Management of Offshore R&D in China: Cross Country Differences in Motivation and Performance

In this paper, multinationals’ motivations for R&D in China are compared across firms’ home countries. It is found that five types of companies (Europe, Japan, the other Asia, US and THKM owned) can be grouped into two. Europe, Japan and the other Asia for production/ market driven R&D, but the degree of market orientation is stronger for European firms, followed by Japanese and the other Asia. Another group is US and THKM firms for technology/cost driven R&D. It should be noted that THKM firms are inclined toward production oriented R&D as well. We have also investigated the relationship between types of R&D activities and firms’ performances. In general, US firms are more profitable than Japanese ones, but this difference in profitability disappears once it is controlled for R&D type variables. In terms of an association of R&D type variables with profitability, heterogeneous results are obtained by host countries. The degree of linkage with universities and PRIs is significant for US firms, while the degree of R&D linkage with home country is important for European firms. It is also found that firm age is strongly correlated with profitability, while whether a firm is a joint venture with a local company or a wholly owned subsidiary does not make any difference.