Multinationals are shifting their R&D focus from cost savings to knowledge-based research.
Sourced through Scoop.it from: www.strategy-business.com
Transitioning to knowledge-driven R&D will become increasingly important for foreign multinationals in China. But along the way, they will need to confront several key challenges. 1st, they will have to decide where to locate their R&D centers. Companies have traditionally emphasized one specific type of innovation at a given facility. But it’s often impossible to simply change a facility’s focus.
Cost-driven R&D has had to follow the manufacturing sector into China’s interior, where costs are lower than in coastal regions. Market-driven R&D needs to be close to where the customers are. For example, automakers’ equipment suppliers need their R&D centers to be near the automakers’ factories, which are scattered across the country. Knowledge-driven R&D, in contrast, needs to be conducted close to research universities and public research institutes. These are predominantly established in the coastal provinces — in 1st-tier cities, but also in 2nd-tier cities such as Hangzhou, Nanjing, and Suzhou. A company pursuing knowledge-driven R&D will therefore typically need to open a new facility. Fortunately, MNCs can often receive incentives from provincial or municipal governments eager to attract investment and create jobs. – The 2nd challenge MNCs face involves talent. Companies conducting cost-driven or market-driven R&D are used to hiring people with bachelor’s degrees, but people who conduct knowledge-driven R&D typically need master’s degrees or Ph.Ds. This means building close links with leading universities and research centers to get preferential access to new graduates.