(Bloomberg Businessweek) -- A rising tide of economic nationalism may soon complicate the efforts of multinational companies to run global research and development networks, says a new study by Strategy&, the strategic consulting business of PricewaterhouseCoopers.
Research and development operations in the United States stand to be hurt the most by conflict because many of them are run by foreign companies that could either choose to—or be forced to—go home if economic nationalism rises, according to a survey of R&D chiefs by Strategy&. Making matters worse, many of the researchers working in the U.S. are foreign nationals. The United Kingdom ranks second for vulnerability in the survey. China places third.
Although China depends even more heavily than the U.S. on R&D by foreign companies, a larger part of the work inside China is conducted by Chinese citizens, Barry Jaruzelski, a co-author of the study, tells us in an interview. A quarter of survey respondents thought China would actually benefit from a rise in economic nationalism. If the U.S. and other countries were to become less welcoming, “China could be a beneficiary of increased innovation flows from companies based in Australia, Canada, or Europe, or even those in the United States and the United Kingdom,” the Oct. 24 study said.
One scenario is that companies could be forced to chop up their R&D programs, placing chunks of the work in many different countries to keep governments happy. “We’ve seen a similar type of autonomous model before,” the study said, citing Lockheed Martin Corp.’s F-35 Joint Strike Fighter and Boeing Co.’s 787 Dreamliner. Both were developed in long-term agreements with networks of partner countries and companies. Such an approach boosts sales in the various host countries while spreading risks. “But these arrangements also entailed complex program management challenges and significant transfers of technology,” the authors noted.The study includes a quotation from Robert Pagano, chief executive officer of Watts Water Technologies Inc., a U.S. company that makes plumbing and heating products. “Restrictions on visas, restrictions on talent movement, how easy it is to share technology and knowledge—none of these were issues we were talking about before our 2016 strategy review, and now they’re on our radar screen,” he is quoted as saying.
Strategy& was formed in 2014 when PwC acquired Booz & Co., a strategy consultant.
To contact the columnist of this story: Peter Coy in New York at pcoy3@bloomberg.net.
To contact the editor responsible for this story: Eric Gelman at egelman3@bloomberg.net.
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