Recruiting in China

COLUMBUS, Ohio, Sept. 29 /PRNewswire-FirstCall/ -- Global competition, once defined by the Cold War arms race, has evolved into a "head and brains race" where nations measure success through the development and application of technology.

That was one of the conclusions from a Battelle-R&D Magazine report on international research and development trends. The report frames international competition as evolving from the arms race to a "hands race" based on lower-cost manual labor and now to the head and brains race driving the current escalation of R&D spending.

"It is tempting, and certainly reasonable, to acknowledge the fact that each of these races has involved a reliable adversary," says Dr. Jules Duga, senior research scientist at Battelle and co-author of the report. "These adversaries continue to present challenges to the United States that can be met and conquered or accommodated only by long-term strategic investment and will."

While the U.S. remains the standard-bearer in terms of worldwide R&D, China is emerging as an R&D giant. That trend will continue, the report projects.

The U.S. is responsible for 32.4 percent of global R&D this year, compared to 13.4 percent for China. Those numbers were first and second, respectively, worldwide but represent a decline for the U.S. and an increase for China. The same trend will continue in 2007, according to the report, when the U.S. will be responsible for 31.9 percent of global R&D and China 14.8 percent.

"There still is a considerable gap," says Duga, "but it's closing."

With China leading the way, Asia continues to seize more and more of the international R&D market. Asia's share of global R&D grew from 34.9 percent in 2005 to 35.6 percent this year and should continue to grow to a projected 36.5 percent in 2007, according to the report. The U.S., over the same period, has declined from 32.7 percent to 32.4 percent this year and is projected to dip to 31.9 percent next year.

Changes in government attitudes, direct government investments, liberalization of their economies, and an increased emphasis on developing a highly educated, technology-oriented population are some of the factors leading to the R&D growth in Asia. These also are reasons why industry from all over the world is changing the way it develops relationships with the R&D communities from these burgeoning countries. The first steps could be characterized as casual, "testing-the-waters" interactions that included preliminary contract research arrangements. These quickly have evolved into major investments in institution-building, the creation of subsidiary operations, and the development of a wide range of joint ventures.

"It is apparent that the modifications in the internal policies of East and South Asia, in particular, have had and will continue to have an influence on the amounts and patterns of R&D performance in the U.S. and other nations," says Tim Studt, editor of R&D Magazine and Duga's co-author on the report.

Outsourcing of R&D has been a growing trend and will continue to grow as long as the cost of doing business makes sense for U.S. companies, concludes the report. The lower costs in most areas, especially China and India, enhance the competitive position as compared to other (usually domestic) resources and lead to measures of higher productivity. When other advantages, such as enhanced global R&D infrastructure and improved support for other global operations, are considered, the value of outsourcing becomes apparent, says Duga.

"Host countries like China and India have come well down the road in terms of providing a technology-friendly environment," Duga says.

Battelle has prepared a report on U.S. R&D funding annually for more than 40 years, including the last 12 in partnership with R&D Magazine. Duga has co-authored that forecast for 27 years. This is Battelle's second comprehensive report on international R&D spending.

The full report is included in the September issue of R&D Magazine. Reprints are available by contacting Battelle's Jean Hayward at (614) 424-7039 or at haywardj@battelle.org.

Battelle is a global leader in science and technology. Headquartered in Columbus, Ohio, it develops and commercializes technology and manages laboratories for customers. Battelle, with the national labs it manages or co- manages, oversees 20,000 staff members and conducts $3.4 billion in annual research and development. Battelle innovations have included the development of the office copier machine (Xerox); pioneering work on compact disc technology; fiber optics for telecommunications; development of new medical products to fight diabetes, cancer and heart disease; breakthroughs in environmental waste treatment; homeland security technologies; and advancements in transportation safety and security.