1. The Rise of Global R&D Embracing global R&D for Innovation Leadership CQDM June 2013 Tomasz Mroczkowski Professor, Kogod School of Business, American University Washington DC

2. The 2005 turning point: during the First decade of the 21 st Century several trends converged: Key emerging economies increase R&D spending and commit to develop knowledge based economies and respect IP. Global R&D investment and offshoring take off New players from EE compete and collaborate Emerging Markets drive growth Open innovation replaces the closed model Location still important

3. The new Realities of Global R&D today …but Flat funding in West Expanded international co-publishing, co- patenting –knowledge explosions New alliances for discovery not just development in EE New innovation clusters and science parks Rise of international science consortia Science become multipolar: US one of several players along EU and Asia New funding sources

4. R&D performed in the United States by U.S. affiliates of foreign companies, by investing region, and R&D performed abroad by foreign affiliates of U.S. multinational corporations, by host region: 1998 and 2008

5. © Copyright Tomasz Mroczkowski5

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7. “Innovation in the West has simply become unaffordable” Kiran Mazumdar-Shaw CEO,Biocon India

8. Year of Adoption of Biotech Strategies and TRIPS by Country © Copyright Tomasz Mroczkowski8

9. Some myths about emerging economy innovation potential It’s a flash in the pan Their science is bad: they will never catch up They should focus on technology absorption and leave innovation to developed nations Their education is based on rote learning not critical thinking Their culture does not support creativity Great location for development but forget about research © Copyright Tomasz Mroczkowski9

10. Top 25 Emerging Economy Universities Academic Ranking of World Universities (ARWU) 2012 UniversityCountryOverall Rank UniversityCountryOverall Rank 1 National Taiwan University Taiwan 113 14 Fudan University China 211 2 National University of Singapore Singapore 114 15 King Saud University Saudi Arabia 212 3 Seoul National University South Korea 116 16 Korea Advanced Institute of Science and Technology South Korea 213 4 National Autonomous University of Mexico Mexico 159 17 Nanjing University China 219 5 Peking University China 163 18 Nanyang Technological University Singapore 220 6 Shanghai Jiao Tong University China 164 19 National Cheng Kung University Taiwan 221 7 The Chinese University of Hong Kong Hong Kong 167 20 National Tsing Hua University Taiwan 222 8 The University of Hong Kong Hong Kong 170 21 State University of Campinas Brazil 234 9 Tsinghua University China 173 22 Sungkyunkwan University South Korea 236 10 University of Buenos Aires Argentina 176 23 The Hong Kong Polytechnic University Hong Kong 239 11 Zhejiang University China 200 24 The Hong Kong University of Science and Technology Hong Kong 240 12 Charles University in Prague Czech Republic 203 25 University of Cape Town South Africa 257 13 City University of Hong Kong Hong Kong 204 Source: Center for World Class Universities, Shanghai Jiao Tong University, http://www.shanghairanking.com/ARWU2012.html

11. Bioindustry Park Distribution in China’s Provinces (Number of Parks) © Copyright Tomasz Mroczkowski11

12. India: Biotech Parks, Operational, Planned and SEZ © Copyright Tomasz Mroczkowski12

13. Gwanggyo Techno Valley © Copyright Tomasz Mroczkowski13

14. Some global best practices by high performing innovators Much more likely to take long term bets to capitalize on growth opportunities, experience matters for success (Novartis) Greater tolerance for risk (Merck) Greater collaboration with outside R&D groups 100% conduct some R&D in emerging economies Maintain strong pro-innovation culture (3M, Sweden, IBM, Samsung) US companies more aggressive than European Overcome resistance to open innovation model

15. © Copyright Tomasz Mroczkowski 15 Sanofi-Aventis Collaborations and M&A with Developed and Emerging Economies

16. Novartis Global Footprint © Copyright Tomasz Mroczkowski16

17. New Players from Asia Spin-offs from large wealthy conglomerates Diversified players that combine profitable production/services with some R&D Move from fee for service providers to integrated, collaborative strategic partners (eg Syngene)

18. Biocon Integrated Research Strategy © Copyright Tomasz Mroczkowski18

19. Biocon Global Alliance: Research, Co-development © Copyright Tomasz Mroczkowski19

20. Biocon Personnel Profile © Copyright Tomasz Mroczkowski20

21. WuXiAppTec Business Model © Copyright Tomasz Mroczkowski21

22. WuXI AppTec Overview “We are well positioned to capitalize on the global trend of R&D outsourcing by emphasizing our experience, capabilities, quality, responsiveness, protection of customer intellectual property and reliability” Largest contract research organization in China More than 1600 customers, most in the United States, with the top 10 representing 48% of all revenue 6,817 employees, including 4,779 science professionals (55% with Master’s degree or above and 92% based in China)

23. WuXI AppTec Research Facilities

25. © Copyright Tomasz Mroczkowski25 The Innovation Pyramid Consumers Sources of Investment Tech Firms, Entrepreneurs, and Industry State Policies Academic and Scientific Systems

26. Source: Nobelprize.org; Wikipedia, http://en.wikipedia.org/wiki/List_of_Nobel_laureates_by_country © Copyright Tomasz Mroczkowski 26 Germany as a scientific and innovation superpower Physics, Chemistry, Physiology & Medicine Nobel Prize Totals, 1901 - 1932

28. History lessons China, Britain, Germany (1900-1933), America 1945-2005 Colonel Liu Mingfu’s book: “China Dream, Great Power Thinking in the Post American Era” China 2040 THE NEW INNOVATION SUPERPOWER? OTHER OPTIONS: Multipolar world, India+ West? Geopolitics of Innovation will not go away From China… to China by 2040? A brief world history of innovation

29. The Old "Western" Universe of R&D Collaboration © Copyright Tomasz Mroczkowski29

30. The New Expanded Universe of Global R&D © Copyright Tomasz Mroczkowski30

31. Financial Times Press

32. For more information, visit:expandinginnovation.wordpress.com