Texas Instruments was the first company to set up a global R&D centre in India in 1985. Since then, the world’s leading IT, automotive, electronics, telecommunications, engineering, manufacturing and services firms have steadily followed suit, combining India’s IT strengths with its skills in chemistry, pharmaceuticals, electronics and engineering to innovate paradigm-shifting, ‘intelligent’ products and services that will keep them ahead of competitors. India’s R&D centres are, in particular, now working at the forefront of wireless, embedded software, and chip design technologies globally. They are also beginning to embark on path-breaking research in bio-medicine and bio-informatics.

More than 250 Fortune 500 companies are drawing actively on India-based R&D talent to develop path-breaking new products and technologies – whether through strategic alliances with local research institutions and corporates, contract research by entrepreneurial R&D firms, or dedicated in-house global R&D centres.

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Of these, some 150 Fortune 500 firms now have global R&D centres in India, many of which are generating a growing share of their parent companies’ new proprietary technologies. For instance, Texas Instrument’s ground-breaking single-chip mobile phone technology was developed primarily out of India, and some of Emerson Electric’s new industrial products entirely so. In fact, India now hosts more such centres than traditional R&D hubs, including Japan and Israel. Most noteworthy, though, is that for many multinationals, their India R&D operation is their second-largest after their headquarters.

India’s primary R&D draw is its vast pool of high-quality, English-speaking scientific manpower, with a strong grounding in pure and applied sciences. According to the India CEOs or R&D heads of multinational companies with global R&D centres in the country, Indian scientific talent is world class.

Particularly compelling, they say, is that Indian scientists and researchers have a rare ability to rapidly learn new skills and concepts on the job, and enjoy complex and challenging research assignments. Pharmaceutical companies find India’s large pool of bio-chemistry and, now bio-informatics, graduates a particular advantage, since this mix of training is not widely available overseas.

Talent pool

India’s vast number of trained scientists and engineers also enables scaling up in a manner impossible elsewhere in the world. General Electric, for instance, ramped up its India R&D centre from 300 researchers to more than 3000 in less than five years. Moreover, Indian talent costs just a fraction of similar talent internationally. Indian R&D centres cost just one-fifth of what they would overseas – and even though many have had to import high-end research equipment, costs have been offset by the government’s generous tax breaks and enthusiastic R&D development policy.

However, the land approval process remains protracted, even though R&D centres qualify for concessional rates. Many companies have thus opted to buy land privately at market rates, rather than get caught up in the lure of bureaucratic government schemes.

Ironically, the greatest challenges are talent-related, triggered by the rapid growth of global R&D activity in the country. The intensifying fight for talent is already apparent in the climbing wage rate and attrition levels (now some 10% to 15% a year) in this sector. Particularly vulnerable is high-end electronics and engineering research. Here, a ‘PhD gap’ is developing, as India’s brightest engineering graduates go overseas to study, or join industry as managers, rather than work as researchers. The ‘flight to IT’ is a further aggravation, with senior engineers deserting manufacturing for high-paying management positions in India’s burgeoning globally oriented business process outsourcing (BPO) and information technology-enabled services (ITES) industries.

R&D centres have also had to invest in specialised training for Indian R&D managers and research scientists, who have had limited experience with high-end process engineering and in using IT for sophisticated engineering design and research applications.

However, India’s R&D centres have employed some simple strategies to overcome these problems. The first is to bring high-end, non-resident Indian talent back from overseas, which dramatically shortens the learning curve and minimises the managerial problems stemming from cultural differences and professional expectations. The second is to enter strategic tie-ups with educational institutions so as to develop and prepare a pipeline of talent.

To minimise attrition, R&D centres have begun to conduct careful due diligence on potential employees so as to ensure that they only hire researchers with the best long-term ‘fit’. Biotech companies have found that hiring women – who are less prone to abandon ship – tends to strengthen employee loyalty, stability and bonding, as do insurance programmes that create a sense of fellowship and support to employees in times of personal crisis.

National pride

Most potent, though, is the competitive impetus and corporate glue that comes from ‘India pride’. In other words, when the Indian R&D team perceives itself to be both integral and invaluable to the global company’s worldwide innovative effort, is it most likely to stay put.

While China, too, has now begun to attract significant R&D investments, India’s IT advantage is likely to continue to give it an edge in ‘intelligent’ and embedded-software technologies. Meanwhile, the slow but growing acceptance of private sector involvement in India’s erstwhile government-dominated higher education sector is likely to modernise science education, minimising the need to make heavy investments in developing the necessary research and R&D management skills.

Premila Nazareth Satyanand has worked with the United Nations Centre on Transnational Corporations in New York and the Economist Intelligence Unit in New Delhi. She is currently a consultant with the World Bank, New Delhi.