The winding path for foreign companies: building R&D centers in China

Abstract

Purpose Only a few foreign companies have started significant R&D activities in China. Although these forerunners have opened the door, their experience now needs to be transferred to followers. The purpose of this paper is to use this experience to offer some guidance to foreign companies wishing to launch R&D activities in China. Design/methodology/approach The authors’ recommendations are based on their investigation into 50 existing foreign R&D centers in China and one pioneering experience into the management of one of those centers. The authors especially investigated the questions of location, people and intellectual property rights, and relationships with authorities. Findings Foreign companies wishing to do R&D in China will have to adapt to an environment different from those they are used to. The authors draw up recommendations that should help them to find their way. They particularly emphasize location in or close to clusters, the type of relationships to be developed with public authorities and with the communist party, the specific characteristics needed by workers in those centers, the need for a cautious intellectual property rights approach and the key role of returnees in R&D centers. These findings are based on previous experience and lessons learned directly by the authors as well as through meetings with R&D executives and managers of medium/large foreign companies or joint ventures s in China. Research limitations/implications The Chinese research, development and innovation landscape has evolved rapidly and has still not stabilized. Consequently, the authors’ recommendations, which capture best practices and recently learned lessons, are applicable for the next five years. Some of them might change in the future as the overall national and international situation evolves. Practical implications These recommendations offer guidelines to companies without R&D centers established in China for expanding their international technology strategy. They will help companies already operating successful R&D centers to better leverage previous investments and efficiently set up and operate R&D activities in China. Originality/value China has been on the R&D map for only a few years as exemplified by the surge of scientific publications and patent deposits, making China the country with the most patents in the world. No foreign company engaged in R&D can ignore this fact. Yet, few papers have been published with “how to?” guidelines.