Innovate or perish: The role of multinationals in local R&D

Innovation is at the heart of competitiveness and multinationals wield significant R&D investment power. A Spanish study sets measure for boosting innovation.

A number of cutting-edge research projects led by foreign multinationals are based in Spain. There's Hewlett-Packard's global 3-D printing tech center in Catalonia, ThyssenKrupp's cable-less elevator project in Asturias, and Ericsson's research into its network design and optimization in Andalusia, for example.

Companies like these are highly desirable: they provide some 35 percent of private R&D investment in Spain, help create quality jobs and facilitate links to international research, development and innovation (RDI) networks. Governments should create the conditions to attract large corporations, and a new study by IESE's Pascual Berrone and María Luisa Blázquez provides pointers on how.

Analyzing three phases of innovation

Produced by IESE's International Center for Competitiveness and the Fundación I+E (a nonprofit group of multinationals promoting innovation in Spain), the report breaks innovation down into three phases: 1) provisioning resources (inputs), 2) facilitating efficiency, and 3) achieving results (outputs). It then looks in-depth at Spain's strengths and weaknesses in a detailed "360-degree analysis."

Spain plays well to its advantages: It boasts many well-trained scientists and engineers; a high volume of broadband subscriptions; exports of mid-range and state-of-the-art tech products; and substantial sales deriving from product innovation.

However, the authors warn of a clear disadvantage compared to some other western European countries, the United States and Japan: Spain lost its grip on innovation between 2008 and 2015, and its current innovation status doesn't match what would be expected from a nation with its GDP per capita.

The road to innovation

Identifying the R&D shortcomings that put Spain on the same rung as Italy, Portugal and Greece, the authors then outline a series of measures to address them. To turn around, government agencies and the private sector must work together to contribute to an innovation process that works:

• Increase public R&D investment to 0.7 percent of GDP, in line with the European average.

• Provide the regulations, fiscal conditions and infrastructure needed to attract more R&D investment from the private sector. Ireland is an attractive role model: its tax system has meant that 71 percent of innovation investment comes from foreign multinationals.

• Guide foreign investment toward the most innovative sectors. For Spain, the key industries are motor vehicles, consulting, aircraft construction, shipbuilding, R&D and IT.

• Improve the caliber of science and math education. The Japanese model provides interesting lessons. It takes a practical focus and runs its education system as a meritocracy. What's more, future researchers are supported to improve their résumés and the culture reveres teachers.

• Raise the level of science infrastructure in line with the Finnish example. The Nordic country has a system for assessing how effective innovation is and rating the institutions working in this field. Finland also boasts an extensive network of government-run research centers.

• Avoid over-regulation, streamline procedures and safeguard protection of intellectual property. When compared to the OECD average, it's clear that Spain lags behind and even actively stifles private R&D investment.

• Foster collaboration in innovation. Technology hubs need adequate resources and more specialization: research should be geared toward what businesses actually need and involve more foreign researchers and scientific exchange. Switzerland is the leading country here. It plugs 3 percent of its GDP into R&D investment, and, thanks to various federal measures, is a leader in producing patents and generating income.

Methodology, very briefly

Incorporating reports from the World Economic Forum, the World Bank and the European Commission, this study provides a "360-degree analysis" into Spain's strengths and weaknesses in terms of innovation. The study also provides an analysis of the country's most innovative sectors, its top-performing local regions, and looks to role models from abroad.

See also, "Shutting the doors to foreign trade and investment? At what cost?" for more on the WEF's Global Competitiveness Report 2016-2017, with IESE contributing data for Spain.