Transcript R D Transaction Choice by MNCs in China: Empirical Analysis Based on Contracts

R&D transaction choices by MNCs in China:
empirical analysis based on contracts
Zheng Feihu Shi xiaoxiao
Background
• China’s potential for innovation;
• China attracts foreign R&D since 1995;
• Beijing offers location advantages for
research-intensive R&D units since 1999.
A “Paradox”
• A “paradox” in the statistic about the MNCs’ R&D
contract transactions in Beijing during 20012006
• “Paradox”——only 18.15% of the deals is inside
the MNCs under the same ownership, while
most of the contracts are executed between the
parties not having close ownership relationship.
• For the R&D contracts transaction
demanding mutual trust and large deal of
proprietary assets inputs, why not
choosing internalization but putting it to
outside market ( here in after called
outsourcing) ?
Aims of this paper
• what’s the cause of the so-called “paradox”
in R&D contract transaction in Beijing?
• what factors determine the choice of R&D
contract outsourcing in Beijing using the
framework of Williamson’s ” threedimensional hypothesis”?
Descriptive analysis
• R&D activities in Beijing are in superior
levels, and the spillover effect to abroad is
obvious.
• The internalization of R&D transaction in
Beijing is not obvious, but the outsourcing
of R&D contracts is prominent.
Data and Research Method
• Dependent variable—— Outsourcing is
coded as “1” and internalization-oriented
activities Is coded as “0”
• Independent variables—— We design
the factors under the framework of ”
three-dimensional hypothesis”，all factors
are categorized into three dimentions.
• transaction frequency
( the variable includes：
the average dealing amounts of R&D in
the same district in half a year)
• Uncertainty
(the Proxy variables are from the outside
R&D clustering environment, including：
average salary、
ratio of Manufactory industry、
Intellectual Property protection、
Financial disbursement means)
• Assets specificity
( that’s up to MNCs’ features of ownership,
the proxy variables include:)
contracts time-span、
contracts types 、
controlling interests of the R&D units.
• control variables——dummy variable
(IND) to control for industry differences.
those fields with human-orientation(mainly
in fields of software and network
development) is coded as “1”,
other fields with asset-orientation is coded
as “0”.
Table 7. dummy variable for IND
IND
Freq.
Percent
Cum.
0
202
32.79
32.79
1
414
67.21
100
Total
616
100
Methodology
P(ifos)=β1 IND+β2 otheramount+β3
avsalary+β4 secper+β5 intelpro+β6
method+β7 period+β8 contype1+β9
selltype3+β10 secsalary+β11 perfield+ μ
Table 9. Logistic Model Estimates for Formation of
outsourcing-oriented R&D transaction
Notes: ( *,p<10%; **, p<5%; ***, p<1%)
ifos
Coef.
Std. Err.
P>|z|
otheramount
-3.31E-10
4.60E-09
0.943
avsalary
-0.0002765 (***)
0.000096
0.004
secper
-16.95722
11.12798
0.128
intelpro
-0.2900843 (***)
0.094578
0.002
contype
1.449447 (***)
0.313532
0
method
0.6134641 (***)
0.232429
0.008
period
0.0011284 (***)
0.000259
0
selltype3
-0.4822039 (**)
0.21263
0.023
IND
1.156235 (***)
0.420541
0.006
secsalary
0.0009668 (***)
0.000358
0.007
indper
-0.0011648 (***)
0.000286
0
_cons
5.382802
3.754648
0.152
Results and Discussions
• the findings suggest that the two
dimensions of Uncertainty and Assets
Specificity can be used to explained MNCs’
R&D transaction in Beijing.
• But the dimension-transaction frequency,
because of the unfavorable proxy variable,
still can’t be tested.
Results and Discussions
• the variables representing Uncertainty
such as average salary level, IPRP,
financial reimbursement means;
• and the variables representing Assets
Specificity such as contract time-span,
contract types, and controlling
interests in seller’s R&D units are
significantly related to the mode of
outsourcing-oriented transaction.
Solving the “Paradox”
• the combination of two conditions
provides a good explanation for the above
so-called “Paradox”
——necessary condition：the maturity of
outside supplying resource；
——adequate condition：outsourcing
business not conflicting with the
ownership of the MNCs
Some suggestions
• For the local government, focusing on
developing the conditions necessary to
maintain a thriving localized research and
development community
• For the MNCs, enhance the synergy
between their international oriented R&D
and the local oriented R&D activity.
Limitation and future work
• Find a suitable proxy variable for the
transaction frequency
• Better our model with new factors such
as the different contract
features(international oriented/host
oriented) and culture distance.
You are Welcome!