WASHINGTON The globalization of high-tech research and development is forcing policy-makers to consider the growing number of strategic alliances between U.S. and foreign companies, according to a new government study.
R&D spending by foreign-owned companies in the United States tripled between 1987 and 1997 to $19.7 billion, or nearly 15 percent of all industry research spending, according to the study released by the Commerce Department's Technology Administration.
"The U.S. experience during the 1990s shows that the overall effect of the globalization of R&D is positive, but globalization also creates new challenges for American policy-makers," said Kelly Carnes, assistant secretary of commerce for technology policy.
One challenge is competing with so-called "low-cost innovators" capable of performing research more efficiently than U.S. competitors. The shift from low-cost production to innovation means the United States must make sustained investments in science and technology while developing ways of quickly integrating new technologies with products, the Commerce Department report found. At the same time, planners must find ways to gain access to global sources of innovation.
While much needs to be done to develop access to foreign technologies, the Clinton administration and Congress both have pledged to increase federal funding for basic research. However, the two sides are far apart on many priorities.
One clear economic benefit of growing overseas research in the United States is increased employment opportunities for U.S. engineers and scientists, Carnes added. According to the report, "Globalizing Industrial Research and Development," foreign-owned companies conducting R&D in the United States employed more than 115,700 workers at the end of 1997.
The study found that at $3.3 billion, Switzerland and Germany ranked first in R&D expenditures in the United States, mostly for biotechnology research. Japan was third with $3.2 billion while the United Kingdom ranked fourth with $3.1 billion. Japan had the largest electronics investment in the United States (see table).
At the end of 1998, foreign companies owned 715 research facilities in the United States. Drug and biotechnology research was the top research area based on the number of foreign-owned labs in the United States, followed by chemicals, software and the automotive arena.
"Foreign corporations still come to the United States to establish R&D facilities because of the size of the U.S. market and, just as important, because it pays to benchmark yourself against the world's best science and technology," the study's authors concluded. "The real question is how to continue to tap into the incredible dynamism of global R&D so that U.S. companies can remain the leaders in building new industries and creating high-wage jobs."
The government report also lists the growing number of U.S. research facilities and design centers overseas. Among them are centers for semiconductor, digital signal processor, software and telecommunications research in China, India, Taiwan and Singapore.
While examining the amount spent by U.S. companies on overseas research, the study confirmed other findings that leading-edge research on core technologies is still performed here. Nearly 90 percent of U.S. research expenditures remain at their facilities here, the study found.