eThesis - School of Business electronic theses

Based on this study, it seems that China has a lot to offer for western telecommunication companies in terms of providing lucrative location for foreign R&D presence. If the challenges relating to the establishment process of the local R&D site are tackled appropriately and the Chinese governmental policies do not radically change from the current situation, then local R&D presence can offer a particular company long term competitive advantage. In addition to cost savings, the extended scope of the global R&D function to China might offer the company as a whole benefits such as increased market share, access to market and technological knowledge, and important strategic contribution of the established R&D site. The former benefits relate closely to attaining a trusted position within the local Chinese relationship network, GuanXi, while the latter benefit relates to the high quality of the local engineers. Along the increasing wage levels, high turnover of the local engineers, problems associated with compliance to intellectual property rights and the risks associated with the uncertainty regarding the future policies of the Chinese government, the western companies operating in China might, however, be facing challenges.

The way in which the establishment process of the R&D site in China is conducted plausibly at least to an extent determines the future role, productivity and competence of the site. If not conducted properly, the site might not increase its R&D contribution as planned and the potential benefits might not be attained. Understanding the effects of the local business environment characteristics to the appropriate management of the establishment process is crucial. This understanding facilitates the execution of the establishment process as appropriate practices and patterns can be followed. An important observation provided by this Master’s Thesis is that such appropriate practices and patterns do exist and thus most of the challenges can be overcome and the site can attain the benefits described.

The main result of this Master’s Thesis is that the establishment process of foreign R&D site to China might be relatively fast. This is facilitated by the high quality of the local workforce. On the other hand, the fast establishment process might be needed to get access to the Chinese relationship networks. Relating to this, it is important that the management is committed to the process and that enough of reciprocal visits is done. Secondly, transferring interesting R&D tasks to the established site is important as they serve as a way to increase the competence of the site and a way for the management at the parent R&D site to discover the capabilities of the established site. Finally, it is important that local Chinese employees are taking part to the establishment process as they are familiar with the local business environment.