Managing foreign R&D

laboratories in China
Maximilian von Zedtwitz
Research center for Technological Innovation, School of Economics and Management, Tsinghua
University, 100084 Beijing PR China. max@post.harvard.edu

This paper focuses on the management of R&D units established by foreign companies in
China, investigating R&D missions, site build-up, integration with the parent organization,
and overall performance measurement. The research is based on 37 qualitative expert
interviews with local R&D directors and managers conducted between 2001 and 2004, using
a semi-structured research questionnaire, and semi-quantitative research done on 199 foreign
R&D labs in China. Cultural influences on R&D management, location advantages, expatriate
involvement, and organizational evolution of local laboratories are discussed. We find that
foreign R&D laboratories in China are not only important vehicles for local market
development but also increasingly important sources of locally developed technology.

1. Introduction scientific education, China has managed to build

an impressive basis for R&D and innovation.
1.1. China’s potential for innovation

T o most Westerners, China is known as the

most populous country in the world, hence
creating a potential market encompassing 1.3
billion customers. What is less known, however,
is China’s history as a country of invention and
technological excellence (e.g., James and Thorpe,
1995). According to a recent OECD report
(OECD, 2003), China has become the third
most R&D intensive country in the world. In
2001, total R&D spending in China reached
nearly US$60 billion, third behind the USA and
Japan only which had expenditures of US$282
billion and US$104 billion respectively, and
ahead of Germany’s US$54 billion. China had
the second highest number of researchers in the
world with 743,000, behind the 1.3 million in the
USA but ahead of Japan and Russia, with
648,000 and 505,000 respectively. R&D spending
in China has also grown rapidly, from 0.6% of
gross domestic product (GDP) in 1996 to 1.3% in
2002. Despite large geographical differences in
average wealth and technology, and despite a
difficult recent history regarding research and
1.2. China attracts foreign R&D
Historically, Western companies have transferred
technologies to China for implementation in local
manufacturing joint ventures. Only recently did
they start to explore China as a platform for new
product development. Two trends have furthered
this development:
1) the growing experience of Western companies
in dealing with Chinese companies, markets
and governments, and
2) structural changes in China’s policy and econ-
omy, such as China’s entry to the WTO and
domestic reforms that opened up opportu-
nities for business and sustainable investments.
Particularly since the second half of the 1990s,
technology-intensive multinational companies
(MNCs) have explored China as a location for their
R&D activities. While the trend towards more
foreign-funded R&D centres is clear, its extent is
not (see Table 1). Most research either has a
particular focus (given, e.g., by the motivation of

R&D Management 34, 4, 2004. r Blackwell Publishing Ltd, 2004. Published by Blackwell Publishing Ltd, 439
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
Maximilian von Zedtwitz
Table 1. Reports on the number of foreign R&D centers in China.
Number Focus Year of investigation
18 Beijing 2000
40 Shanghai December 2001
80 Shanghai February 2003
34 China Early 2000
82 China August 2002
100 China 2002
120 China June 2002
148 China 2002
223 ICT companies in China 2002
400 China October 2002
the report sponsors) or lacks in survey consistency.
Furthermore, definitions of what constitutes an
R&D centre are not consistent across reports.
In one of the earliest surveys (prepared as a
NSF report for the Tokyo Regional Office), Xue
and Wang (2001) identified 34 R&D units in
China established by foreign MNCs by early
2000. In an aggregation of three different lists,
the Chinese S&T Statistical Office identified 82
different foreign R&D labs in China in August
2002 (STS, 2003). This may still be underesti-
mated: Motorola alone lists 18 R&D units in
China on its website (Motorola, 2003), and plans
to open up seven more (People’s Daily, 2003). Ten
more multinationals announced new R&D cen-
tres in 2002 alone and more than a dozen in 2003
(with BEA Systems establishing its first and LG
its largest foreign R&D site), while smaller com-
panies usually do not internationally advertise
their Chinese R&D investments.
In complementary research for this paper, I
identified 199 distinct foreign R&D centres estab-
lished or under construction in China in early 2004.
China has thus reached a number of foreign R&D
laboratories that is equivalent to about one fourth of
foreign R&D in the USA (715 centres in 1998, see
Dalton et al., 1999) in a remarkably short period of
time (Figure 1 summarizes the years of establish-
ment for foreign R&D labs in China). What is
perhaps even more noteworthy is that this growth
was achieved during a period of global economic
uncertainty in which R&D investments were de-
creased or maintained stable at best. Given the
available talent in China and the continuing demand
by foreign companies it is expected that foreign-
based R&D will become even more significant.
1.3. Aims of this paper
This contribution focuses on wholly-owned multi-
national’s R&D centres in China or those with a
440 R&D Management 34, 4, 2004
Source
China Economic Weekly (2000)
Xinhua News Agency (2001)
Xinhua News Agency (2003)
Xue & Wang (2001)
China’s Statistical Office (STS, 2003)
Greatwall (2002)
People’s Daily (2002a)
Asia Pulse (2002)
Walsh (2003)
People’s Daily (2002b)
22
20
18
# of R&D labs / year
16
14
12
10
8
6
4
2
‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03
Figure 1. Number of new R&D labs in China set up by MNCs
between 1987 and 2003 (Source: STS, 2003, and own research).
foreign majority ownership stake. Observing a
trend towards locating R&D activities in South-
east Asia and China during a previous research
project on international R&D, my intention was
to focus on China as a host of foreign R&D and
the laboratories established by foreign companies.
In particular, I sought to answer the question why
China is so attractive for foreign R&D, whether
there is a particular domestic location predisposi-
tion, and how foreign R&D sites are established
and managed. These questions thus have a strong
focus on managerial and strategic implications for
the R&D departments of technology-intensive
companies.
1.4. Literature review and focus of study
The topic of international R&D has received
increasing attention since the early 1990s. Based
on groundbreaking research in the 1970s and 80s
(e.g., Cordell, 1973; Ronstadt, 1977; Behrman
and Fischer, 1979; Hewitt, 1980; Hirshey and
Caves, 1981), new taxonomies were developed,
transnational innovation processes suggested,
locations of R&D activity studied, and interna-
tional R&D organizations analyzed. Interna-
tional R&D has been investigated more
thoroughly in some countries than others (see
r Blackwell Publishing Ltd. 2004
 Managing foreign R&D laboratories in China

Table 2. Literature on international R&D by regional focus.

Country focus Key literature

Europe Sweden: Hakanson and Zander (1988), Hakanson and Nobel (1993a and 1993b); Germany:
Wortmann (1990);
UK: Papanastassiou and Pearce (1996)
Japan Westney (1993), Kenney and Florida (1994), Papanastassiou and Pearce (1994), Asakawa
(1996), Odagiri and Yasuda (1996)
U.S.A. & Canada Ronstadt (1977), Mansfield et al. (1979), Dalton and Serapio (1995), Dunning and Narula
(1995), Niosi (1997)
P.R. China Wu (2000), Xue and Wang (2001), Greatwall (2002), Walsh (2003)

Table 2). R&D management in China has gone 2. Research methodology

largely unnoticed, partly due to difficulties in
doing adequate research in China but also be-
cause China-based R&D had been limited in size
and impact to the outside world (Fischer, 1983;
De Boer et al., 1998; Li and Atuahene-Gima,
2001; Liu and White, 2001). There is very little
systematic research on foreign R&D in China as
this is a relatively new phenomenon. Some note-
worthy recent research has been published by
Greatwall (2002) and Walsh (2003). While the
Greatwall report is written and published in
Chinese for a Chinese audience, the report by
Walsh reflects a strong US American perspective
on international R&D in China. An earlier survey
by Wu (2000) was published in Chinese only and
did not focus on adding to our conceptual under-
standing of foreign R&D in China. Xue and
Wang’s (2001) report is an unpublished research
memorandum based on a survey of 33 foreign
R&D centres in China.
Exploratory interviews with R&D managers of
multinational companies in China and their
CTOs revealed that many of the managerial issues
identified in the literature have either not yet been
adequately addressed or require reassessment due
to China’s rapid technological and economic
development. Given the initial aims of this re-
search and limited time and resources, I report on
the following issues in this paper:
 Mission and R&D mandate of foreign R&D
sites;
 Choice of location of R&D sites;
 Staffing the individual R&D lab;
 Support and international coordination of
R&D units from abroad.
This research is based on informed qualitative
research methodology. Key factors of foreign
R&D management were identified in an extensive
review of international R&D literature. Com-
paratively little information was found on foreign
R&D in China. Since there was no established
body of knowledge on managing R&D in China
and the present population of foreign R&D
managers is still relatively small, there was little
support for pursuing quantitative empirical re-
search. Nevertheless, a semi-structured research
questionnaire was developed to capture and struc-
ture information to be obtained from interviews
and tertiary research sources.
A total of 37 qualitative expert interviews were
conducted with R&D directors of foreign labora-
tories in China between 2001 and 2004. The first
level structure of the research questionnaire con-
sisted of guiding questions listed below, with
several follow-up questions refining these princi-
pal categories further:
1) What is the strategic mission of the R&D site?
2) What were the reasons for its location and
establishment?
3) How was the R&D lab established and ramped
up?
4) How were R&D directors selected for
their positions – what criteria had to be
fulfilled?
5) What is the role of the parent company/of
central R&D in supporting the Chinese R&D
unit?
6) What are particular insights in managing
R&D in China?

Other equally pressing research issues in this The answers were captured in writing, and
context had to be set aside, unless they became written after-interview feedback was sought
important in addressing any of the above research from the interview experts to correct false inter-
themes. pretations and update new developments. In some

r Blackwell Publishing Ltd. 2004 R&D Management 34, 4, 2004 441

Maximilian von Zedtwitz
Table 3. Origins of companies in the study with R&D sites in China.
Europe (15) USA (17)
Nokia, Ericsson, Microsoft, Lucent,
Hoffmann-La Roche, DuPont, Proctor & Gamble,
Firmenich, Schindler, IBM, Honeywell, Intel,
Tetrapak, Volkswagen, UTC, Oracle, Hewlett-Packard,
Electrolux, SAP, Unilever, Dell, GM, GE, Agilent, Sun,
Nestle, Alcatel, Bayer, Qualcomm, Kodak
Novo Nordisk, Siemens
instances several managers of the same company
or the same R&D unit were interviewed, thus
increasing data validity per company. Addition-
ally, and in compliance with data triangulation in
qualitative case study research as stipulated by
e.g. Yin (1988), secondary and tertiary informa-
tion was collected, for instance reports on the
establishment of foreign R&D centres, informa-
tion published on associated websites, personal
observations, and interviews with external
experts.
Also, several companies that were not inter-
viewed were researched based on publications on
their China R&D strategies and operations. These
publications had been issued either by the com-
panies themselves or by other researchers. The
investigated companies operated in different in-
dustries such as pharmaceuticals, chemicals, food,
engineering, electronics, and telecommunications.
All of the companies in the study sample had
established R&D sites elsewhere before investing
in China, hence they could rely on a certain
amount of experience in starting up R&D abroad.
All companies were also present in China with a
sales and/or marketing organization. The origin
of these companies is also varied, including 12
from Japan, 15 from Europe, 17 from the USA,
and five from other countries (Table 3). As
intended by this research, the diverse origin of
the 199 studied R&D units in China produced a
variety of different results that, in a later stage,
will have to be refined and validated for different
industries and geographical/cultural origin.
3. Mission and mandate of foreign R&D
sites in China
The term ‘R&D’ denotes a complex process of
scientific and technological research, development
of new products and processes, manufacturing
and marketing support, and provision of techni-
cal services. Individual R&D units rarely have an
absolute focus on any particular one of these
R&D activities; it is the nature of innovation to
442 R&D Management 34, 4, 2004
Japan (12) Other (5)
Ajinomoto, Hitachi, Acer, Infosys,
Toshiba, Matsushita Nortel, LG, Samsung
Electric, Yamaha,
Canon, Sharp, NTT
DoCoMo, Sony, NEC,
Fujitsu, Honda
blend science, technology and market related
efforts into a single direction. Nevertheless,
R&D sites are usually established with a specific
R&D mandate or R&D mission in mind to
complement a perceived need in the parent orga-
nization – determining the R&D mandate is thus
one of the first steps in establishing a foreign
R&D laboratory.
Several mandate categories have been described
for international R&D laboratories (Cordell,
1973; Ronstadt, 1977; Hood and Young, 1982;
Pearce and Singh, 1992; Hakanson and Nobel,
1993a,b; Chiesa, 1996; Kuemmerle, 1997). There
is a relatively strong correspondence of R&D
missions of some of these typologies (Medcof,
1997: 310–311), including Kuemmerle’s taxon-
omy of home-based augmenting and exploiting
R&D sites which is relatively close to the conven-
tional research versus development distinction.1
Given that mandates evolve over time with R&D
activity (e.g., a product-support unit develops
indigenous technical capabilities and repositions
itself as a technology core competence centre) and
the sometimes deliberately fuzzy differentiation
within R&D units of the type of technical work
(e.g., ABB chooses to assign its engineers to a mix
of concurrent research and development work if
possible), in this research I used the somewhat
simplistic definition of research unit or develop-
ment unit to differentiate among foreign R&D
labs.
How do foreign firms enter China with R&D?
There are three typical entry modes: 1) wholly
owned independent R&D labs, 2) R&D depart-
ments or R&D activities conducted under a
branch of a Chinese operation or within its joint
venture with the Chinese partners, and 3) coop-
erative R&D with Chinese research universities
and R&D institutes.
What goals do foreign companies pursue by
establishing R&D in China? According to the
Greatwall (2002) report, foreign firms pursue the
following missions with their local R&D sites: 1)
to act as a linkage between China’s specific
market demand and technology of their parent
r Blackwell Publishing Ltd. 2004

company; 2) to act as an important part of
corporate R&D; 3) to demonstrate their commit-
ment towards the Chinese government. While
these missions typically overlap in larger R&D
labs, most units have clearly delineated missions,
often in connection to specific goals stipulated by
their corporate sponsors.
After a decade of technology transfer through
license partners or joint ventures, the Chinese
government finally allowed foreign companies to
establish wholly-owned independent operations.
In April 2000, the Chinese Ministry of External
Trade and Economic Cooperation (METEC)
issued a regulation intended to encourage further
establishment of foreign R&D labs. It provides
preferential treatments on foreign-funded R&D
such as import tariff exemptions for equipment,
instruments, and other machinery. This opened
up the possibility of more extensive local R&D
organizations. The mandates of most of these labs
are clearly development focused, indicating sup-
port of local business and customers (China is
among the top three markets in optical networks,
mobile handsets, and elevators). However, not all
development carried out in China is targeted at
the Chinese market only. Several companies em-
phasized that their China R&D labs have world-
wide mandates for some of their products and
technologies. For instance, Nokia shifted a sig-
nificant part of its third generation software
development to Hangzhou, transferring technol-
ogies and people from the former competence
centre in Finland. The rationale for moving world
product mandates to China is also found in cost
efficiency (e.g., salaries of Chinese engineers are
still about one forth of US or European compar-
ables). Inexpensive labour can also lead to R&D
results faster, particularly if R&D work can be
executed independently and concurrently. The
dynamics in some industries in China (e.g., tele-
communications) also speeds up time-critical
feedback and prototyping cycles in the product
development process.
While it was mentioned that until a few years
ago it was difficult to obtain engineers of inter-
national quality levels, this situation seems to
have changed in the meantime. In China, ‘the
best engineers go overseas for work, the second
best work for foreign companies.’ These second-
best engineers are still of impressive technical
competence and education. Furthermore, once
trained by one foreign company (i.e., familiar
with Western management methods and good
command of English) they are very attractive
recruits for other foreign companies with nearby
r Blackwell Publishing Ltd. 2004
Managing foreign R&D laboratories in China
operations. As a consequence, engineering exper-
tise has reached high standards, particularly
within foreign R&D units in China (and salary
levels have risen as well).
R&D always has a long-term perspective, and
thus most R&D directors cited ‘to become a well-
respected R&D unit in China’ as one of their
main missions. Image is important, and good
reputation and recognition helps recruiting local
scientists and engineers. The local laboratory
must therefore develop a clear technical compe-
tence that contributes to both the local commu-
nity and the parent’s international R&D network.
Me-too product development is not the focus of
such labs.
Standards, both local and global, are also on
the agenda. The peculiarities of Chinese culture
and language are best explored and incorporated
locally. For instance, one of Microsoft’s research
ambitions is to develop a better understanding of
the Chinese language for next-generation voice
and handwriting recognition systems. Since China
is a sizeable and fast developing market in many
product categories, a technical standard estab-
lished in China may have a good chance of
becoming a world standard. For this reason,
telecommunications firms work closely with tech-
nology standardization bodies both inside and
outside China.
In conclusion, market proximity and technol-
ogy competence are strong reasons for foreign
companies to set up research and development in
China, although intellectual property issues are –
understandably – of concern particularly for non-
public-domain innovation activities. It is impor-
tant to notice that some of the surveyed R&D
centres were not conducting indigenous technol-
ogy R&D but rather focused on technology
monitoring and corporate R&D representation.
While these R&D units would not qualify as fully-
fledged R&D labs by most interpretations,
they are nevertheless part of the parent com-
pany’s international R&D network and often
form the nucleus of more significant future
R&D investment.
4. Locations of foreign R&D units in
China
R&D is usually one of the last functions to
internationalize (e.g., Mansfield et al., 1979).
Most companies explain their first international
R&D sites with local market arguments, i.e.
the need to develop more localized products.
R&D Management 34, 4, 2004 443
Maximilian von Zedtwitz
Although a large number of R&D sites in MNCs
may be acquired during M&A activity, most appear
to be greenfield establishments (Mansfield, 1984;
Caves, 1996; Kuemmerle, 1999). In the investi-
gated research sample of almost two hundred
R&D sites in China, none were acquired by a
foreign multinational. However, there is some
indication that joint venture-based R&D labs
(e.g., Nissan’s RMB330 million joint R&D lab
with Dongfeng Motors in Guangzhou) become
more viable modes of entry into R&D in China.
For R&D entry into a particular target coun-
try, five principal classes of drivers are considered:
input drivers such as local R&D personnel, out-
put drivers such as local lead users, efficiency
drivers such as the potential to build a 24-hour
laboratory, political/socio-cultural drivers such as
legal content rules, and R&D-external drivers,
such as overall tax optimization schemes. Drivers
differ for research and development (Voelker and
Stead, 1999), and for different industries (Carrin-
cazeaux et al., 2001; Le Bas and Sierra, 2002).
Kumar (2001) concluded that there are different
propensities for internationalizing R&D between
Japanese and US companies. Based on Hofstede’s
(1980) work on cultural distances, Shane (1992)
found that some societies are more inventive than
others (using patents as a proxy). However, the
potential of cultural match between the origin of
the parent organization and host country has not
been translated yet into managerial implications
(Jones and Davis, 2000).
Except in some studies of global R&D loca-
tions (e.g., Kuemmerle, 1997; von Zedtwitz and
Gassmann, 2002), little scholarly attention has
been given to the locations of R&D sites in China.
The same is true for research carried out by or
with Chinese authors (White et al., 2001). Parti-
cular attention was thus given to the intra-China
location question in this paper. Location data was
collected in research interviews, archival data
analysis, and integrated with data published by
Greatwall (2002) and STS (2003) (see Figure 2).
The Greatwall (2002) and STS (2003) reports
allow interesting observations about the origin of
foreign R&D labs in China (see Table 4). The
Greatwall (2002) report also claimed (based on a
total of 25 R&D labs) that Beijing was a preferred
R&D site for IT companies and Shanghai for
automotive and chemical companies. Greatwall
also suggested that – partly due to prevalent
industry structures – American firms tended to
go to Beijing and European firms to Shanghai.
The data sample for this research refines the first
hypothesis by arguing that Beijing is also a place
444 R&D Management 34, 4, 2004
1
1
78
8
1
4 2 9
61
1
1
9
5
n=180
Figure 2. Number of foreign R&D units in China: Focus on
Beijing and Shanghai.
for telecommunications and electronics compa-
nies, while Shanghai attracts more food, pharma-
ceutical, and engineering companies. In industries
where central government involvement is still
critical (telecoms, for example), or in industries
where a concentration of engineering schools is
critical (computers, for example), then Beijing is a
natural choice. In other industries where style or
fashion or taste is critical, Shanghai may be
preferred.2
The optimal environmental conditions for re-
search differ from those for development: for
instance, research needs access to local scientific
communities while development must be close to
internal or external customers. These considera-
tions play also a role in various regions of China,
although several other factors influence the loca-
tion decision. The two primary locations in China
are clearly Beijing and Shanghai, with Tianjin
(near Beijing), Suzhou (near Shanghai) and the
Southern cities of Guangdong, Shenzhen and
Hong Kong as second-tier R&D attractors (see
Table 5). It is interesting to note that 89% of all
foreign R&D sites are located along a relatively
short (given China’s geographic dimension) strip
between Beijing and Shanghai.
Although China still attracts more develop-
ment than research overall, it appears that R&D
units with a research mission tend to locate
themselves in Beijing (18 out of 52 identifiable R
or D labs) whereas development laboratories
choose a location in or in the vicinity of Shanghai
(46 out of 54 identifiable R or D labs). Why
development in Shanghai? For one, Shanghai had
been the door to the rest of the world for a long
time and has been among the first cities in China
to rekindle its international heritage during the
r Blackwell Publishing Ltd. 2004
 Managing foreign R&D laboratories in China

Table 4. Origin and number of firms investing in R&D in China.

Publication USA Europe Japan Other

Greatwall (2002) 27 14 33 (including Japan)

STS (2003) 32 20 18 5 (Taiwan-China)
3 (Korea)
2 (Canada)
1 (the UN and
Hong Kong-China)
Own data 95 56 32 6 (Taiwan)
5 (Korea)
4 (Canada)
1 (India)

Table 5. R&D locations of major foreign companies in China.

Location R&D Units of Foreign Companies (established or under construction in early 2004)

Beijing Acer, Agilent, AMD, Bea Systems, BP, Bristol Myers Squibb, Cisco, Computer Associates,
Delvo, Eli Lilly, EMC, Ericsson, France Telecom, Fuji Xerox, Fujitsu, General Electric,
General Motors, Hitachi, Hewlett-Packard, IBM, Intel, Johnson & Johnson, Lexmark,
LG, Lucent, Panasonic, Matsushita Electric, Merck, Microsoft, Mitsubishi, Motorola,
NEC, Nokia, Nortel, Novo Nordisk, NTT DoCoMo, Oracle, Proctor & Gamble,
Philips, Qualcomm, Ricoh, Schlumberger, Servier, Siemens, Sony, Sony-Ericsson,
ST Microelectronics, Sun, Toshiba
Shanghai 3M, Abbott Laboratories, Acer, Ajinomoto, American Standard, Alcatel, AstraZeneca,
Bayer, Degussa, Dell, Delphi, Dupont, Eli Lilly, Ericsson, Firmenich, General Electric,
General Motors, Honda, Honeywell, Hewlett-Packard, Infineon, Infosys, Intel, Kodak,
L’Oreal, Lucent, Merck, Microsoft, Mitsubishi Electric, Motorola, Nestle, Pfizer, Philips,
Pioneer, Rhodia, Roche, SAP, Schering-Plough, Schindler, Sharp, Siemens, Toshiba,
Unilever, United Technologies, Yamaha
Suzhou Matsushita Electric, Yageo, Canon, Lucent, Microsoft, Motorola, Samsung, SIG, Yamaha
Tianjin Fujitsu, Honeywell, LG, Matsushita Electric, Motorola, Samsung
Guangzhou Hitachi, Nissan, Nortel, Sony
Xi’An Infineon, Hewlett-Packard, IBM, Philips
Shenzhen Electrolux, Intel, Oracle, ST Mircoelectronics
Hong Kong Motorola, Citrix, Altera, Copeland
Nanjing Fujitsu, Motorola
Chengdu, Motorola, BP, Nokia, Lucent, LG
Dalian,
Hangzhou,
Qingdao,
Shenyang
Note: Some companies operate several R&D labs in the same city. Only R&D units of large MNCs included.

political reforms in the 1990s. Most foreign com-
panies operate their Chinese headquarters in
Shanghai or at least a significant portion of their
local operations. Thus development, dependent
on good relations with other corporate business
units, naturally chooses to locate itself not too far
from the centres of power and business. Often,
R&D starts out in a local representative office
before it outgrows the premises and settles nearby.
Another reason is the availability of highly
qualified engineers and a relatively large pool of
expatriate managers. Network externalities cer-
tainly play a role as some companies explicitly
sought the proximity to some of their main
foreign competitors. Expatriates, local managers,
and higher-level engineers thus appreciate the
presence of a critical number of foreign compa-
nies as an element of job security.
Shanghai also has geographic location advan-
tages, although they appear to be more pro-
nounced in some industries than in others. For
instance, Ajinomoto placed a development lab in

r Blackwell Publishing Ltd. 2004 R&D Management 34, 4, 2004 445

Maximilian von Zedtwitz
Shanghai not only because of a nearby produc-
tion unit but also because of its central location in
China, i.e. travel distances to other regions in
China are relatively short, and because of Shang-
hai’s reputation as a centre of Chinese haute cuisine.
In some cases international competition led also
to an overcrowding effect and thus to a greater
dispersion of R&D sites: While proximity to other
R&D institutes is important, a little distance is also
appreciated. Nokia thus set up a development unit
in Hangzhou, which recently inaugurated a new
international airport, is home to one of the leading
universities in China, and it is considered as one of
the most beautiful regions in all of China. Hang-
zhou is only a short drive from Shanghai but not
yet as contested by foreign competitors.
Beijing, however, offers location advantages
for research-intensive R&D units. Several reasons
are important. First, with almost 100 universities,
Beijing is the academic centre of China. The
Chinese Academy of Sciences, Tsinghua and
Beijing universities have campuses in Beijing’s
Zhonguangcun district, a high-tech zone with
many R&D laboratories and start-up companies
of national and private technology companies.
Second, China is also governed mostly from
Beijing, and thus home to most standard-setting
and decision-shaping bodies. It is important to be
part of such networks to have access to some of
their key individuals, as political decisions often
determine which fundamental technology will
become a China-wide accepted standard. Third,
as Shanghai had often been chosen earlier as a site
for development, companies looked for a less fast-
paced location for their more long-term research.
However, to facilitate technology transfer, several
companies (e.g., Microsoft, Nokia) operate sepa-
rate research and development units in adjacent
premises in Beijing.
5. Staffing issues of foreign R&D units in
China
Few studies focus on establishing individual inter-
national R&D units. The implicit assumption is that
setting up an international R&D lab is not much
different from managing any other R&D unit.
The literature on establishing international
R&D has concentrated on location decisions
and organizational integration and did not con-
tribute much to the staffing question (see e.g.
Brockhoff, 1998; Niosi, 1997). The selection of
the R&D director appears to be of a more
practical concern and hence finds occasional
446 R&D Management 34, 4, 2004
mentioning in articles authored for R&D practi-
tioners (see e.g. Krogh, 1994). However, during
the R&D ramp-up process, the choice of the new
laboratory director is crucial (see e.g. Kuemmerle,
1997). In addition to scientific or technological
qualifications, this individual is also responsible
for ramping up the local R&D organization
and meet R&D performance targets. ‘Copy-
Paste’ approaches of existing R&D departments
into a new business and science environment are
not possible. Between the traditional choices of
expatriate and local manager, von Zedtwitz
(2003) identified a spectrum of eight director-
ship styles refined by cultural and ethnographic
factors.
What people are selected to start up the Chi-
nese R&D operations? This decision depends on a
number of factors, most importantly on the R&D
mission, and the intended degree of coordination
between China and headquarters.
Somewhat surprisingly, more than two thirds of
the initial R&D directors in this study were non-
Chinese, and many had no or little China experi-
ence before being assigned to the job. Among the
Chinese R&D directors, most had significant over-
seas experience. Only in one case a local Chinese
was hired to head up the R&D lab; this person
happened to be one of the main promoters of the
initial proposal to start R&D in China.
The role of returning overseas Chinese as R&D
managers was particularly important among US
companies, and has increased in general for
foreign R&D labs. Since the USA has a large
population of Chinese origin, either through
work-related immigration over the past decades
or the pursuit of study and education, US com-
panies can draw on a larger pool of engineers and
managers with Chinese linguistic and cultural
background than, for instance, their European
or Japanese competitors. Increasing learning ef-
fects, with particular respect to running R&D
sites as integral elements of local scientific net-
works, have led foreign companies to resort
increasingly to foreign-trained Chinese nationals
as R&D directors of their local R&D labs. Initial
expatriate R&D directors are replaced by local or
overseas Chinese.
While development sites were predominantly
managed by expatriate directors, the picture is not
so clear for research. Microsoft’s research lab in
Beijing was headed up by a Chinese director who
had significant work and management experience
in the USA. Hitachi’s research unit, however, is
run by a Japanese, and Nokia’s research lab,
which had a dual mission of research and some
r Blackwell Publishing Ltd. 2004

development, was ramped up by a Finnish man-
ager with only marginal China experience.
What were the criteria for top technology
management to select R&D directors? Whether
in research or development, familiarity with the
company’s lines of business and strong internal
networks were a clear advantage. In one case an
external candidate was hired, and he was rotated
quickly through the most important departments
in the headquarters, including R&D, to become
familiar with the parent company. Interest and
dedication to an overseas appointment helped, as
indicated for instance by previous work experi-
ence in the company’s international R&D orga-
nization. Some initial R&D directors were
members of the proposition or evaluation group
of the China R&D sites and were internally
selected for the job. Familiarity with Chinese
culture and language was only a secondary criter-
ion in most appointments. This may be explained
by the larger share of development sites in the
sample (development usually puts more emphasis
on internal networks versus external scientific
contacts), the lack of suitable bilingual/bicultural
candidates, and the hesitation to assign director-
ship of critical technical and intellectual property
to a local in a country that has a notorious
reputation of uncontrolled knowledge diffusion.
The local influence of the parent company was
further reinforced by posting expatriate managers
in key positions, such as department heads or
group managers. The R&D director of a telecom-
munications lab underlined the importance of
expatriates for the build-up of a foreign lab: ‘No-
one should be hired outside the company without
the group manager’s input’. Expatriate managers
bring in their network to other business units, thus
strengthening the project portfolio of the new
R&D lab, particularly if it has a development or
process focus. Locals hired too early may not be
compatible with the group manager’s expectations.
Technology or product experts were dispatched
as temporary expatriates to transfer processes and
routines, but also to help with recruiting. Most of
the scientists and engineers of the investigated
R&D labs were locally recruited. Considering
that the anticipated lab sizes of some R&D labs
were several hundred up to the low thousands, the
job of the initial R&D director was mainly to hire
people. Given that many of these recruits are
graduates from Chinese universities, it is impor-
tant to be aware of the annual graduation cycles
when establishing the R&D lab.
The managing director or COO of a lab, how-
ever, was generally a local Chinese. It would be
r Blackwell Publishing Ltd. 2004
Managing foreign R&D laboratories in China
nearly impossible for a non-Chinese to handle
relations with local authorities and partners with
the necessary cultural and interpersonal etiquette.
This Chinese manager was often employed in a
predecessor representative office and thus familiar
with the parent company. He or she then acts as a
liaison between the foreign R&D unit and the
local municipality and authorities.
After the initial build-up of a core group con-
sisting of expatriate and local engineers, some labs
chose to sustain further growth through on-site
partnerships with local technology suppliers and
collaborators. In the case of pharmaceutical com-
panies, partnerships were established with local
hospitals and research institutes. The foreign R&D
labs thus created a virtual organization of techni-
cal partners around the core R&D unit. Managing
such a network through times of growth and
decline is preferably assisted again by the local
Chinese manager and COO.
6. Coordination with central R&D and
parent headquarters
Brockhoff (1998) found that efficiency was nega-
tively correlated with the share of R&D spent
abroad, offering overruns in time and local boot-
legging activities as possible explications. Princi-
pal agency theory and organizational costs
considerations have been used to explain trends
in autonomy and control structures in transna-
tional R&D networks (Gassmann and von Zedt-
witz, 1999). In research on autonomy-control
tensions between local and parent organizations,
Asakawa (1996) gave a detailed description of the
linkages between local research directors and the
R&D headquarters of four Japanese multina-
tional companies. Coordination mechanisms and
their requirements have been studied for interna-
tional innovation (e.g. Bartlett and Ghoshal,
1989) and global R&D (e.g., De Meyer and
Mizushima, 1989), who considered two options
for overseas laboratory management: expatriates
and local managers. They noted that particularly
during the start-up phase of an R&D facility,
managers and employees are transferred from the
parent company to the local R&D laboratory.
Different angles of attack have been used, such as
a differentiation between formal and informal co-
ordination (Reger, 1997) or transnational R&D
processes and project teams (Gassmann, 1997).
The present study focuses particularly on the role
of formal and informal linkages between R&D
R&D Management 34, 4, 2004 447
Maximilian von Zedtwitz
directors and corporate management, including
the interpersonal, program and process levels.
There are several ways how the parent organi-
zation can coordinate and influence the R&D
lab’s management. I have mentioned already the
role of expatriate managers and experts who
transfer company processes, routines and culture.
What are other typical reporting and coordina-
tion lines between the local R&D lab in China
and the parent organization?
Many R&D directors felt that there was too
little support from headquarters during the start-
up of the R&D lab. Initial operations were started
quite autonomously, except in cases where R&D
was started from within existing offices. A tele-
communications lab in Shanghai started operat-
ing from rented floors in a hotel. However, some
R&D directors reported difficulties from having
to coordinate headquarter as well as local country
head expectations. Technical support was usually
provided by headquarters, and managerial sup-
port – if any – from the local country organiza-
tion. Initial R&D directors were thus ideally self-
starters, ‘people who create something out of
nothing.’ This is similar to the situation encoun-
tered by many start-up entrepreneurs, except for a
stronger financial support from headquarters.
It was critical for many labs to start out with
interesting projects that – at the same time –
would also come to a successful conclusion
quickly. Building a reputation of success not
only attracted good people locally but also vali-
dated risky decisions made by top managers who
had sponsored the local R&D lab. This meant
that technology was not only transferred to China
successfully, but also that new products or pro-
cesses developed locally were to be used by inter-
nal customers and business units.
Good internal coordination, sometimes infor-
mal networking, was crucial to facilitate this.
Some R&D units, however, had formalized pro-
gram and project management to ensure integra-
tion of their lab with other R&D labs and
headquarters. Coordination meetings with plat-
form and program managers, sometimes as often
as every two weeks, made sure that the new
Chinese R&D unit was recognized as a new
node in the international R&D network. Infor-
mation and communication technologies such as
computer-supported group work and intranets
were of great help.
If long-distance managerial support was per-
ceived to be limited, then what were typical
criteria for the evaluation of performance of the
Chinese R&D labs by top management back in
448 R&D Management 34, 4, 2004
R&D headquarters? Although project-based cri-
teria such as meeting predetermined milestones
(e.g., target headcounts and number of projects)
and stage-gate were used to asses some of the
R&D ramp-up accomplishments, the relative un-
familiarity with the target country as well as the
still emergent structures of newly started R&D
labs led to many R&D units being evaluated
differently. In the extreme case, headquarters
had stipulated no other expectations than the
complete transfer of a particular technical com-
petence by a given year. Evaluation of R&D
laboratory performances was done mostly in
personal meetings between the R&D director
and technology top management at headquarters,
with the vice-president of R&D using his judg-
ment and experience to asses the progress of the
Chinese R&D unit. Patents, patent applications,
papers and other output-related indicators of
R&D performance were rarely used in these
recently established R&D sites due to the ex-
pected time lag. A more frequently used criterion
was the number of projects in relation to employ-
ees and their distribution over the expected tech-
nological expertise to be developed. In some
cases, particularly in development units, team-
based and project-specific measures were used to
assess the quality of individual projects. Overall,
however, the evaluation of initial R&D units was
carried out with sensitivity to the particular early-
stage nature of the R&D unit and the general
unfamiliarity of the company in establishing
R&D in China.
7. Discussion of foreign R&D
management in China
The Chinese have a very positive perception of
innovation and technological advancement. Gi-
ven the amount of technology transferred
through foreign direct investment and local train-
ing programs, China is clearly interested to learn
from the West. But is the West interested to learn
from China? The answer is ‘yes’, if we understand
research as a home-base augmenting function (in
the Kuemmerle (1997) terminology) and note that
26 of 80 foreign R&D units have a clear role in
research, collecting local scientific information
and developing technology locally, and passing
these results on to other corporate R&D labs
outside China. The answer is ‘no’, however, if
we assess prevailing attitudes and perceptions
of Western managers towards Chinese science
and technology. Currently, Western companies
r Blackwell Publishing Ltd. 2004

seem to be trapped in short-term profit maximi-
zation and bottom-line thinking. The key to
succeeding in China is always based on a long-
term strategy.
As one Western expatriate R&D manager men-
tioned during this research, it is important to
refrain from a colonial attitude when dealing
with Chinese business partners. ‘Guanxi,’ saving
face and cultural sensibility are still important in
China, but questions arise whether expatriate
managers fall into two categories: those who insist
on their own culture in China, and those who
become overly adapted to Chinese thinking.
There was some evidence in our research inter-
views that Chinese managers were expected to
adhere to Western style management and also got
away with behaving relatively un-Chinese, while
Western expatriates compromised perhaps too
much on their Western values devoted much
effort to pursuing China-style management.
Guanxi – strategically understood – is not just
helping day-to-day networking but also facilitates
a company’s long-term prospects by building
good relations with local governments (‘local
citizen’ role). The directors of Chinese R&D
labs have to play important intermediary roles
between the local Chinese culture and the pre-
valent culture in their parent companies.
Western managers also often expect assurances
(as, for instance, in the case of intellectual prop-
erty protection) which they are unlikely to obtain
from their Chinese counterparts. There are two
principal reasons: 1) China changes too fast to be
reasonably predictable even for the Chinese, and
2) the Chinese culture tries to avoid sources of
future conflict (when, for instance, a forced pro-
mise cannot be kept). Good honest personal
relationships and networks help over difficult
times: this favour is also extended to the genuinely
interested Westerner. But this approach premises
a long-term commitment by the foreign company.
Interestingly, the presence of foreign R&D labs
is not unanimously welcomed. Foreign R&D labs
lure some of the best Chinese scientists to work
for foreign companies with agendas benefiting
primarily their own international business objec-
tives rather than goals of possible Chinese na-
tional importance. Also, Chinese high-tech
companies disapprove of the foreign R&D labs
greater attraction among highly educated young
university graduates.
But the migration of scientists is bidirectional:
While the Chinese government may be worried
that intelligent manpower is lost to foreign private
industry, non-Chinese R&D firms are concerned
r Blackwell Publishing Ltd. 2004
Managing foreign R&D laboratories in China
about the uncontrolled dissipation of know-how
to local competitors. However, the more foreign
companies establish R&D sites with the mission
to develop technology and do research locally
(i.e., to learn and transfer knowledge from China
to abroad), the less they are concerned with
unwanted local spill-over, as in the worst case
locally generated knowledge is lost back into the
local scientific community. This argument, how-
ever, only holds for early-stage R&D where
patents are not yet of concern. Stronger intellec-
tual property rights and their consistent enforce-
ment will certainly have positive effects on the
interaction of foreign R&D centres with the
Chinese scientific and engineering community.
With respect to the establishment and growth
of R&D labs in China, most strategic planners of
Western companies are unfamiliar with China’s
culture and technological capacity and have to
rely on second-hand information. Given the im-
pressive economic performance of China in the
1990s, they expect and push for rapid growth in
their Chinese operations, which is also often
achieved. When it comes to R&D labs, however,
is rapid growth always the best strategy? Many of
the interviewed R&D directors of Chinese labs
indicated that mature and manageable growth
would be more sustainable.
8. Implications for companies intending to
set up R&D in China
What are some of the specific implications for
managing Chinese engineers in foreign R&D
laboratories? The following summary builds on
our previous discussion but also integrates addi-
tional frequently heard concerns and observations
of Western R&D managers in China:
 Saving face and winning trust;
 Managing individualistic Chinese engineers;
 Developing young R&D directors;
 Managing attrition by offering advanced
training and interesting projects.
‘Face-saving’ requires Western managers to be
more sensitive towards their Chinese employees
than they would be with most Westerners. As one
R&D manager noted, Western managers may be
more tolerant to work with people who misbe-
have – most Chinese are not. Therefore manage-
ment must respect certain ways of communication
in order to win the respect, and eventually trust,
of their mostly Chinese workforce.
R&D Management 34, 4, 2004 449
Maximilian von Zedtwitz
At the personal leadership level, many R&D
directors mentioned that they had shifted from a
relatively open management style to more control
and direction. ‘They are good engineers who need
to be managed well.’ Chinese employees were
more individualistic than expected and behaved
more like e.g. their US counterparts than their
Japanese colleagues, who value group achieve-
ment over individual performance. This is ap-
pears to be in disagreement with Hofstede’s
(1980) findings of cultural differences among
nations, including the Chinese. It could be argued
that with China’s rapid internationalization and
adoption of more capitalist values individual
expectations and cultural behaviours have chan-
ged. In this case, Hofstede’s findings concerning
China would have to be considered now with
more caution.3
It was also found that foreign R&D units
tended to be staffed mostly with young Chinese
employees. For instance, the average age of the
workforce at Ericsson’s R&D lab was 27 years,
and another R&D director was the oldest em-
ployee in his company at age 36. Perhaps these are
indications of a new profile of expatriate manage-
ment, which has so far suggested that seniority be
preferred over youth in China. Although most
expatriates were non-Chinese, there was a clear
indication that most companies with a long-term
strategy in China spend much effort to develop
their local R&D directors. US companies may
have an edge here as they can draw upon a large
Chinese community present in top positions in
engineering and management in many US cor-
porations. Additionally, some companies had
started to build a pool of international R&D
managers who have acquired important on-the-
job lessons about starting overseas R&D opera-
tions previously and are now redeployed to start
up laboratories in China (the ‘sequential initial
R&D director’).
Chinese engineers are very attracted to work-
ing in a foreign R&D lab because this experience
serves them as a springboard into top positions
in other companies in China, and offers them a
possibility to obtain training or education
in the USA (for example), usually coupled with
a US visa. These elements of intrinsic motiva-
tion must not be ignored by R&D directors;
they are excellent leverage points for developing
future leaders and highly skilled scientists.
Lucent, for instance, has sent most of their
newly hired engineers abroad for training. As a
result, they now have a highly dedicated work-
force that is competing to become Lucent’s world-
450 R&D Management 34, 4, 2004
wide centre in their chosen technological
competence.
Employee turnover is of great concern to most
companies investing in China, as it is often
associated to unwanted knowledge transfer and
technology spillover to competing firms. Firms
who exhibited low attrition rates (as low as 8%
per year) reasoned that in addition to the reputa-
tion of working for a well-respected Western
company they also offered very competitive sal-
aries and exciting projects. Great projects were
important not only to maintain efficient R&D
operations but also to get the new R&D site off
the ground: this would attract the right people
and also build the new R&D centres international
reputation. The challenge is of course to have a
new R&D organization going at full speed
quickly. Experienced expatriates and visionary
R&D directors are crucial in this process.
9. Conclusions
This paper investigated management issues of
R&D sites of foreign technology-intensive com-
panies in China. Most of these foreign R&D sites
have been established over the past few years
only, and more are expected to follow soon.
Assuming that China continues its economic
and societal transformation, and considering pre-
sent trends in R&D internationalization in the
USA and Europe, we can expect China to become
the second-most populous country in terms of
foreign R&D labs within a few years.
Few of the existing R&D laboratories in China
have so far exploited their full potential, and most
are still in the process of establishing themselves
within the Chinese scientific and technical com-
munities as well as within the company-internal
R&D network. A surprisingly large number of
foreign R&D sites are engaged in research and
technology development, indicating that it is time
to revise the decade-old perception of China being
merely a recipient of technology, and to consider
her as an increasingly important source and pro-
vider of global technology. The state of intellectual
property rights and possible knowledge leakage are
of great concern to corporate strategist, but taking
from the rich is less frowned upon than taking
from the poor. However, with more and more
Chinese companies developing strong technologi-
cal competencies and international R&D networks
themselves (e.g., Haier, Huawei), many Western
and Japanese companies are well advised to take
China into the international R&D equation.
r Blackwell Publishing Ltd. 2004

Acknowledgments
I am grateful to Professors Xie Wei, Felicia Fai,
Bill Fischer and H.K. Tang and two anonymous
reviewers for their constructive feedback and
access to data sources.
References
Asakawa, K. (1996) External-internal linkages and
overseas autonomy-control tension: the management
dilemma of the Japanese R&D in Europe. IEEE
Transactions on Engineering Management, 43, 1,
24–32.
Asia Pulse (2002) Taiwan’s R&D should differentiate
from that of China. Asia Pulse, 5 December.
Bartlett, C.A. and Ghoshal, S. (1989) Managing Across
Borders – The Transnational Solution. Boston: Har-
vard Business School Press.
Behrmann, J.N. and Fischer, W.A. (1979) The coordi-
nation of foreign R&D activities by transnational
corporations. Journal for International Business Stu-
dies, 10, 3, 28–35.
Brockhoff, K. (1998) Internationalization of Research
and Development. Berlin: Springer.
Carrincazeaux, C., Lung, Y. and Rallet, A. (2001)
Proximity and localization of corporate R&D activ-
ities. Research Policy, 30, 777–789.
Caves, R. (1996) Multinational Enterprise and Economic
Analysis. Cambridge: Cambridge University Press.
Chiesa, V. (1996) Managing the internationalization of
R&D activities. IEEE Transactions on Engineering
Management, 43, 1, 7–23.
Cordell, A. (1973) Innovation, the multinational cor-
poration: some implications for national science
policy. Long Range Planning, September, 22–29.
Dalton, D.H. and Serapio, M.G. (1995) Globalizing
Industrial Research and Development. Washington
DC: US Department of Commerce.
Dalton, D., Shapiro, M.G. and Yoshida, G. (1999)
Globalizing Industrial Research and Development.
Washington DC: US Department of Commerce,
Office of Technology Policy.
De Boer, S., Gan, W. and Shan, G. (1998) Critical
issues facing R&D managers in China. R&D Man-
agement, 28, 3, 187–197.
De Meyer, A. and Mizushima, A. (1989) Global R&D
management. R&D Management, 19, 2, 135–146.
Dunning, J.H. and Narula, R. (1994) The R&D activ-
ities of foreign firms in the US. University of Reading
Discussion Paper Series B, Vol. VII, No. 189.
Fischer, W. (1983) The structure and organization of
Chinese industrial R&D activities. R&D Manage-
ment, 13, 2, 63–81.
Gassmann, O. (1997) Internationales F&E-Management
– Potentiale und Gestaltungskonzepte transnationaler
F&E-Projekte. Oldenbourg: München.
r Blackwell Publishing Ltd. 2004
Managing foreign R&D laboratories in China
Gassmann, O. and von Zedtwitz, M. (1999) New
concepts and trends in international R&D organiza-
tion. Research Policy, 28, 231–250.
Greatwall (2002) R&D Yongbao Zhongguo (R&D Em-
bracing China). Nannin: Guangxi Renmin.
Håkanson, L. and Nobel, R. (1993a) Foreign research
and development in Swedish multinationals. Re-
search Policy, 22, 373–396.
Håkanson, L. and Nobel, R. (1993b) Determinants of
foreign R&D in Swedish multinationals. Research
Policy, 22, 397–411.
Håkanson, L. and Zander, U. (1988) International
management of R&D: the Swedish experience.
R&D Management, 18, 3, 217–226.
Hewitt, G. (1980) Research and development per-
formed abroad by U.S. manufacturing multina-
tionals. Kyklos, 33, 2, 308–327.
Hirschey, R.C. and Caves, R.E. (1981) Internationali-
sation of research and development by multinational
enterprises. Oxford Bulletin of Economics and Statis-
tics, 42, 2, 115–130.
Hofstede, G. (1980) Culture’s Consequences: International
Differences in Work Related Values. Beverly Hills: Sage.
Hood, N. and Young, S. (1982) US multinational
R&D. Multinational Business, 2, 10–23.
James, P. and Thorpe, N. (1995) Ancient Inventions.
New York: Ballantine.
Jones, G.K. and Davis, H.J. (2000) National culture
and innovation: implications for locating global
R&D operations. Management International Review,
40, 1, 11–39.
Kenney, M. and Florida, R. (1994) The organization
and geography of Japanese R&D: results from a
survey of Japanese electronics and biotechnology
firms. Research Policy, 23, 305–323.
Krogh, L. (1994) Managing R&D globally: people and
financial considerations. Research Technology Man-
agement, 37, 4, 25–28.
Kuemmerle, W. (1996) Home base and foreign direct
investment in research and development. Unpub-
lished doctoral dissertation, Harvard University,
Boston MA.
Kuemmerle, W. (1997) Building effective R&D cap-
abilities abroad. Harvard Business Review, March–
April, 61–70.
Kuemmerle, W. (1999) Foreign direct investment in
industrial research in the pharmaceutical and elec-
tronics industries – results from a survey of multi-
national firms. Research Policy, 28, 2–3, 179–194.
Kumar, N. (2001) Determinants of location of overseas
R&D activity of multinational enterprises: the case
of US and Japanese corporations. Research Policy,
30, 159–174.
Le Bas, C. and Sierra, C. (2001) Location versus home
country advantages’ in R&D activities: some further
results on multinationals’ locational strategies. Re-
search Policy, 31, 589–609.
Li, H. and Atuahene-Gima, K. (2001) Product innova-
tion strategy and the performance of new technology
R&D Management 34, 4, 2004 451
Maximilian von Zedtwitz
ventures in China. Academy of Management Journal,
44, 6, 1123–1134.
Liu, X. and White, S. (2001) Comparing innovation
systems: a framework and application to China’s
transitional context. Research Policy, 30, 1091–1114.
Mansfield, E. (1984) R&D and innovation: some em-
pirical findings. In Griliches, Z. (ed.), R&D, Patents
and Productivity. Chicago IL: University of Chicago
Press.
Mansfield, E., Teece, D. and Romeo, A. (1979) Over-
seas research and development by U.S. based firms.
Economica, 46, 187–196.
Medcof, J.W. (1997) A taxonomy of internationally
dispersed technology units and its application to man-
agement issues. R&D Management, 27, 4, 301–318.
Motorola (2003) Website of Motorola Corporation
China, at www.motorola.com.cn.
Niosi, J. (1997) The globalization of Canadian R&D.
Management International Review, 37, 4, 387–404.
Odagiri, H. and Yasuda, H. (1996) The determinants of
overseas R&D by Japanese firms: an empirical study
at the industry and company levels. Research Policy,
25, 1059–1079.
OECD (2003) OECD Science, Technology and Industry
Scoreboard 2003. OECD: Paris.
Papanastassiou, M. and Pearce, R. (1994) The inter-
nationalisation of research and development by Ja-
panese enterprises. R&D Management, 24, 2, 155–165.
Pearce, R. and Papanastassiou, M. (1996) Overseas
R&D and the strategic evolution of MNEs: evidence
from laboratories in the UK. University of Reading
Working Paper Series B, Vol. IX, No. 225.
Pearce, R.D. and Singh, S. (1992) Internationalisation
of research and development among the world’s
leading enterprises: survey analysis of organisation
and motivation. Granstrand, O., Håkanson, L. and
Sjölander, S. (eds), Technology Management and
International Business: Internationalization of R&D
and Technology. Wiley: Chichester, 137–162.
People’s Daily (2002a) China tipped to become world
hi-tech center. 3 June.
People’s Daily (2002b) China’s foreign trade sets new
high despite adverse circumstances. 28 October.
People’s Daily (2003) Transnationals locate more R&D
centers in China. 19 March.
Reger, G. (1997) Benchmarking the internationalisa-
tion and co-ordination of R&D of Western Eur-
opean and Japanese multi-national companies.
International Journal of Innovation Management, 1,
3, 299–331.
Ronstadt, RC. (1977) Research and Development
abroad by U.S. Multinationals. New York: Praeger.
Serapio, M.G. and Dalton, D.H. (1999) Globalization
of industrial R&D: an examination of foreign direct
investments in R&D in the United States. Research
Policy, 28, 2–3, 303–316.
Shane, S. (1992) Cultural influences on national rates of
innovation. Journal of Business Venturing, 8, 59–73.
452 R&D Management 34, 4, 2004
STS (2003) R&D in China. Report #3 by the National
Office for Science and Technology Statistics, P.R.
China. Available online at http://www.sts.org.cn/
REPORT_3/documents/2003/0301.htm.
Voelker, R. and Stead, R. (1999) New technologies and
international location choice for research and devel-
opment units: evidence from Europe. Technology
Analysis & Strategic Management, 11, 2, 199–209.
von Zedtwitz, M. (2003) Initial directors of interna-
tional R&D laboratories. R&D Management, 33, 4,
377–393.
von Zedtwitz, M. and Gassmann, O. (2002) Market
versus technology drive in R&D Internationaliza-
tion: four different patterns of managing research
and development. Research Policy, 31, 4, 569–588.
Walsh, K. (2003) Foreign High-Tech R&D in China.
Washington DC: Henry L. Stimson Center.
Westney, D.E. (1993) Cross-Pacific internationalization
of R&D by U.S. and Japanese firms. R&D Manage-
men, 23, 2, 171–181.
White, S., Liu, X. and Xie, W. (2001) A survey of
Chinese literature on the management of technology
and innovation, 1987–1997. International Journal of
Technology Management, 21, 1/2, 130–150.
Wortmann, M. (1990) Multinationals and the interna-
tionalization of R&D: new developments in German
companies. Research Policy, 19, 175–183.
Wu, Y. (2000) A survey on foreign-established R&D
units in China (in Chinese). China’s Soft Science, 1,
64–66.
Xue, L. and Wang, S. (2001) Globalization of R&D by
multinational corporations in China: an empirical
analysis. EAP Report Memorandum #01-06, NSF
Tokyo.
Yin, R.K. (1988) Case Study Research: Design and
Methods. London: Newbury Park.
Xinhua News Agency (2001) More multinationals
locate R&D centers in Shanghai. 13 December.
Xinhua News Agency (2003) Shanghai announces
R&D center construction plan. 9 February.
Notes
1. While the R-D classification is a sequential distinc-
tion, the difference between augmenting and exploit-
ing sites is a functional one. In his PhD thesis,
Kuemmerle (1996, p. 49) found that 25% of the
studied research sites were not home-base augment-
ing, and that 11% of development sites were not
home-base exploiting.
2. I am grateful to William A. Fischer for suggesting
this possible explanation.
3. On a side note, the headquarters’ culture was per-
ceived to be stronger than the local Chinese culture
or ‘technical’ culture in development sites, whereas
in research units technical culture overrode head-
quarters culture. Sun’s R&D lab in Beijing, for
instance, was specifically designed to convey a Sili-
con Valley atmosphere.
r Blackwell Publishing Ltd. 2004