Tue, 05/19/2009 - 02:48 By Sabine Vollmer

Offshoring R&D

Posted in IASP 2009

Anybody who believes jobs in research and development are safe from going to countries with low labor costs, should read Robert Atkinson's testimony before a congressional subcommittee on technology and innovation.

Atkinson, president of the Information Technology & Innovation Foundation, a Washington, D.C., think tank, told members of the subcommittee about 18 months ago that the U.S. is losing more R&D jobs to competition abroad than it is gaining.

I came across the testimony transcript while researching key speakers at the International Association of Science Parks conference that starts June 1 in Raleigh. Atkinson, who has been affiliated with the Brookings Institution and was a Clinton appointee to a commission that looked at information technology's effects on workers and communities, will address how research parks like Research Triangle Park, one of North Carolina's economic engines, can summon their strengths to keep innovation and jobs at home.

That's important for the Triangle for several reasons: About 700,000 jobs in the Triangle alone are R&D-related. State government is spending millions of dollars every year to boost the area's biotech and pharmaceutical industry, which five years ago became an economic development priority. And while U.S. companies may benefit from moving R&D jobs to India, China or Russia - a business strategy known as offshoring - it won't benefit the Triangle much, because RTP is home to so few corporate headquarters.

Atkinson backed his offshoring claims with plenty of statistics. Here are the most striking numbers he cited:

  • From 1998 to 2003, U.S. majority-owned affiliates increased their R&D investments overseas by 52 percent. Total corporate R&D investment by U.S. and foreign firms in the U.S. rose 26 percent during the same time period.
  • From 1999 to 2003, corporate R&D investments as a share of gross domestic product  fell 7 percent in the U.S. It grew by 3 percent in Europe, by 9 percent in Japan and even faster in China and India.
  • From 2005 to 2007, R&D investments rose 4.9 percent in the U.S. and 8.7 percent in the rest of the world.
  • A survey by the Industrial Research Institute, a leading professional organization for corporate R&D managers, found that 52 percent of respondents reported that offshoring R&D led to reductions in U.S. R&D spending or staff. The survey was published in 2006.
  • R&D salaries in China are one-sixth of those in the U.S. An electric circuit engineer with a master's degree and five years experience earns an average $18,000 in India, compared to $84,000 in the U.S., and the Indian engineer works 450 hours more per year than his or her American colleague.
  • Incentives may be more attractive outside the U.S., whose R&D tax reductions ranked the 17th most generous in 2004.

Tags: Atkinson, innovation, offshoring, rtp

Comments

Post new comment

The content of this field is kept private and will not be shown publicly.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <small> <sup> <sub> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd> <h2> <h3> <h4> <img> <br> <br /> <p> <div> <span> <b> <i>

More information about formatting options