Globalization Distributes More of the R&D Wealth
Former Third World countries are assuming major roles in the sourcing and performance of R&D, while offshore outsourcing forces a more even distribution of effort throughout the world.

It’s no secret that R&D spending continues to expand on a global basis. Worldwide spending (and performance) exceeded $1 trillion in 2006 and continues to expand at a substantially higher rate than most countries’ inflation rates. This year’s edition of the Global R&D Report, a collaboration between Battelle, Columbus, Ohio, and R&D Magazine, forecasts that global R&D spending will reach $1,210 billion in 2008, 7.6% higher than in 2007.

Much of this growth continues to be fueled by a rapid expansion of R&D in China, whose spending is expected to grow by nearly 24% in 2008 to $216.8 billion—about 18% of global spending, up from 14% just two years ago.

Outsourcing as a Driver
R&D growth continues in all geographical regions as well, although at less inflated rates than China. Much of the present attention is given to the very significant growth of the offshore R&D outsourcing practices involving activities throughout Asia—in China, India, South Korea, and Singapore. This outsourcing, however, goes back many years. The U.S. Dept. of Commerce (DOC) has published reports related to offshore outsourcing by U.S. companies, with the first of these having been published in 1995, with a follow-up report in 1999.

In these reports, extensive accounts were provided relating to the support of R&D, primarily in Western Europe and Japan. They were generally confined to discussions of the work that was performed at facilities that were, for all intents and purposes, subsidiaries of the home (funding) organizations.

While the DOC reports concentrated on such “captive” laboratories, it is well known that additional relationships were developing between U.S. companies and independent R&D performers throughout the world. Efforts were undertaken to test the waters relative to contracting with independent industries and academic institutions in India, including agreements with the National Chemical Laboratories in Puna and with software firms—both large and small—in Bombay, Bangalore, Hyderabad, and other cities. ...

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A joint effort of Battelle and R&D Magazine, the 3rd annual report is an in-depth analyses of global trends in government and industrial research and development.

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CEO’s Message: R&D International
Welcome to the third edition of the Global R&D Report updated for 2008.

The long-standing alliance between Battelle and R&D Magazine has produced annual in-depth analyses of domestic trends in federal government and industrial research and development. Three years ago we began viewing similar data through an international lens.

Since then a discernable pattern has emerged and is gaining momentum: World-wide R&D activities will no longer be focused in the traditional centers of North America, Europe, and Japan. R&D in the future will grow and prosper around the globe, and Battelle is well positioned to continue as an influential participant.

Battelle has maintained an international science and technology presence in world business centers for decades, including Geneva (since the early 1950s), Mexico City (1998), the United Kingdom (2000), and Rome (2005). Battelle has also enjoyed a nearly 40-year collaboration with the Mitsubishi Corporation in Japan, and we helped establish the Korea Institute of Science and Technology (KIST) in 1966. Both of those relationships are poised for growth through the opening of Battelle offices in Tokyo and Seoul last year. Battelle, in other words, is no stranger to the world’s R&D stage.

The script directing the action on that stage, however, is undergoing significant revision. To ensure our long-term growth and success, Battelle plans to leverage its comparative advantage with a measured, strategic approach to the international R&D marketplace.

Toward that end, we are recalibrating our operational elements into three primary functions: Global Laboratory Operations, Global Businesses, and Battelle Ventures.

• Global Laboratory Operations – We will continue to manage laboratories and major science and technology programs with a renewed emphasis on adding value for our customers. These include our own private labs and the six national labs we manage or co-manage for the U.S. Department of Energy: Pacific Northwest National Laboratory, Oak Ridge National Laboratory, Brookhaven National Laboratory, Idaho National Laboratory, National Renewable Energy Laboratory, and Lawrence Livermore National Laboratory (contract begins October 2007). Battelle also manages the National Biodefense Analysis and Countermeasures Center for the Department of Homeland Security.

• Global Businesses – We will continue integrating science and technology and intellectual property into solutions for our customers through three distinct global businesses in the areas of Energy Science and Technology, Health and Life Sciences, and National Security and Defense.

• Battelle Ventures – We have increased the capital available to help create even more spin-out products and companies for our clients through the licensing of intellectual property, product co-development or value-sharing, joint ventures, and seed or early-stage funding.

These refinements take into account the increasingly global nature of research and development; they will also enable Battelle to acquire additional know-how, access an even broader range of intellectual property and, in turn, elevate our ability to serve clients and communities around the world. We’ll be able to do more of what we do best – helping the world solve significant problems, target and deliver on opportunities, and build on our tradition of innovation and global R&D leadership.

Carl F. Kohrt
President and CEO, Battelle

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