The Emergence of China and India as New Competitors in MNCs' Innovation Networks

Abstract

The globalisation of business research and development (R&D) was initially confined to developed countries, primarily to the triad of North America, Western Europe and Japan. Around the turn of the millennium, multinational companies (MNCs) increasingly started to include developing countries in their R&D value chain, with a particular preference for China and India. Based on the scattered yet growing evidence, this paper argues that the shift of MNC R&D to China and India is still limited in sectoral and regional scope. The investment is initially more market-seeking in China and more resource-seeking in India, with a tendency to evolutionary learning-based upgrading in both countries. Despite the dynamism in these developments, it seems that knowledge integration and appropriation remains hierarchical and firmly rooted in the triad-based R&D centres. Although alarmist and techno-nationalist arguments, predominantly from the US, of an imminent loss of position in the global innovation contest are exaggerated, these developments may nevertheless herald a historic shift in the global loci of innovation and power.