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Another study on the internationalization of US-Japanese MNCs has brought out two very striking observations, which are quite opposed to the traditional view. Up until now it was believed that the R&D component of an MNC could be lured to a new location through tax and non-tax incentives, but that seems to be no longer the case. In fact, the responses of different companies, and collected scholarly works about this subject clearly establish a link between research and marketability. This implies that an MNC would only locate its R&D facilities in a economy, or region, where they are likely to manufacture and market their researched product; in the absence of such a possibility the MNCs are not likely to invest in R&D alone.
The second important finding deals with the importance of tax incentives. Until recently all governments believed tax breaks to be a major selling strategy for inviting R&D involvement of MNCs, but that doesn’t seem to be the case. The study reveals that most companies are not quite concerned with the tax breaks—as the research operation is usually small and easier to sustain compared to manufacturing—but are attracted to a economy and region where they can find capable researchers, and good universities. Thus, in this case, it can be said that besides the taxes, the technological know-how of the host economy, and its intellectual pool of researchers and engineers becomes the major deciding factor.
Traditional government policies for foreign direct investments do not seem very effective in attracting MNCs R&D investments. This is partly because MNCs can achieve one of their goal—i.e., to scan local technologies and markets—simply by forming technical alliances, such as collaborative joint research projects with local universities, or cross-licensing with local firms.
The need for geographically distributed, multi-function, and multi-cultural teams arises from many of the pressures faced by modern industry. Globalization of markets and competitive pressures have forced industry to reduce time-to-market cycles, while at the same time increased the difficulties of coordinating activities across widespread operations. The engineering design process is one area where product development time can be reduced. Concurrent engineering, where different functions in engineering design and manufacturing are worked on simultaneously, rather than sequentially, is one approach firms use to reduce product development time. Yet, people with different functional specialties are often found in different locations, making coordination dependent upon electronic communications. Moreover, with the increasing internationalization of firms, effective coordination among distributed teams, even those from within the same specialization, becomes an even greater necessity. Such cross-locational teams can be separated by large distances with extreme time zone differences. Moreover, the different styles of communication, work, and project management across cultures hinders group efforts to coordinate activities and work effectively as a team. Although many new communication technologies have reduced the overall costs for information sharing, it is not clear whether they can yet serve as a viable substitute for co-location of engineering teams.