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In Brazil, do as the Brazilians do

Investments by transnational companies in ReD outstrip the national average

LaurabeatrizThe percentage of investments of companies in technological innovation is one of the indicators generally used to evaluate the prospects of economic growth of a country. In Brazil, the investments in Research and Development (ReD) in 1996 accounted for 0.8% of the Gross Domestic Product (GDP) according to statistics from the World Bank (Bird). In 1998, the resources destined towards innovation, in the accounts of the National Association of Research and Development of Industrial Companies (Anpei), represented 1.3% of the revenues of national foreign companies installed in the country.

Some transnational companies installed in Brazil appear to be going contrary to this tendency, dissipating the myth that they concentrate their research activities in their country of origin and do not develop innovation in the destination countries. A survey conducted by the Brazilian Society for the Study of Transnational Companies and of Economic Globalization (Sobeet in Portuguese acronym) has discovered that the Brazilian subsidiaries invest, on average, 3.7% of their income in ReD and in technological training, understood here as support activities, support and technology acquisition and of non-routine engineering. It is worthwhile registering that in Japan and the United States, the percentage of investments in innovation of the transnational companies is 4.8% of their income, and in Germany 3.9%.

“The transnational companies work in dynamic and highly competitive sectors. They are motivated to maintain a large volume of investment in innovation, which is a way of keeping the leadership in the market and of coming out ahead of their competitors”, explains Antônio Correia de Lacerda, the president of Sobeet. Furthermore, he completes, these companies have a tradition in this type of investment in their country of origin. “Or that is to say, innovation is part of their culture”, sums up president Lacerda. “In this manner, the creation of centers of competence in Brazil has given an impulse to these investments in innovation.”

Of the 500 largest global companies, 405 are operating in Brazil. The survey by Sobeet, named Technological Behavior of Transnational Companies Operating in Brazil, consulted 85 of them, with the objective of analyzing their innovative profile, measuring the amount of resources destined towards innovation and evaluating their competition strategies. It was concluded that in 1998, in a general manner, the transnational companies spent on average US$ 12.5 million on activities related to ReD always using their own resources. These values are equivalent to 1.9% of their income, less than the figures spent between 1995-1997, due the shrinking of the Brazilian economy. The majority of the companies, nonetheless, intend to increase over the next few years their investments until they reach the mark of 2.3% of their revenues.

During the same time period analyzed, the transnationals increased their investment in technological training, from 1.7% over their sales income to 2.2%. However, their future plans do not foresee a further expansion of the resources destined to training, a task which is being more and more often concentrated at their headquarters. Among the transnational companies considered to be innovators, the average investment in ReD hit 2.1% of their income, during the same period, and the resources destined to technological training was 1.6%, making a total of 3.7% of investment in innovation. Among the megagiants the expenditure is even greater, reaching 4.6% of their gross sales. In the case of the German, North American and French based companies, along with the machinery, equipment and electronics industry, expenditure on innovation can be as high as 6.9%.

The survey, coordinated by Rene Roxo Matesco, a director of Sobeet, came to the conclusion that the investments in innovation vary according to the size of the company and sector. Companies in the chemical sector, for example, are relatively low on innovation, investing something around about 1.7% of their income, according to the Sobeet survey. In general, the activities of ReD are concentrated at their headquarters.

Basic research
Among the transnationals, experimental development is the main activity of ReD, absorbing almost 68% of the total resources set aside for this sector. Basic research on average accounts for 8.5% of the total expenditure. The American and Japanese companies are those who have a comparatively higher investment in basic research, something around 14% of the total invested in ReD. To have an idea of what these values represent, it is worth remembering that in the United States the average expenditure of innovative companies on basic research is some 8%. The vast majority of companies (87%) carry out their own ReD activities.

Among the megagiants, the percentage of those that outsource these activities is comparatively higher, and is generally done by universities and technology institutes. For example, the German company Siemens, through its Technology Administration Center, maintains agreements of cooperation with universities and institutes. Between January of 1994 and September of last year, the company invested R$ 98 million in ReD, under the Information Technology Law, by way of agreements with the Catholic Pontifical Universities of Paraná and do Rio de Janeiro, Mackenzie University, the Federal Universities of Santa Catarina and Rio Grande do Sul, (Uniemp), among others.

“Some of these institutions that have laboratories that carry out complex engineering tasks have had their infrastructure financed through Siemens”, reports Sergio Bruel, the Technology Administration manager of the company. For the vast majority of the companies (75%), the decision to invest is defined jointly with the headquarters abroad and is intimately related to the strategy of increasing the participation of the company in the national market, to reduce production costs (85%), to improve the quality of the product (82%) and in search of new markets (69%).