (2) The evolution path from HBA to HBE; (3) The evolution path from cooperative learning to experiential learning. In particular the latter two evolution paths seem to be more feasible for the emerging MNCs according to the developing process of our cases.



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