fabrice hatem, afii oecd meeting 16/17th of november, 2006 location of r&d centres in europe : a...

Fabrice Hatem, AFIIOECD Meeting

16/17th of november, 2006

Location of R&D centres in Europe : a new kind of competition between host

countries

© AFII 20052, avenue Vélasquez75008 Paris

Summary

A new kind of market : The location of R&D centres in Europe

The demand side : home countries and industries

The supply side : competition between host countries


Location of business support functions :

a major stake for host territories

The firms’ activity relies on various functions : not only production, but also logistics, R&D, administrative services, etc.

Transnational corporations organise their international network of sites in order to capture the specific advantages of various host regions

This strategy regards all the business functions, which consequently become « internationaly mobile »

There is thus a growing competition between host territories for the location of those functions


The trend to internationalisation of R&D activities creates a « market » for the location

of R&D centers The internationalization of R&D is motivated by three driving

forces : access to scientific ressources (fundamental research), access to technico-industrial skills (development of new products), access to local market (product adaptation)

It can take various shapes : alliances, research contracts and outsourcing, acquisition of foreign companies…

But also greenfield projets for the creation/extension of R&D centers abroad…

.. This resulting in the apparition of a « market » for the location of R&D centers, especially in Europe


A measurement tool : the invest in France agency « European investment observatory »

The traditional FDI statistics are not well adapted to the measurement of greenfield investment projects. Thus, new economic intelligence tools are being developped to measure those projects. Ex : Ernst/Young EIM, IBM/PLI, Locomonitor, AFII observatories

Method : census of mobile international investment projects based on various sources (WEB, press, etc.) « Mobiles » projects are those giving way to a competition between various potential home countries. They are generaly related to the production of an internationaly tradable good or service.

Each project is described by about fifteen parameters (host and home country, industry, job created, amount invested, business function, etc.).

Scope : Europe (+ Mediterannean countries through the Anima/Mipo spillover data base). Data collected since 2002 till.. yesterday.


A interesting market for developped countries despite a relatively limited size

limited size : 5,4 % of projects, 3,9 % of jobs between 2002 and 2005, less than 10 000 jobs per year in Europe

The average size of projects is lower than that of factories

But strong structuring impact on the host country : innovation, hiring of highly qualified manpower, high added value per capita…

The competition of emerging countries is less intense than in manufacturing activities

This market is thus very interesting for developed countries


R&D centers : between 130 and 140 international projects yearly in Europe, sharp

rise in 2005

Number of international projects in R&D centers in Europe, 2002-2005

Source : AFII

0

20

40

60

80

100

120

140

160

180

200

2002 2003 2004 2005

Germanic countries & Sw.

Britannic Islands

France

Southern Europe

Northern Europe

Benelux

Hung, Cz, Poland

Other Eastern Europe


A quantitatively limited market : 5,4 % of projects, 3,9 % of jobs

Source : AFII

Breakdown of projects by function,2002-2005

Breakdown of jobs created by function,2002-2005

31%

5%

2%

8%9%

37%

8% 0%

Repres. Offices

R&D Centers

Call Centers

Logistics

Services to customer

Production

HQ, Internal services

Waste management

1% 4%6%

7%

6%

71%

5% 0%

Repres. Offices

R&D Centers

Call Centers

Logistics

Services to customer

Production

HQ, Internal services

Waste management


Small average size of R&D projects

Source : AFII

Taille moyenne des projets en emplois, 2002-2005Average size of projects by function, 2002-2005

0

50

100

150

200

250

Repres. Off ice R&D Center Total Services HQ andinternal

services

Services tocustomer

Logistics Total Call Centers Production


Main R&D projects in Europe 2002-2005 (more than 300 jobs)

Year Company Jobs Home country Host country Opération Industry

2002STMicroelectronics; Philips ; Motorola 984 U.S. France Creation Electr., Electron. Equipment

2002 Abbott Laboratories 700 U.S. Irland Creation Pharmaceuticals, cosmetics

2005 Samsung Corporation 600 South Korea Poland Extension Software

2003 Faurecia 550 France Germany Creation Automotive

2002 General Electric 520 U.S. Hungary Creation Pharmaceuticals, cosmetics

2004 Siemens 500 Germany Portugal Creation Software

2005 Inverness Medical Innovations 500 U.S. United Kingdom Creation Biotechnologies

2005 Delphi Corp. 500 U.S. Poland Creation Automotive

2005 Motoraola inc . 500 U.S. Germany Extension Electr.components

2005 IBM corp. 500 U.S. Poland Creation Software

2003 Honeywell 400 U.S. Tch. Rep. Creation Other Transport. Mat.

2005 Sun Microsystems Inc. 400 U.S. Tch. Rep. Creation Software

2005 Volkswagen AG 370 Germany Tch. Rep. Extension Automotive

2002 Dow 350 U.S. Switzerland Creation Chemicals & plastics

2005 Tata Consultancy Services 350 India Germany Creation Software

2005 General Motors Corp. 350 U.S. Germany Creation Automotive

2003 GlaxoSmithKline Biologicals 300 U.K. Belgium Extension Pharmaceuticals, cosmetics

Source : AFII


Strong concentration on some industries

Main industries : software, electric and electronic equipements, automotive, health products, electronic components, biotechnologies

Those six industries alone account for more than 75 % of projects and job creation


A high concentration on some industries, for projects…

Source : AFII

Breakdown of projects by industries, 2002-2005

22%

18%

13%13%

8%

5%

4%

3%

2%2%

2%2%2% 4%

Softw ares

Electric & electronic equipement

Pharmaceuticals

Automotive

Electronic components

Biotechnologies

Chemicals & plastics

Agrifood

Machines & mecan. equipments

Other transport equipements

Other services to business

Household electronics

Telecom & Internet operators

Others


… as well as for jobs

Source : AFII

Breakdown of job created in R&D centers in Europe by industry, 2002-2005

23%

21%

17%

15%

6%

4%

3%

3%

2%

2%

4%

Software

Automotive

Pharmaceuticals

Electric & electronic equipement

Electronic components

Other transport equipements

Agrifood

Chemicals & plastics

Biotechnologies

Household electronics

Others


Important share of anglo-saxon firms in R&D projects in Europe

Large share of US and UK companies in projects. Why?

Important role of high tech industries in the home countries (US, UK)

The globalisation of R&D involves locations outside the home continent of the company (Europe for US firms, US for European companies) for fundamental research as well as for adaptation centers

In Europe, no strong need to create adaptation centres in neighbouring countries of the home country of the company

Nevertheless, European companies amount for more than 40 % of international jobs creation in R&D centers in Europe


International investment R&D centers: key-role of north-american investors, followed by west-

europeans, in projects….

International projects in R&D by home region, 2002-2005

Source : AFII

47%

1%6%3%0%3%3%

7%

7%

8%

1%

14%North America

Others

Other Asia

Benelux

Eastern Europe

Northern Europe

Southern Europe

France

Britain Islands

Japan

Océania

Germanic Countries & Sw.


… as well as for jobs

Source : AFII

International jobs in R&D centers by home region, 2002-2005

54%

0%5%

3%0%

3%1%

9%

5%

3%0%

17%

North America

Others

Other Asia

Benelux

Eastern Europe

Northern Europe

Southern Europe

France

Britain Islands

Japan

Océania

Germanic Countries & Sw.


R&D : the breakthrough of east-european countries

Western European countries provide the best scientific clusters (for the attraction of fundamental research centers) and offer large-size markets (for the attraction of adaptation centers)

Their market share thus remain dominant (Germany, UK, France), especially for fundamental R&D centers

But East European countries offer a high-quality manpower at low costs

Their market share thus is quickly increasing, especially for global development centers (Cz. Rep. Poland, Hungary)

The average size of projects in terms of jobs is much larger in eastern- european countries


Host countries : domination of western Europe...

Source : AFII

Job created and international projects in R&D by host region 2002-2005

0%

20%

40%

60%

80%

100%

Projects Jobs

Germanic countries & Sw .

Britannic Islands

France

Southern Europe

Northern Europe

Benelux

Hung, Cz, Poland

Other Eastern Europe


But the market share of east-european countries is increasing

Job created in R&D centers projects in Europe 2002-2005

Source : AFII

0%

20%

40%

60%

80%

100%

2002 2003 2004 2005

West

Est

0%

20%

40%

60%

80%

100%

2002 2003 2004 2005

West

EstProjects in R&D centers in

Europe 2002-2005


The average size of projects is larger in east-european countries

Source : AFII

Average size of projects by host region 2002-2005

0

50

100

150

200

Hung., CZ,Poland

Geman.Countries,

Sw.

Benelux Total SoutherEurope

Brit. Islands France OtherEasternEurope

NorthernEurope


East-european countries are attractive for global development centers

Source : Sachwald, AFII meeting on R&D localization strategies in Europe, oct.2006


Merci pour votre attentionMerci pour votre attentionThank you for your

attention

[email protected]

fabrice hatem, afii oecd meeting 16/17th of november, 2006 location of r&d centres in europe : a...

Documents

host countries

paris rd centers

location of rd centers

avenue vlasquez

europe slide

location of rd centres

developped countries

internationalization