Geography Reference
In-Depth Information
11,152, respectively (UNCTAD 2005). Therefore, although amongst the
BRIICS countries China and India appear to be the leading knowledge-
generators, their relative contributions are far smaller than those of other
advanced Asian economies. Meanwhile, the share of global R&D expendi-
ture accounted for by the BRIICS countries combined is only 4 per cent,
of which China accounts for more than half of this percentage (UNCTAD
2005). In contrast, the world's developed economies account for 94.7 per
cent of global R&D expenditure.
As such, there is still a very long way to go for these countries to catch
up with the knowledge base of the developed world. Yet, the outward
flows of FDI by the multinational firms from developed economies will
facilitate, encourage, and enable this process. In particular, MNEs will
play a catalytic role in the knowledge growth of developing and transition
countries as long as there is a positive cumulative causation mechanism
at work between a sufficient local absorption capacity and the types of
FDI increasingly associated with knowledge investments. Indeed, there
is already some evidence that this process of knowledge creation and
transfer is well underway. The share of total domestic business R&D
undertaken in developing countries which is accounted for by the R&D
undertaken by multinational affiliates located in these developing coun-
tries rose from just 2 per cent in 1996 to 17.7 per cent in 2002 (UNCTAD
2005).
Amongst developing regions, it is the economies in South and East
Asia which are the major locations for MNE R&D investment. During
2002‒2004, of the 1773 inward FDI projects involving an R&D com-
ponent, 1095 (62 per cent) were undertaken in developing or transition
economies, of which 861 projects (49 per cent) were located in developing
Asia alone (UNCTAD 2005). In the case of developing Asia, the share
of R&D accounted for by the foreign affiliates of US multinational firms
increased from 3 per cent of their total foreign-located R&D in 1994 to 10
per cent in 2002 (UNCTAD 2005). Similar trends are also observable for
MNEs from other developed economies which are locating R&D-related
investments in Asia.
Within developing Asia itself, it is China in particular which dominates
inflows of multinational R&D investment, and the impact on China of
these inflows has also been the most marked. Between 1998 and 2002,
the share of total domestic business R&D in China accounted for by
foreign affiliates increased from 18 per cent to 22 per cent. The R&D
expenditure associated with this R&D-related inward FDI now accounts
for 13.5 per cent of China's total domestic (public plus private sectors)
R&D expenditure (UNCTAD 2005). To get a sense of how important
these MNE R&D investments are to China, we can observe that the
