Asia has become the top destination for corporate R&D spend this year mainly due to robust growth in countries like India and China, according to a study.
Asia accounted for 35 per cent of total in-region R&D, including both domestic and imported, said the 2015 Global Innovation 1000 Study from Strategy &, PwC’s Strategy Consulting Business, which examined the R&D footprint of 207 of the world’s largest corporate R&D spenders.
“Considering the global trend of companies taking their R&D spend closer to key growth markets, it is not surprising to see that Asia has taken the lead as the top destination for corporate R&D,” said Per-Ola Karlsson, Partner with Strategy &, formerly Booz & Company.
Asia is ahead of North America and Europe, who dropped to third position, in a complete reversal from 2007 when Europe was the leader.
Robust growth in China and India drove Asia’s growth, recording increases of 79 per cent and 116 per cent, between 2007 and 2015, in imported spend, respectively, as more R&D moves into these regions mainly from the US, it said.
Results found that China in particular has become the most popular destination, with 71 per cent of R&D professional survey respondents indicating that the most important reason for moving R&D to China is proximity to high-growth markets.
The other benefits that respondents stated of moving R&D functions to China include ‘proximity to key manufacturing sites’, ‘proximity to key suppliers’and ‘lower development costs’.
According to this year’s results, the US remains the largest spender of in-country corporate R&D, with in-country (domestic & imported) R&D spend at USD 145 billion in 2015, up 34 per cent since 2007.
“While the US lead may be tapering, it still remains the biggest global market and despite the high cost of labor, it offers a more agile and sophisticated workforce,” Karlsson said.
“As such, companies look at the US as a desirable market with a capable workforce, an innovative culture and a more flexible business environment that cultivates top talent, all of which are conducive to R&D functions,” Karlsson added.
The study finds that Europe’s fall to the third largest region for corporate R&D spend is a result of low growth in domestic and imported R&D, coupled with a substantial rise in exported R&D – particularly from France and Germany.
Comparatively, Europe’s domestic R&D spend growth has risen just 2 per cent between 2007 and 2015, compared to gains of 40 per cent in North America and 60 per cent in Asia.