Why Do Multinational Corporations Locate Their Advanced R&D Centres in Beijing?

Why Do Multinational CorporationsLocate Their Advanced R&D Centresin Beijing?

YUN-CHUNG CHENHong Kong University of Science and Technology, Hong Kong

ABSTRACT Theories of the globalisation of innovation assume that multinational corporations(MNCs) distribute their innovation activities hierarchically, with advanced technology beingconfined to the advanced industrialised countries, while more routine low-end innovation isdecentralised in a few developing countries. The emergence of about 40 research and development(R&D) centres in Beijing, China, many of which engage in basic and advanced applied research,challenges the above assumption. This article argues that the cheap and abundant highly skilledlabour of the latecomer countries is an essential factor in attracting global R&D activities but thatthis factor is far from being a sufficient condition for the presence there of advanced R&Dactivities. Through its analysis of the historical transformation of local institutions and of their co-development with MNCs, this paper identifies four major knowledge assets that explains whyBeijing could attract advanced R&D activities. First, Beijing has developed a strongentrepreneurial culture that creates highly motivated engineers who are eager to learn newknowledge from abroad. Second, the experienced Chinese returnees provide a critical bridging rolebetweenWestern R&Dmanagement knowledge and local engineer culture. Third, the lack of inter-firm trust and networks makes the entrance ofMNCs into a ‘loose’ cluster much easier. Fourth, thelarge and dynamic Chinese market that desires high-tech products with low prices shortens theproduct life cycle, forcing MNCs to upgrade their R&D facilities in China. The findings show thatthe co-development of local institutions with theMNCR&D centres can create locational windowsof opportunity for advanced R&D activities to be carried out in unconventional sites outside theTriad countries. This article concludes with the discussion on how Dunning’s Ownership, Locationand Internalisation (OLI) framework and Mathew’s Linkage, Leverage and Learning (LLL)framework might be useful in explaining this new phenomenon.

I. Introduction

In the early 1990s, Beijing’s policymakers and its public were worried about thedeparture of manufacturing activities from Beijing to the south,1 and, by 1995, werepuzzled by the appearance of multinational corporation (MNC) research anddevelopment (R&D) centres in Beijing.2 As of 2005, there were perhaps as many as

Correspondence Address: Yun-Chung Chen, Division of Social Science, Hong Kong University of Science

and Technology, Clear Water Bay, Kowloon, Hong Kong. Email: [email protected]

Journal of Development Studies,Vol. 44, No. 5, 622–644, May 2008

ISSN 0022-0388 Print/1743-9140 Online/08/050622-23 ª 2008 Taylor & Francis

DOI: 10.1080/00220380802009092

403 mostly wholly owned MNC R&D centres in Beijing, an unusually high numberin a latecomer context.4

According to theories on the globalisation of innovation, major and moreadvanced R&D activities are still overwhelmingly based in the home countries ofMNCs (Vernon, 1966; Patel and Pavitt, 1991; Patel, 1995; Doremus et al., 1998).What is more important is that even if some parts of the innovation do globalise, thisonly happens among the advanced industrialised countries in Western Europe, theUnited States, and Japan, the so-called Triad. The ‘Triadisation’ of innovationamong the advanced countries might be a better explanation than the misleading term‘globalisation’. Simple statistics on R&D spending explains the iron cage of the Triad.A study of 244 worldwide leading R&D-intensive companies shows that 80 per cent oftheir total investment still stays in the Triad (Boutellier et al., 1999: 9). Another studysuggests that the figure is 95 per cent (Fusfeld, 1995: 264). This upward tendencyimplies that the resulting MNC global innovation networks tend to be highly skewedtoward the Triad, where most of the ‘centres of excellence’ (or first-tier innovativecities) are located (Boutellier et al., 1999; Edler et al., 2002). Developing countrieswere unable to participate in the globalisation of innovation because of theirunderdeveloped human capital, poor infrastructure, and limited market.

However, there is some literature according to which a spillover of innovation to afew developing countries did occur as early as the 1980s. The first argument is the ‘over-supply of skilled labour’ in the case of India (Reddy, 1997, 2000). Owing to theircountry’s slow industrialisation process, local Indian industries have been unable tofully absorb the over-supplied and under-utilised engineers trained by the bestmeritocratic engineering schools in Asia. The second argument concerns the upgradingof MNC branches in Asia from production to production-related R&D through‘carefully guided government incentives’, as in Singapore (Amsden and Tschang, 2003).The third argument comes frommanagement-school scholars who are paying attentionto the MNC R&D labs in China. They correctly argue that the strongest drivercomprises both the market (Gassmann and Han, 2004) and technological competence(von Zedtwitz, 2004). However, they seem to suggest that the innovative activities aremostly confined to local product adaptation and to intensive customer cooperation.

In sum, theMNCR&D centres found in the developing countries fall into one of fourcategories. (i) Cost-driven research centres in which MNCs subcontract low-end R&Dactivities (see Reddy, 1997), and (ii) production-driven research centres in which MNCsupgrade their production-only facilities to production-related research (see Amsden andTschang, 2003). The above theories fail to explain the presence of the following types ofadvanced R&D centres, which are confined mostly in the Triads. (iii) Market-drivenresearch centres, which respond to the increasing competitive host market, and (iv)technology-driven research centres, which look for cities that can provide new technologyand new production not yet in the current market. Thus, the expression ‘advanced R&Dcentres’ used in this paper refers to (iii) the market-driven and (iv) the technology-driventypes of research centres. For details of the above typology, see Chen (2004, 2006).

To understand this puzzling phenomenon in Beijing, we begin with an analysis ofthe historical transformation of regional knowledge assets in Beijing since the 1980s.Second, this paper investigates the interaction between the MNC R&D centres andBeijing’s regional assets. Third, this paper elaborates on four of Beijing’s specificlocational advantages. This paper concludes with a discussion on a possible new

MNCs and R&D Centres in Beijing 623

form of informal knowledge spillover in Beijing and on the spillover’s implicationsrelative to other latecomer city regions.

II. The Making of an Entrepreneurial Region: Zhongguancun in Beijing

Zhongguancun (ZGC) was originally planned to be Beijing’s scientific research andeducational zone located in the Haidian district, northwest of Beijing between thefourth and the fifth ring (see Figure 1). Ever since the 1950s, the central governmentand the Beijing municipal government have either relocated or established researchinstitutions and universities in this area, creating the largest enclave of top scientistsand engineers in China. By the late 1990s, the area surrounding ZGC counted 39universities, 213 research institutes (including 40 departments of the ChineseAcademy of Science – CAS), and 378,000 engineers and scientists.5 The mostprominent institutions include Peking University, Tsinghua University, and theCAS, with its 41 research units, in addition to other leading technology universitiessuch as Beijing Polytechnic University, Beijing University of Aeronautics andAstronautics, and Beijing University of Post and Telecommunication.

The Origin of ZGC’s University Research Complexes

ZGC is the birth place of the CAS, which acts as the anchor of the Chinese nationalscience system. It was established immediately after the founding of the People’s

Figure 1. The five Zhongguancun Science Parks (ZSP).

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Republic of China (PRC) in October 1949. The CAS resulted from a merger betweenthe former National Research Institute and the National Academy of Beijing, withabout 200 research workers.6 Over the years, the mission-oriented technology policythat privileged military technology slowly built itself into a large scientific complex inthe context of the Cold War.

The CAS was responsible for the majority of the mission-oriented researchprojects, targeting military technology. The infamous ‘Two Bombs and OneSatellite’ (liandan yixing)7 project was a highly celebrated achievement of the CAS.It put China on the map of Cold War geopolitics. From the year 1950 until the early1980s, the Soviet-style mission-oriented scientific complex had virtually noconnection with its surrounding community. Inside ZGC’s walls were scientists,while outside the walls were farmers pushing their trolleys. There were no spin-offs ofprivate high-tech firms from this research complex until the early 1980s. It is wellknown that the boiler run by an old collective, the Sijiqing Collective in ZGC, wasthe only high-tech town-and-village enterprise (TVE) in the early 1980s.8

After the 1980s, the major function of the university research complex in ZGCbegan to shift owing to the serious shrink in direct funding from the centralgovernment. The initial crunch forced the CAS and related university labs to speedup the diffusion of technologies through poorly executed diffusion-orientedtechnology policies in order to stay financially viable. With encouragement fromthe Beijing government, the CAS and universities started to set up incubators andtechnology transfer centres. For example, CAS established a Technology LicensingOffice (TLO) and ‘S&T Development Centre’ in Haidian District to facilitate thecommercialisation of CAS research. Suddenly, the walls that had closed off thepublic research institutions from the market broke down, and the institution-affiliated startups mushroomed after the mid-1980s.

The Socialist-Capital Effect – The High Demand for IT Productsin State Sectors

If downsizing of Public Research Institutes (PRIs), university labs, and the CAS wasthe push factor for ZGC’s entrepreneurship, the high market demand for affordableIT products and services was the critical pull factor. From the 1980s to the early1990s, the central government bureaucracies that were concentrated in Beijingimported 150,000 PCs and 4,000 medium and large PCs.9 The main business ofstartups was mostly to produce cheap assembled computers that, based on cheapercomponents,10 would act as an import substitution for expensive imported brandname computers like IBM.

There were two strong market demands for IT hardware and software. In terms ofhardware, the high tariff barrier gave local startups a large profit margin inassembled low-end computers for mainly public institutional consumers such aspublic institutions (both Beijing and central government institutions), universities,the CAS departments, and the state-owned enterprises (SOEs). In terms of software,both imported and locally assembled PC products needed Chinese operatingsoftware and technical support. Together, they created a huge demand for thelocalisation of both hardware and software in the field of Chinese-languageprocessing and Chinese software development.


Before the 1990s, almost all headquarters (or major offices) of large public andprivate enterprises needed to locate in the political capital of Beijing in order tosecure large contracts from the government and the public sector. As a capital city ofa state-socialist country, Beijing has had the convenient locational advantage ofdirect access to the decision-making managers of these enterprises. I call thisadvantage ‘the socialist-capital effect’. By that, I mean the initial demand from thebureaucracies that were concentrated in the capital of the socialist state gave thelocal emerging IT industry an important initial boost, when individual consumerscould not yet afford these IT products.In 1991, the original area of ZGC – the Haidian Zone – extended northwest to

the Shangdi information industry incubator zone. Then, the four sub-districts of theZGC Science Park (ZSP) – the Changping Zone (1992), the Fengtai Zone (1992), theYizhuang Zone (1998), and the Electronics Zone (1998) – were set up, respectively, in1998 owing to the demand of the local county governments to capitalise on the fameof ZGC. These five zones have formed a vigorous high-tech industrial zone whosespecial features extend along the 4th Ring Road of Beijing (see Figure 1). However,more than 90 per cent of the output continues to concentrate in the original Haidiandistrict.In the next 10 years, the ZSP gained over 30 per cent annual economic growth in

trade. In 1999, the total revenue of ZSP amounted to 637.32 hundred million Yuan(about US$7.68 billion). Its GDP reached 191.71 hundred million Yuan (US$2.19billion).

Exposing the Weaknesses of ZGC in the Midst of Globalisation

Many critics have rightly pointed out that ZGC is not qualified as an effectiveinnovation system because of the absence of inter-firm linkages (Wang and Wang,1998; Wang, 2001). There very few vertical and horizontal linkages between localfirms. And there are virtually no strategic alliances among complementary firms. TheChinese call these firms ‘small but complete’ firms.11 A lack of trust is probably themain reason for this lack of cooperation.The great majority of the local startups are independent from each other in terms

of products and services. There is hardly any collaboration. A total of 84.5 per centof the local firms have below 50 employees; 62 per cent of the firms have below 20employees. They all compete with each other in similar markets. There are very fewhigh-tech local firms in the district. Most firms engage in low-end softwaredevelopment, system integration, and mutual cutthroat competition. The failure rateof ZGC firms is high, and this trend continues to this day.Ironically, since the mid-1990s, the above weakness of the ZGC district has made

the entrance of technology-mining MNCs easier as all the small firms were eager toseek collaboration with the MNCs instead of each other.

III. The Localisation of MNC R&D Centres in ZGC

In fact, the term ‘technology-mining’ might not be appropriate as a description ofMNCs’ motives for investing in Beijing’s R&D centres. Beijing is a potential second-tier innovative city, and there is little existing technology to be mined. This

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technology-mining phenomenon in Beijing is different from the intra technology-mining activities carried out by the MNCs within the Triad. Rather, it is aboutexploiting both the highly skilled labour and the proximity to the local market, andits aim is to reinvent new technologies not yet available elsewhere.

The data used in this article derive from my fieldwork in Beijing from September2002 to January 2003 and my follow-up research there in June 2005. The basicprofiles of the surveyed MNC R&D centres are listed in Appendix A.

Before we go into a detailed analysis of the specific locational advantages ofBeijing in section IV, I will give an overview of the interaction of MNC R&D centreswith Beijing’s crucial regional assets. Figure 2 below shows the interaction of MNCR&D centres with ZGC’s regional assets in a more dynamic way. The boxes inshaded are the key agents and institutions that are essential for the successfullocalisation of MNC R&D centres in Beijing.

Availability of Specifically Skilled Labour

As mentioned above, the emergence of the ZGC IT district has, since the mid-1980s,successfully released highly skilled labour whose skills span a wide spectrum, fromthe public sector to the private sector. Interviewed R&D managers often noted thatthey can be very specific about the skills required and still obtain qualified applicantsin fewer than 10 days, compared to three months in Europe.12 While taking fulladvantage of this highly trained pool, local private firms have been unable to absorb

Figure 2. Interaction of MNC R&D centres with Beijing regional assets.


all talents. Many skilled labourers are scientists or fresh graduate students who areexcellent in basic research but who have little experience and knowledge aboutindustrial production. The emergence of technology-driven MNC R&D centres hasprovided not only a rare opportunity for them to continue their research but also aneffective outlet for their strong desire to go abroad (or to the West) in order toestablish connections with a more advanced technological community through eitherfurther study or work in high-tech districts.Therefore, the primary asset of ZGC is the skilled labour pool, as indicated on the

left of Figure 2. Table 1 shows that Beijing ranks number one in the concentration ofhigher education facilities, teachers, and student enrolment. Table 2 shows thatBeijing ranks highest in terms of R&D personnel, including teachers, researchers,and R&D staff.Almost all the interviewed R&D managers emphasised that the primary motives

underlying the establishment of advanced R&D centres in China concerned not thecost, but the availability of the required skilled labour. For example, the director ofIBM China Research Labs emphasised the following point repeatedly:

[the migration] is not just about outsourcing for low labour rates. If it were justabout low labour rates, we’d probably have R&D centres in places likeRomania and the Philippines

China’s advantage is not in low production costs. Production costs are evenlower in India. China’s advantage lies in the availability of the best talent, thelargest market. The establishment of software development here enables us to

Table 1. Data on higher education, teachers, and student enrolment, year 2000

Institutes of highereducation % Teachers % Student enrolment %

Beijing 59 5.5% 34,952 7.7% 282,585 5.2%Shanghai 37 3.5% 20,491 4.5% 226,798 4.2%Guangzhou 31 2.9% 13,271 2.9% 185,078 3.4%Shenzhen 2 0.2% 1,114 0.2% 14,123 0.3%

Total 1067 100% 453,117 100% 5,403,619 100%

Source: Urban Statistical Yearbook of China (2001).

Table 2. The distribution of R&D personnel in major cities in 2001 (unit: number of people)

Teachers and researchers % R&D staff %

Beijing 20,673 5.0 8,397 5.6Tianjing 12,011 2.9 4,561 3.0Shanghai 17,856 4.3 5,823 3.9Chungqing 8,112 2.0 3,143 2.1

Total 412,953 100% 151,021 100%

Source: Higher Education Statistics Data (2002).

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provide better service to the local market. Cost is a big concern of softwaredevelopment, but not the most fundamental drive.13

What differentiates Beijing from Shanghai, for example, is that the engineers inBeijing have a wider spectrum of technological expertise, thanks to the concentrationthere of universities and PRIs in ZGC. Indeed, Agilent located its labs in Beijingchiefly in order to exploit the concentration of specialised skilled labour. To locateAgilent Labs in China (particularly in Beijing) is to be close to optical scientists.14

The decision to locate the research group in Beijing was strongly influenced by thepresence of the existing Agilent development team focused on communicationsand, most important, the availability of high-calibre optical scientists andengineers. There are more than 15 universities in China with excellent graduateprogrammes in optics, and it is our goal to secure the best talent, worldwide.15

Therefore, it is the high quality of specialised engineers, and not just the abundantquantity of generic engineers, that differentiates Beijing from Shanghai and, moregenerally, from the rest of China. Since the entrepreneurial movement that gotunderway in the 1980s, the sources of skilled labour have also diversified. There arefour main sources:

(i) The scientists, faculty members, and graduates from the top universities andthe CAS-affiliated graduate programmes, all corresponding to specific skills(top box in Figure 2).

(ii) ZGC’s engineers with basic research skills are in over-supply (the bottom boxin Figure 2). Because of the post-911 diminishment in student visa availability,many Chinese students are delighted to extend their passion for basic researchin the MNC R&D centres.

(iii) The domestic skilled labour from other cities and provinces, attracted by theentrepreneurial spirit of ZGC (see side box on the left in Figure 2). Theseskilled labourers are not limited to software programmers and engineers. Thereare also finance managers, technology brokers, and patent lawyers, as well asconsultants and accountants from the producer service sectors (the bottom leftbox).

(iv) The sizable body of Chinese returnees16 and overseas Chinese17 coming fromabroad (side box on the left in Figure 2). Many of them worked in the MNCsbefore they decided to come back to China to head the key R&D posts in theMNC R&D centres. These two groups of Chinese experts, or the so-calledtransnational technology community,18 are the key agents that bridge both thetechnology gaps and the cultural gaps between Chinese engineers and themodern R&D management practices of the MNCs.

The Collaboration between (1) MNCs and (2) Public Research Institutesand Universities

The major drives behind the locating of MNC technology-driven centres in ZGC arethe formal and the informal collaboration between, on the one hand, MNC R&D


centres and, on the other, both the local research institutes from the universities andthe CAS. This collaboration takes various forms.

(i) Joint-research labs (such as Lucent Technologies’ Bell Labs with Tsing-huaUniversity).

(ii) Joint-research projects (such as the Intel China Research Centre with TsingHua University).

(iii) Internship programmes held by MNC R&D centres (such as Bell Labs withPeking University).

(iv) MNCs’ subcontracting of some employee training programmes to theuniversities (Motorola with Peking University).

(v) Informal flows of scientists, faculty members, and students. While most ofthe time we see the flow of talent from the universities/the CAS to theMNC R&D centres, there are some research teams that leave the MNCsfor the CAS or universities. Elaboration on these interactions followsshortly.

Because local firms – compared to MNCs – are still far behind in their R&Dinvestments compared to MNCs, there are very few joint-research projectsbetween, on the one hand, local firms and, on the other, public institutes anduniversities.

MNCs and the Government

It is surprising that both the local government and the central government have verylittle to do with the everyday operations of the MNCs. The central government’simplicit ‘technology for market’ policy might force a handful of big MNCs toestablish their R&D centres in a manner that establishes the MNCs’ loyalty andlong-term commitment to China. The advantages of these R&D centres soonbecome manifest to MNCs even though the commitment may have started as apolitical exchange with the central government. Most R&D centres avoid dealingwith bureaucrats as much as possible.19 And even though most Beijing governmentofficials are sceptical20 about the operation of MNCs in their city, these same officialsare eager to attract MNCs through incentives and improved services. Their rationaleis that even if the centres do not bring real benefits to the city (create substantial jobsand increase the tax base21), they look good as showcases for the promotion ofBeijing as the ‘Silicon Valley of China’.

IV. The Specific Locational Advantages of ZGC

The concentration of skilled labour, and to a lesser extent, the opportunity tocollaborate with public research labs are the locational advantages underlying MNCR&D centres’ decision to come to Beijing in the first place, but these advantages donot, in themselves, explain why the MNCs R&D labs stay and develop further inBeijing. To grasp the full explanation, one must identify the combined effects of fourlocational advantages of Beijing. These advantages are unique in China and meritelaboration, which I undertake below.

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We will elaborate four major knowledge assets accordingly, namely:

(i) the strong entrepreneurial culture that creates highly motivated engineers;(ii) the experienced Chinese returnees provide a critical bridging role between

Western R&D management knowledge and local engineer culture;(iii) the lack of inter-firm trust and networks makes the entrance of MNCs into a

‘loose’ cluster much easier;(iv) the large and dynamic Chinese market that desires high-tech products with low

prices shortens the product life cycle, forcing MNCs to upgrade their R&Dfacilities in China.

Networks of Motivated Engineers

The high entrepreneurial spirit in ZGC has changed the engineering culture there,and this change has differentiated the culture from that in Shanghai and the rest ofChina. Highly motivated engineers are highly welcomed by advanced R&D centres,especially the basic research centres. The high levels of uncertainty in the basicresearch require strongly motivated, persistent, and creative engineers. According toone interviewee, the highly individualistic nature of Chinese engineers differentiatesthem from their counterparts in India.

Engineers in India and China are very different, their ways of thinking aredifferent. For the same piece of software program, Indian programmers write100 thousand lines while Chinese write only 10 thousand lines to meet the samefunctions. Chinese programmers are smart and they have strong logicalthinking, while Indian programmers are more realistic and rule-oriented.22

Whether this assessment has any merit, it is apparent that the motivation to excelin their field, to differentiate their abilities, and to think outside the box areexceptionally pronounced characteristics among Beijing engineers, owing largely tothe entrepreneurship embedded in ZGC. Almost all my engineer interviewees inShanghai and Beijing told me the same story. Their entrepreneur-based inspirationhad come from the IT pioneers in ZGC throughout the 1980s and the 1990s. Manyinterviewees explained the difference between the engineering culture of Beijing andthat of Shanghai in a distinctly essentialist way that inherited much of its form andcontent from regional culture and history. As I argue, it is the entrepreneurial spiritthat, over the last two decades, and not the last 200 years, has played the mostimportant role in cultivating a highly motivated and risk-taking culture amongZGC’s engineering culture.

These motivated engineers, with their basic research interests, are attracted by theWestern-style academic-like atmosphere of these R&D research centres. Forexample, IBM China Research Labs and Microsoft Research Asia (MSR-Asia) inZGC granted researchers a high degree of autonomy in which to pursue their ownresearch interests: the lab atmosphere was relaxed and non-hierarchical; the dresscode was casual; and the researchers were encouraged to know each other throughmany channels, including casual lunches, afternoon tea breaks, and ping-ponggames.


This academic-like atmosphere in this technology-driven centre integrated easilyinto the existing campus-based networks. Many MNC basic research labs have had ahigh concentration of PhD holding researchers. For example, in Bell Labs ResearchChina, there are 28 researchers, 24 of whom have PhDs.23

By locating in the ZGC and close to campuses, these centres enjoy an advantageinsofar as they can tap into the alumni–student–academic networks. Therefore, whilelocal firms still struggle to take full advantage of the under-utilised knowledge assetin ZGC, MNCs have already demonstrated a new way of making university–industrial linkages through the human networks.The more common collaboration efforts between MNC R&D centres and the

university-CAS complex are intern programmes, joint-research labs, joint-researchprojects, subcontracted research work to the universities, the use of senior MNCresearchers as visiting professors at local universities,24 fellowship competitions,25

competition-based funding of university research projects, and joint-authorshipprojects among faculty members. I will focus on two aspects of the collaboration thatreveal the heavy reliance on these networks. In response to this reliance, thecollaborative projects create a new vehicle for knowledge exchange between theuniversity-CAS camp and the MNCs.

Intern Programmes

Successful MNC R&D centres often hold sizable student intern programmes. Mostbasic research labs have intern programmes almost as large as their permanentemployee body. For example, MSR-Asia has around 200 regular in-house interns.This number is, in fact, greater than its 180 full time researchers.26 Having large internprogrammes is the best way to legitimise the exploitation of the engineering students.The centres do not need to pay benefits and provide fixed office space and equipmentto these student interns. The great advantage of having a large number of interns isthe possibility of having a flexible workforce for irregular and variable scopes ofresearch projects. If a project requires more labour, the labs can readily recruit moreinterns (another word for cheap labour) to work on this particularly timely project.Once the project is done, interns can also be easily dismissed. They just return to theiruniversities. Students also compete fiercely to get into the internship programmes,because they are eager to obtain exposure and in-company experience in famous labs.In that sense, both the centre and the students benefit from this kind of flexible labourcondition. For interns to travel between classrooms and R&D centres frequentlywithin a day, proximity becomes essential. Owing to the worsening traffic in Beijingand to the improvement of amenities in ZGC, many newly established advancedR&D centres prefer to locate close to the campuses in ZGC instead of to the centralbusiness district at the Southeast corner of the third ring road in Beijing. The reasonfor this preference concerns the usual one-way travel time back to the campus, whichusually takes 30 minutes but can end up taking three hours during the rush hours.27

Joint-Research Labs

In the past, joint-research labs (JRLs) by both foreign firms and local firms were away for them to advertise their brand name on top university campuses. The hunger

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for research funding has pushed many engineering departments’ research labs tograb as much outside funding as possible – the labs’ central quest is to stave offbankruptcy and closure. MNCs donate equipment and funding (usually around1 million RMB per year) to these public research labs for public relations purposes.They do not intervene in how the public research labs are conducted, using the JRLsmerely as showrooms for international clients who visit China. The other purpose ofthese nominal JRLs is to secure the future skilled labour force of the company byregularly exposing the students to the brand name on campus.

However, this situation has changed because the university authorities have begunto regulate the JRLs in Beijing’s top universities. It is now harder for MNCs andlocal firms to exploit – purely in their favour – the brand name effect of topuniversities. Many MNCs, especially those engaged in basic research, have begun totake JRLs more seriously. Owing to the fact that basic research is often more publicthan applied research, MNCs are less worried about giving away their researchfindings. The findings of JRLs often end up as joint publications that represent thework of both MNC researchers and university professors and that appear in majorinternational journals. Thus, the JRL has become another vehicle stationed oncampus to mirror the internship programme often stationed in the MNC R&Dcentres.

The Transnational Technological Communities

The local engineer networks will not work efficiently without the most importantcatalyst: the transnational technological communities. They are the souls that buildthe main characteristics of the centres in their own image. Both Zhang Yaqin, thedirector of MSR-Asia, and Gong Li, the director of Sun Microsystems’ R&D centre,graduated from academic institutions in Beijing. David Lee, the director of Bell LabsResearch China, was born in Hong Kong but raised in Suzhou. George Wang, thefounder and director of IBM Research China, was born in Tianjin and received auniversity degree in Taiwan. Even though not all of them are from Beijing, theyshare a similar engineering education in the greater China context, which includesTaiwan and Hong Kong. All of them worked in the research arm of MNC parentcompanies for more than 10 years before they were appointed to lead R&D labs inChina. These Chinese returnees tend to possess advantages, in terms of social capital,over non-Chinese directors, because the former can better exploit the local student–alumni–faculty networks through their shared Chinese engineering culture.

Local yet transnational, culturally Chinese yet trained in the West, these Chinesereturnees, or to be more precise – ‘members of the Chinese transnational technologycommunity’ – understand the strengths and the weaknesses of Chinese engineeringeducation, the engineering networks, and what is more important, the engineeringculture (habits, inspirations, motivations, and so on). They speak frequently to localengineers because of their shared engineering education background.

Chinese returnees understand that these ZGC engineers like to take up challengesbut are, as some interviewees contended, usually poorer team players than theirIndian counterparts.28 In light of this weakness, the key to managing the Chineseengineers is to boost their spirit and to make them feel that they are working forthemselves and that the company relies on their effort.29 At the same time, Chinese


returnees also need to introduce Silicon Valley-style management to create animproved team spirit. Sun Microsystems in China is a telling example: Gong Licreates Friday afternoon tea sessions and numerous sports activities to tighten up the‘togetherness’ of the research teams. Cultivating informal dialogues and friendshipsnot only facilitates teamwork but also builds bridges across different isolated teams.MSR-Asia has a ‘thinking room’ with white boards on every wall and every table. Themanagement there hopes that the informal meeting place can easily trigger discussionand thus become a room for brainstorming. The IBM research labs with no dress codeand no time constraints appear more like a dormitory than a workplace.In short, these new forms of Silicon Valley-style management create a sense of

belonging and new identities for Chinese researchers. While local high-tech firmsstress techno-nationalism to motivate their Chinese employees to compete with the‘wolves’,30 the MNCs stress new learning cultures that target individual learning andperformance.With the shared culture and language, Chinese returnees acting as R&D team

managers communicate well with local engineers. They have a great advantage overthe foreign expatriates, who often have great difficulties adapting to the localengineering culture.31 In this sense, the US R&D centres have cultural advantageover European, Japanese, and South Korean counterparts because most Chineseengineers are trained in the United States. In addition, US MNCs tend to be morelocalised than all other MNCs because the former are more willing to use Westerntrained Chinese returnees as lab directors.The successful intervention of the Chinese returnees has created a strong sense

among local engineers that they can do something marketable. Many basic researchlabs have since added a development arm that works on the development of somepromising results from their basic research. For example, the commercialisation rateof MSR-Asia in Beijing (established in 1998) was surprisingly higher than expected.32

In 2003, MSR-Asia created a new division called the Advanced Technology Centre(ATC) that would incorporate mature research results into products. The ATCalready employs 80 engineers, whose task – as prescribed – is to incorporate thealgorithms invented in Beijing into existing products. The ATC is the most secret partof MSR-Asia and prohibits outside visitors from entering the facility.

Asymmetrical Cooperation between MNCs and Local Firms

As weak inter-firm networks in the ZGC-based cluster fail to provide satisfactorysolidarity, the entrance of outside MNCs threaten the existing cluster. In contrast,local firms are eager to form partnerships with MNCs, especially those listed in theFortune 500. This eagerness has thus given MNCs a surprisingly smooth entranceinto the ZGC cluster. The partnership often takes on the form of an asymmetricnetwork hierarchy, with the MNCs dominating the technology and the local firmsdominating the distribution channels. In the short term, the arrangement might looklike two parties exploiting their competences and creating an interdependency: awin–win situation.33 In the long run, however, the arrangement creates technologydependency and undermines the incentive for local firms to develop their owntechnology. While local firms’ efforts to catch up to competitive technology levelsencounter difficulties, it is less difficult for MNCs to overcome the distribution

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hurdle, especially since the WTO agreement in 2001. For example, Dell Computer’sonline distribution of PC models has seriously challenged the market share of theLegend/Levono computers, which relies on traditional distribution channels for theestablishment of special stores nationwide. This unequal partnership will furthererode local firms’ motivation to accumulate technology and to collaborate with oneanother. Consequently, local firms will become more and more technologicallydependent on MNCs.

If this tendency continues, we will witnessing an extreme scenario in which MNCsbecome the core of the inter-firm networks in ZGC. The new vertical network ofZGCis constructed with MNCs at the top of the value chain pyramid, where theycontrol the technology and capital. The hierarchy will further deepen the distrustamong local firms and also weaken local firms’ motivation to innovate.

In short, the famous MNCs were able to exploit the distribution strength of localfirms while concentrating their resources on both product development andtechnology development for the Chinese domestic market. Ironically, the weaknessesof the ZGC cluster benefit the MNC because MNCs can focus more on localisedtechnology research development.

Market Uncertainties – Competition for Design and Technology

China’s large domestic market is often the default explanation for anything that goesinto China, including the R&D centres. However, I argue that it is not merely thesize of the market, but the market’s dynamism and competitiveness, that attractMNCs and that compel them to increase the localisation of more advanced R&Dcentres in China. The market uncertainties in China are the result of the unusualdemand of Chinese urban consumers for the latest high-tech products. Since the1990s, MNCs have been unable to dump older models, especially consumer durables,on the Chinese market as they did in the 1970s. Unlike consumers in less prosperousurban areas, Chinese urban consumers exhibit an unusually high demand for thelatest technology for any given product. These consumers, who refuse to make atrade off between price and technology, want both. For example, when it hit theChinese market in the 1990s, the DVD player almost wiped out the VCR because ofthis unexpected demand for high-tech goods. The assumption that a developingcountry will start off consuming inferior and cheaper products (such as the VCR)obsolete in the developed market, and will later upgrade to higher-end products(such as the DVD), was proven to be a gross mistake that prompted many VCRmanufacturers to calculate their future production inefficiently.

Intensified competition shortens the lifecycle of almost any new technologicalproduct. Fierce price-related competition from local firms, and high consumerdemand for newer products, have forced MNCs to reorganise and reintegrate theiroperations in China in order to meet the challenge of shortening product cycles.These days, many MNCs in China soon realise that it is imperative to reintegrateR&D, production, distribution, sales, and services. The MNC R&D centre oftenupgrades itself to engage in higher-end R&D in order to keep up with thecompetition and to offset market uncertainties. The best example, herein, is thedynamic upgrading of Motorola’s personal communication sector (PCS) R&Dcentre in Beijing.


Motorola PCS R&D Centre. The PCS34 is one of Motorola’s major sectors. In 1999,Motorola officially established its PCS R&D centre in Beijing by consolidating itstwo R&D centres there: Greater China Cellular and Paging Groups. Currently, thecentre has 300 engineers who are conducting research on software, electrical,mechanical, and industrial design development.

Competition in Design. Due to the intensive competition in the industrial design ofthe mobile phone, one of the functions of Motorola’s PCS R&D centre in Beijing isto improve the industrial design of the corporation’s Chinese cell phones. Industrialanalysts have long criticised Motorola’s Chinese phones as technology winners thatsuffer from lousy designs, especially when compared to fancy models offered byother MNCs (such as Samsung from South Korea and BenQ from Taiwan) and theirlocal imitators. This criticism is especially detrimental to Motorola’s sales in non-metropolitan, where style matters more than technology. Compare to metropolitanmarket, handset is highly regarded as a symbol of social status in the non-metropolitan market.One fascinating example is how Motorola responds rapidly to changing local

market competition. Motorola competes with local cell phone manufacturer TCLInternational Holdings, the giant manufacturer of TVs in Guangdong. TCL’s phonefeatures a diamond-studded handset (baoshi shouji) sold in non-metropolitanmarkets. When it first came out, people fainted over its gaudy design. It soonacquired the nickname ‘cell phone for the wife of the village head’ (chunzhang taitaide shouji). To everyone’s surprise, it sold very well in non-metropolitan areas. Soon,the other local competitor, Eastcom, a state-owned enterprise that has joint ventureswith Motorola for export markets, was selling an RMB $425 cell phone that wasmounted with specially treated fish skin (yupi shouji) in imitation of crocodile skin.This version of vanity, however, has not sold as well, simply because diamond is amore conspicuous status symbol than its fishy competitor. To join in thecompetition, Motorola designed and sold a glam faux-diamond-studded handsetof its own.35

The point is that China’s large market, nuanced by local tastes and needs,certainly plays a part in driving Motorola’s dispersal and localisation of industrialdesign and development in China.

Competition in New Technology

Smart phone A6188 – as well as its subsequent version (A6288) and finally the A388model – is a good example of Chinese engineers’ tendency to design a product firstfor the Chinese market, which is later sold on the world market.36 The A6188 modelwas designed and developed by Chinese engineers at the PCS centre in China,especially with regard to the design and development of the model’s softwarearchitecture.37

In a smart phone, PDA is integrated into a cell phone that has Internet capability.This multifunction cell phone was sold at RMB$2,500 (US$320) for the corporateuser market in China when it first came out and was hailed as the first generation ofsmart phones. It looks like a mobile phone but has a Palm-like touch screen insteadof a keypad. It was designed to allow easy writing of Chinese characters for email,

636 Y.-C. Chen

but it also functions as a dictionary, Web surfer, and organiser all in one, whileretaining the look, feel, and function of a phone. Since it hit the market in early 2001,it has led the market, with Nokia and Ericsson coming up with similar models in avery short time. It uses a Dragonball processor38 that has critical input from theSingapore IC design centre.39 The original Dragonball processor was the brainchildof the IC design team in Hong Kong back in 1996. It has undergone manymodifications since then.

The Chinese IC design team in Suzhou has also worked on the processor since2000. All these IC design teams have focused on different features of the Dragonballprocessor. On the basis of Chinese market demands, their respective efforts finallycame together in the PCS R&D centre that designed the model – smartphone. Theappropriateness of this design for the Chinese market can be gleaned from thefollowing fact: PDA is not as popular in the Chinese market as in the US or othermarkets. PDA products never really took off in China. However, the smartphone(the cell phone with PDA functions) is a highly acceptable idea in China.

The A6188 was designed, developed, and finally manufactured mainly at the PCSfactory in Tianjin. It was later modified to become the A6288, the A388, and theA388c (with colour monitor). The latest version, the A388 smartphone, becameavailable in the US market a year after the invention of the A6188 in China. Thissequence of events exemplifies how PCS China not only has taken the lead inproduct R&D but also has begun to take part in inter-Asia innovation networks.

In short, Motorola’s PCS R&D centre in Beijing has expanded from a technicalsupport unit in the mid-1990s to a major design and development centre (productdevelopment) in Motorola’s global innovation networks. The China teams designsthe leading model and simultaneously takes charge of its manufacture and testing inthe Chinese market before selling it to the world. Smartphone A388 has sincebecome the poster child of Motorola, a tool used to convince the Beijing government

Figure 3. Motorolla cell phones that are designed in China and sold worldwide.


that Motorola is truly committed to genuine technology transfer to China. However,this official public relations language is not accurate. The expression ‘technologytransfer’ usually means the transfer of a newer design from the United States to aplace of manufacture in China. The truth is that the design of A6188 was initiated inChina and later exported to the United States and other countries. Therefore, itconstitutes a ‘reverse technology transfer’, or more accurately, a new ‘two-way flowof knowledge’ between R&D centres in China and Motorola’s global innovationnetworks.In sum, market uncertainties – competition for design and technology – have

forced MNCs to continue to upgrade, relocate, and reintegrate their branch R&Dfunctions in China. Thus, the advanced R&D centres in China are not just a low costoption but an essential part of MNCs’ global innovation networks.

V. Conclusion

By examining the global–local interaction between MNCs and regional assets, thisresearch explains the locational logic of MNCs’ advanced R&D investments inChina. In explaining the presence of these investments, analysts often invoke thecliches of China’s large market and China’s cheaper labour costs, both of which areinsufficient accounts of the phenomenon. If we want a more accurate explanation asto why not just China but specific cities in China attract such investments, we have toconsider supply side and institutional factors. To do this, we must first examine howcity-based regional assets are organised historically by various agencies in cityregions; then, we can better understand how and why the co-development betweenMNC global innovation networks and local knowledge economies occurs.This approach enriches Dunning’s eclectic OLI approach (Ownership, Location

and Internalisation) in giving more dynamic explanation to the ‘L’ factor, which isoften more overshadowed by the Ownership factor in explaining the existence andgrowth of MNCs (Dunning, 1981, 1988, 1995). In fact, Dunning has alreadyobserved the new tendency in which MNCs seek intangible assets (the L factor) thatare location-bound in the host countries not only as complements to their own corecompetence but also to create new assets that harness their competitiveness(Dunning, 1998). What this article challenges is the fundamental assumption in theOLI framework: that the critical territory-bound assets are predominantly limited tothe triad economies because of their advanced intellectual capital and markets.I argue that latecomer countries like China and India might not have the establishedintellectual capital and mature markets such as those found in the Triad economies,but they have dynamic ‘learning human capital’ and ‘highly competitive domesticmarkets’. In fact, the experience of MNCs from developed countries locatingadvanced R&D centres in the developing countries – China in this case – throughengaging in human capital and interacting with highly uncertain local market, is verysimilar to the risk-taking experience of latecomer MNCs that venture into FirstWorld countries to strengthened their competitive edge against incumbents. In thissense, the LLL framework (Linkage, Leverage and Learning) proposed by John A.Mathews (2006a, b), though not as he originally intended,40 can fill in the gap toexplain why and how MNCs can possibly extend their innovation networks outsidethe ‘safe zone’ of the Triad economies into the highly uncertain zones of selected

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metropolitan cities in the developing countries. The Beijing case shows how MNCsmake linkages with the host innovation systems (the ZGC), leverage between localcompetitors to form asymmetry partnership, and most importantly, learn tointegrate the local innovation systems into their global innovation networks. In thisway, the LLL framework has the potential to capture the dynamic andevolutionary nature of the L factor (in the OLI framework) to explain whyMNCs locate advanced R&D centres in selected Third World cities. Based on thistentative eclectic approach, we can explain the puzzling research question of thisarticle using two locational factors set in the dynamic, evolutionary and learningprocess.

First, the MNCs’ technology-driven (TD) centres come to ZGC for theabundantly available quality of its skilled labour, which blossomed from a widespectrum of expertise embedded in the CAS-university networks in ZGC. Theentrepreneurial and motivated engineers and scientists (and not mere cheap) in ZGChave become the most valuable local asset MNCs are mining. Moreover, MNC-advanced R&D located in ZGC not only mine existing technologies embedded in theinnovation systems, but also invent new technologies through engaging the localtalents. For instance, the research focus of MSR-Asia – the first basic research centreof Microsoft in developing countries – is multimedia technologies. Local institutionsin ZGC, however, did not specialise in multimedia technology to begin with. Therewas no true relevant technology for Microsoft to mine. Instead, this technology wascreated in ZGC, thanks to its high quality, fast learning, and highly motivatedengineers. In addition, the experienced Chinese returnees bring advanced researchmanagement and facilitate the communication linkages between Beijing and theMicrosoft R&D headquarters in the US. Through this new synergy of people, MNCsfurther embed their research in the local innovation systems through internshipprogrammes, joint-research labs, and joint-research projects. This kind of newknowledge exchange platform between the universities and the MNCs’ labs create anopportunity of university–MNCs linkage, which is new to ZGC and the rest ofChina.

Second, the MD centres come to China to engage in the heated competition andthe technology uncertainties embedded in the Chinese market. The competitionamong MNCs for the host market, and increasingly, from local imitator-turn-creators, forces MNCs to accelerate their integration of R&D, production, andmarketing in the host region in order to maintain their market share. The mainpurpose is to create new products for the highly competitive local market. Only bylocalising the design centre can the MNCs maintain their proximity to the market tocompete directly with local firms and overcome trade and cultural barriers. In thetelecommunications sector, the heated competition actually extends from theChinese domestic market to other newly emerging markets in Russia, India, EasternEurope and Africa.

In addition, the processes of intensified formal and informal interactions betweenMNC R&D centres and local innovation systems have created opportunities forinformal knowledge spillover through embedded human networks and through theestablishment of new technology communities (Chen, 2007). This type of spillovereffect on human networks has the potential to encourage further agglomeration ofMNCs R&D centres in the ZGC cluster.


Notes

1. It is the so-called ‘northern sparrows fly south’ phenomenon. Since the early 1990s, the

manufacturing segments of Zhongguancun – an IT district in Beijing – have slowly moved out of

the area because of the high production costs there. By 1994, 64 per cent of the production value of

firms in Zhongguancun’s Experimental Zone was produced in Guangdong because of the dense PC

and peripheral cluster located there (see Wang, 2001: 225).

2. This is a common response from the policy maker informants in Beijing.

3. ‘Beijing ZGC wants to build world class R&D district’ (in Chinese), 10 September 2004, http://

www.xinhuanet.com; ‘Multinational corporation R&D investment, its effects, and relevant policies’

(in Chinese), 26 June 2005, http://www.chinafiw.com.

4. For example, we might expect many more MNC R&D centres to locate in Taipei because of its

established OEM-led innovation model over the last 30 years. However, since September 2002, only

IBM and HP have established research bodies. The Taiwanese government’s long-term goal is to

have 30 MNC R&D centres by the year 2006.

5. ZGC Administrative Government, 2000.

6. Feigenbaum (2003: 60).

7. The ‘two bombs’ expression refers to the atomic bomb and the hydrogen bomb. The ‘one satellite’

expression refers to the ‘artificial satellite’.

8. ‘Zhongguancun’s 10 years’, Reform Publication, 1998, Beijing, p. 53 (in Chinese).

9. Wang (2001).

10. According to some interviewees, many PC components were smuggled from Hong Kong so that high

tariffs could be avoided.

11. Wang Jici (2002).

12. Interview with an Ericsson R&D manager, 2002.

13. ‘Interview with the behind the scene heroes’, by CCID reporter Yu Mi, CCIDNET, 11 June 2003,

ww.CCIDNET.com.

14. See ‘Agilent to expand operations in China’, People’s Daily Online, 4 January, 2001, http://

english.peopledaily.com.cn/

15. Quotation from Thomas Saponas, Chief Technology Officer of Agilent Laboratories, cited in

‘Agilent Technologies expands its central research facilities in China’, News@Agilent, 4 December

2000, http://www.agilent.com/about/newsroom/presrel/2000/04dec2000a.html.

16. The term ‘Chinese returnees’ refers to those who have PRC citizenship and who have pursued their

higher education in Western countries.

17. The term ‘overseas Chinese’ refers to those who do not hold PRC citizenship. In general, they

were born not in China but in other regions, namely, in Taiwan, Hong Kong, and Southeast

Asia.

18. ‘Transnational technical community’ is a term coined by Saxenian (2003) to explain the cross-border

flow of knowledge by Chinese and Indian technological experts who travel to and fro between Silicon

Valley and their country of origin.

19. Interviews with people in the MNC R&D centres in 2002.

20. I often encountered questions, usually privately, from Chinese technocrats regarding the real

intentions that underlie the R&D centres and that concern the re-exportation to the West of

technology invented in China.

21. Research centres are often small, between 40 and 200 employees, so they create few job opportunities

that, since the manufacturing base’s move south, could strengthen solutions to the resulting

unemployment problem in Beijing. MNC R&D centres creates zero taxes because they are not

intended to be profitable, with a few exception such as software development centre. Most advanced

R&D centres rely on continue R&D investment from their headquarters. The return to R&D

investment, if any, will not be calculated in the account book of the R&D centre. This profit will most

likely be included in the accounting practice of the manufacturing or sales department that is separate

from the R&D centre. In other words, the advanced R&D centre – with their independent

accounting – will not show any taxable profit from the standpoint of Beijing government.

22. Interview of an R&D manager at ZTE – a local communication equipment company with R&D labs

in India.

23. Interview of an R&D manager at BRLC in 2002.

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24. David Lee from Bell Labs Research China, for example, has been appointed as adjunct professor in

Tsinghua and other universities. He actively engages in supervising PhD theses and co-writing papers

with the students.

25. MSR-Asia provides ‘Microsoft fellowships’ to top students from Chinese universities.

26. Interview of a public relations manager at MSR in October 2002.

27. This is based on my interviews of student interns.

28. Directors often consider Indian IT professionals to be more disciplined and more rule-oriented than

their Chinese counterparts.

29. This Chinese approach to technology management is rarely found in the business wings of MNCs,

because MNCs often inherit rigid hierarchical structures tightly controlled by the headquarters in the

home countries.

30. MNCs are often referred to as ‘wolves’ that threaten to dominate the Chinese market. ‘Dancing with

the wolves’ is the dream of local firms to compete with MNCs and to capture a share of the domestic

market.

31. For example, a P&G director, an expatriate from the United States, cited the need to take years to

learn how to communicate with the local engineers without hurting their feelings.

32. MSR-Asia claims that their Beijing labs have made more than 70 key contributions to Microsoft

products. See ‘Microsoft research: Asia establishes advanced technology centre’, 3 November 2003,

http://www.microsoft.com/presspass/press/2003/nov03/11-03MSRBeijingATCPR.mspx.

33. See Zhou and Ton (2003).

34. To avoid confusion, I have to clarify that the PCS sector has two major entities. The PCS R&D

centre in Beijing is the R&D arm that serves the PCS factory in Tianjin.

35. See Bruce Einhorn, ‘Winning in China: can Motorola hang on to its top spot as local rivals come on

strong?’, Business Week Online, 27 January 2003, www.businessweek.com.

36. Models 6188 and 6288 cannot be found in the US market. Only the latest and more mature model,

the A388, went to the US market and the rest of the world.

37. Interview with an ex-engineer who used to work at the PCS centre.

38. It was renamed ‘Accompli’ in China.

39. The Singapore SPS IC design centre creates the Dragonball application processor with Bluetooth

technology, called the Dragonball MX1.

40. Mathews’s (2006a) LLL framework challenges the OLI framework, which fails to explain the

latecomer MNCs from the Asia-Pacific regions, which are the so-called Dragon MNCs. Mathews

argues that the Dragon MNCs do not posses ownership advantage to begin with. However, these

‘resource-poor companies utilise linkage and leverage to expand their operations, exploiting

latecomer advantages such as low labor costs as well as leapfrogging to advanced technologies and

management systems’ (Mathews, 2006b: 154).

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Appendix A

Table A1. Basic Profile of MNC R&D Centres in Beijing

NameLocation,year

Employee/researcher R&D focus

1 Intel ChinaResearch Center

Beijing, 1998 40 Applied research on human–computer interface (HCI),computer architecture, &compiler technology

2 SAP DevelopmentCenter

Beijing, 1998 35 Business software development

3 SUN ChinaEngineeringResearchInstitute

Beijing, 2000 120 Development of softwareproducts; improving thefunctions and characterisationof Sun’s product

4 Motorola GlobalSoftware Group(GSG) R&DCentre

Beijing, 1993 200 Embedded software supportfor other Motorola R&Dcentres; software solutionprovider for clients

5 Motorola PersonalCommunicationSector (PCS)R&D Centre

Beijing, 1997 300 Software, electrical, mechanical,& industrial design of smartphones, updating of GSMcell phones & localisation ofCDMA cell phones

6 Motorola GlobalTelecomSolution Sector(GTSS) ChinaDesign Center

Beijing, 1998 250 System engineering, software/hardware development,product testing & newproduct introduction for cellphone infrastructureproducts

7 Lucent’s Bell LabsResearch China

Beijing, 2000 32 Basic & applied research in thefield of networking,communication software,optical networks, computerscience, & mathematics;joint-research labs with localuniversities

8 Turbolinux Beijing, 2000 80 Linux software for server9 Nokia R&D

CentreBeijing, 1998 300 Applied research on the

Internet & mobilecommunication; cooperationwith universities andinstitutions in establishmentof joint-research labs

10 IBM ResearchLabs

Beijing, 1995 72 Basic & applied research onlanguage processing, speech& handwriting recognition,pervasive computing, mobilecomputing, and e-businesstechnologies & solutions.

(continued)


Table A1. (Continued)

NameLocation,year

Employee/researcher R&D focus

11 Ericsson-CATT Beijing, 1999 45 Research on 3G12 Agilent Labs

ChinaBeijing, 2000 20 Design & modelling of the next

generation of optical andcommunication products

13 Agilent CCO Beijing, 2002 30 Technical support forappliance R&D &manufacturing test solutionsfor the wireless industry

14 MicrosoftResearch Asia

Beijing, 1998 200 Basic research on language &user interface

15 Microsoft R&DCentre

Beijing, 1995 150 Software product localisation

16 Matsushita(Panasonic)R&D Center

Beijing, 2001 100 Experimentation on and designof technology/products inthe electricity & electronicsfields, information &communication fields, &software field

17 NEC R&D Centre Beijing, 2003 30 Basic research18 Samsung SDS Beijing, 2000 100 Software development,

integrated network systems,& management of systemsfor production; networkdigital communication;technology support fore-business

Source: By author.

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Why Do Multinational Corporations Locate Their Advanced R&D Centres in Beijing?

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