Corporate R&D will shift to developing Asia and Eastern Europe - A.T. Kearney Survey

A study by management consulting firm A.T. Kearney says nearly half of global investors plan to increase R&D spending and only 3 percent will decrease it over the next three years. Almost three-quarters of these increases will be allocated to developing Asia and Eastern Europe. About one in five global investors indicate plans to increase R&D in North America and Western Europe, with virtually the same number of global investors indicating planned decreases in R&D investments in these locations, respectively.

Overseas migration of R&D spending is expected to rise. Global investors from North America and Western Europe said their most significant R&D spending reductions will occur in their home territories.

Cost and quality drive R&D investment location decision-making

The three most important location attributes driving global R&D investments are lower R&D costs, availability and quality of local R&D labour, and intellectual property protection -- with just over half of global investors citing these as the most important location attributes. The quality of universities and research centres and IT infrastructure were the fourth and fifth most important R&D investment location factors, with 46 percent and 42 percent of investors noting these factors, respectively.

About one third of investors believe that regulatory environment, reputation for creativity and innovation and ability to tailor products and services are most important R&D investment location attributes. Roughly 28 percent consider market size, while 26 percent view government R&D incentives as critical R&D location attributes.

Globalization of R&D will be a balancing act, not a 'zero-sum' event

China and India are the most preferred countries for future R&D investments, according to the A.T. Kearney study, with slightly more than 40 percent of CEOs indicating they will likely make such investments in these markets over the next three years.

Almost one third of global investors cited Eastern European locations for R&D activities -- with Poland and Russia leading the way. Investor preference for these slowly maturing R&D locations says much about their views on their future potential talent base, intellectual property protection, the quality of

educational and research communities and infrastructure.

The United States, the United Kingdom, Japan and Germany trail China and India as the most preferred future R&D investment locations. As of 2003, these four industrialized countries' combined gross domestic expenditure on R&D amounted to approximately $520 billion, compared with an estimated $26 billion spent in China and India combined. The U.S. and these other developed countries likely will remain on the frontier of innovation in most fields, but certain components of the corporate R&D process will benefit increasingly from support of developing world locations.

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