Course Assignment Article and a Company Case Study - Article: the Drivers of Foreign Direct Investment Into Research and Development: an Empirical Investigation

COURSE ASSIGNMENT ARTICLE AND A COMPANY CASE STUDY - ARTICLE: THE DRIVERS OF FOREIGN DIRECT INVESTMENT INTO RESEARCH AND DEVELOPMENT: AN EMPIRICAL INVESTIGATION

CASE COMPANY: NOKIA

Vesa Renfors Radoslav Todorov

Research and Development in Multinationals Professor Michele Cincera

Solvay Business School – Université Libre de Bruxelles March 5, 2008 R&D IN MULTINATIONALS COURSE GROUP ASSIGNMENT Vesa Renfors and Radoslav Todorov

TABLE OF CONTENTS

INTRODUCTION ...... 1

THE ARTICLE ...... 1

I INTRODUCTION TO THE RESEARCH ...... 1 II HOME‐BASE EXPLOITING AND HOME‐BASE‐AUGMENTING FDI IN R&D ...... 2 III DATA AND MODEL ...... 4 IV RESULTS ...... 6 V CONCLUSION ...... 6

THE CASE ...... 7

INTRODUCTION TO NOKIA ...... 7 R&D FACTS AND FIGURES ...... 8 RESEARCH CENTERS ...... 8 ALLIANCE NETWORK ...... 10 VENTURING ...... 11 PATENTS AND IPR ...... 12 R&D STRATEGY ...... 12

ARTICLE ARGUMENTS FOR COMPARISON ...... 15

COMPARISON OF ARGUMENTS ...... 16

I. INCREASINGLY SOPHISTICATED DEMAND ...... 16 II. SPILLOVERS IN CONGLOMERATION AND CLUSTERING ...... 16 III. ADDITIONAL EXTERNALITIES ...... 16 IV. EXTERNALITY INFRASTRUCTURE ...... 17 V. EXISTENCE OF CORE R&D NEAR HQ ...... 17 VI. HBE’S AND/OR HBA’S ...... 17 VII. REASONS FOR DISTANCE ...... 17

CONCLUSION ...... 17

SOURCES ...... 19

APPENDICES ...... 21

APPENDIX I: NOKIA RESEARCH CENTERS ...... 21 Locations and Research organization ...... 21 Nokia Core Technology Centers ...... 23 Nokia Beta Labs ...... 29 Nokia Innovation Center Tampere ...... 29 APPENDIX II: NATIONAL TECHNOLOGICAL AND INDUSTRIAL ZONES IN GERMANY, CHINA, AND FINLAND ...... 30 High Tech Industrial Zones in Germany ...... 30 Industrial and Technology Zones in China ...... 31 Science Parks in Finland ...... 31 APPENDIX III: STATISTICAL DATA ...... 32 Tertiary attainment for age group 25‐64 ...... 32 Global Competitiveness and IT Readiness Index ...... 32

R&D IN MULTINATIONALS ARTICLE AND CASE REPORT Renfors, Todorov

INTRODUCTION

The nature of this report is to give a brief summary of an assigned article, a case company, and finally compare the arguments of the former to the latter. The layout of the report is also structured in the same manner.

THE ARTICLE

The name of the reviewed article is “The Drivers of Foreign Direct Investment into Research and Development: An Empirical Investigation”. It is written by Walter Kuemmerle in the JOURNAL OF 1 INTERNATIONAL BUSINESS STUDIES of Harvard Business School. The paper examines the determinants of foreign direct investment (FDI) in research and development laboratories by 32 multinational companies in the pharmaceutical and electronics industries. Results from an econometric analysis of 136 laboratory investments show that relative market size and relative strength of country’s science base determine whether FDI in research and development (R&D) is carried out in order to exploit existing firm‐specific advantages (FSA’s), or in order to build new FSA’s. According to the author, this holds true in similar form for Japanese, European and US firms and across the two industries.

I INTRODUCTION TO THE RESEARCH

Foreign direct investment (FDI) in research and development (R&D) is not a new phenomenon. It has been found2 that since 1930’s the largest European and US firms have carried about 7 per cent of their total R&D abroad, and since the WWII this figure has been rising steadily. The increasing presence of foreign firms R&D sites has left domestic firms concerned about the effects of these investments on inter‐firm competition. Furthermore, it has left governments concerned about the welfare effects of FDI in R&D on the host nations3. The paper by the author makes use of a database that was built up through a systematic survey of laboratory investments carried out by 32 of the world’s largest pharmaceutical and electronics firms4. The database comprises detailed evidence regarding motives and locations of

1 31, 1 (First Quarter 1999): 1-24. 2 Cantwell 1995 3 OECD 1996 and the US Government 1992 4 Kuemmerle 1999

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FDI in R&D. The database, in combination with macro‐economic data on source countries and target countries of investments, permits an innovative look at FDI in R&D. The paper examines the forces that drive firms’ decisions for locating R&D sites in foreign countries. Specifically, the paper develops a separated set of motives for FDI in R&D, namely, that firms invest in R&D sites abroad either to augment1 a firm’s existing stock of knowledge, or to exploit this stock of knowledge within the firm’s boundaries. Section II develops the set of motives. Section III examines potential stimuli for laboratory investments abroad and proposes an empirical test. Section IV presents and discusses empirical results. Section V concludes, suggesting some implications for managers and public policy makers.

II HOME‐BASE EXPLOITING AND HOME‐BASE‐AUGMENTING FDI IN R&D

Once a firm realizes it has a capability that could be used to satisfy demand in a foreign country, it will evaluate different options for exploiting this capability2. Firms will generally face a decision between setting up its own subsidiary in the foreign country or contracting out the activity in question. Rivoli and Salorio3 show that the decision between FDI and contractual agreements to exploit firm‐specific capabilities should evaluate not only the direct benefits of FDI, but also the option value of deferring an FDI commitment under conditions of high uncertainty. Several researchers have described the importance of FDI in R&D for exploiting firm‐specific capabilities in foreign environments4. They argue that as local demand grows increasingly sophisticated, local R&D facilities are useful in helping a firm to adapt existing products better to local needs. As firms establish manufacturing facilities abroad and assign increasingly complex products to them, R&D sites in close proximity to factories are necessary. These sites support the transfer of knowledge and prototypes from the firm’s home location to actual manufacturing. The importance of co‐locating some firm R&D efforts with manufacturing operations and local demand has been described not only in the international business literature, but also in industrial geography5 and technology management literature6. In contrast to the capability‐exploiting motive for FDI and R&D, a number of researchers have pointed out more recently that particularly in the case of R&D, the main driver for FDI might be a

1 to make (something already developed or well under way) greater, as in size, extent, or quantity (www.thefreedictionary.com/augment) 2 Dunning 1958 and 1995, and Hymer 1976 3 1996 4 Bartlett and Ghoshal 1990, Hakanson 1990, and Vernon 1966 5 Fors 1997 and Howells 1990a and 1990b 6 Clark and Fujimoto 1991, Hayes and Wheel-wright 1988, Nonaka and Takeuchi 1995, and Hippel 1998

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firm’s need to augment its knowledge base1. Wesson2 has made a similar argument for FDI in general. These researchers argue that specific nations and specific regions within them might be particularly advantageous locations for R&D facilities because of potential spillovers from existing and productive R&D organizations. Additional externalities that make a country attractive for FDI in R&D are created by supporting industries offering these inputs, such as firms that provide laboratory equipment, maintenance firms or specialized laboratory testing services. A number of researchers have studied the relationship between growth of geographical agglomerations (clusters) of firms and the competitive position of nations3. These researchers found that differences in the character and size of national innovations systems (higher education, public funding, intellectual property laws, and venture capital structures) shape the nature of externalities within a cluster. As a result, nations differ in their attractiveness for FDI in R&D. A firm’s geographical expansion of R&D sites generally originates from a base location in which product strategies and core technologies are developed and updated. This central R&D location is generally close to the firm’s headquarters, divisional headquarters, or “home base”. It is important to note that the distinction between home‐base‐exploiting (HBE) and home‐ base‐augmenting (HBA) FDI in R&D is strictly instrumental for the larger purpose of understanding how firms make their decisions for locating knowledge production sites, and for transferring knowledge within the firm’s boundaries. It is prima facie efficient to carry out both types of activities at the same time and in the same place, since intensive information must be exchanged between HBE and HBA activities. For both types of R&D activities to be carried out in geographically separate overseas locations, one of two conditions must hold. Either scope diseconomies exist between the two types of laboratories, or the two types of laboratories are subject to strongly different locational pulls. The paper examined whether the two types of laboratories were subject to different locational pulls. One can hypothesize that different characteristics of a country would induce a firm to establish either an HBA or an HBE laboratory. HBE laboratories will be more probable if a foreign country which offers important market opportunities that the foreign firm seeks to convert into high profits. Such market opportunities justify the high, fixed up‐front investments and operating expenses of a laboratory site that adapts products to local demand. HBA laboratories, however, will be more probable if the size of a country’s knowledge base is large and the quality of this knowledge base is high. Firms who seek to augment their home base are looking for a large pool of

1 Cantwell 1989, Florida 1997, Howells 1990b, Kogut and Chang 1991, and Pugel, Kragas and Kimura 1996 2 1993 3 Krugman 1991, Porter 1990, and Scherer 1992

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qualified engineers and scientists from which they can select the most suited to the firm’s needs. At the same time, firms seek to tap into knowledge pools of very high quality, since the ideas that the firm hopes to generate and capture through HBA investments are intended to provide the foundation for the long‐term future profitability of the whole firm.

III DATA AND MODEL

To understand the global dispersion of R&D activities, data was collected on all locations at which 32 pharmaceutical and electronics companies carried out R&D activities, mainly in the United States, Japan, Germany, France, and the Netherlands. These who industries were chosen because a number of independent surveys identified them as the most active in FDI in R&D1, followed by the chemical, vehicle and machinery industries. Study was carried out through wholly or partially owned laboratories. The reason the world’s largest firms were chosen, was because it was hypothesised that large firms domiciled in these countries would be particularly active in establishing R&D sites abroad since these firms are at the forefront of knowledge creation and have probably exhausted the advantages of a single location. Furthermore, the variation of patterns of laboratory establishment was tested whether it would differ across major industrialized countries.

Unit of Analysis and Dependent Variables The unit of analysis is the laboratory classified at the time it was established. An R&D laboratory is defined as a specific site carrying out R&D activities2. The variable was collected through a questionnaire that contained a detailed explanation of the concepts of home base, HBA and HBE. Interviews were scheduled once the questionnaire had been returned and the responses concerning the dependent variable were verified.

Independent Variables The first of the independent variable is defined as the difference between gross expenditures on R&D divided by gross domestic product in the target country, and gross expenditures on R&D divided by gross domestic product in the source country by the time the laboratory’s establishment. This measure is a proxy for the relative strength of the target country’s science base. It is hypothesized that the higher the R&D spending in the target country relative to the

1 MIRI 1991 and OECD 1993 2 OECD definition 1981

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source country of FDI, the higher the probability that a given laboratory at the time of establishment will be an HBA laboratory. The second variable is the analysis of the difference in revealed comparative advantage between the target country and the source country. This is the difference between industry‐ specific exports of the target country and industry‐specific exports of the source country normalized by industry‐specific world exports in the year of laboratory establishment. This revealed comparative advantage can be as a proxy for the relative advantage of a nation’s industry over the same industries from other nations. Arguably, a high‐value for revealed comparative advantage is determined by high‐priced and technologically advanced products. Therefore, it is expected that the higher the comparative advantage of the target country relative to the source country in the year in which the site was established. The third independent variable is a proxy for country’s scientific excellence. A variable of Nobel Prizes in hard sciences at the national level was used. Location decisions for corporate laboratory investments are not so much triggered by the nationality of the Nobel Prize winner, but by the country and home institution where the research activity for the Prize was carried out. So, the variable is the difference between the cumulative number of Nobel Prizes that were awarded over the last five years for scientific discovery activity carried out in the target country, and the source country controlling the industry. For electronics, Nobel Prizes were primarily expected in physics and for pharmaceuticals in both medicine and chemistry. Also there was a variable tested for the amount of tertiary education in the target country and the source country in the year of establishment of the laboratory. Because of the relatively higher importance of the level of formal education of human resources for the success of HBA research, the hypothesis is that the higher the percentage of population with a tertiary education in the target country relative to the source country the higher, the probability that a given laboratory establishment will be HBA rather than HBE. The fourth independent variable is the absolute difference in GNP of target country and source country in US$ millions. This variable is used as a proxy for measuring the relative attractiveness of the target country concerning HBE investments by the firm domiciled in the source country. The larger the absolute size of a national market relative to the size of the firm’s home market, the higher the probability that the firm will make considerable up‐front investments that it alter hopes to recuperate through volume sold in that market. It is expected that the larger the difference in GNP, the lower the probability that a newly established lab is an HBA laboratory. Finally, also control and dummy variables were included.

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IV RESULTS

Findings support the analysis carried out. For HBA laboratories, firms tend to choose countries where the science base is relatively well developed. For HBE laboratories, they tend to choose countries with large markets1. In general, the results concerning the regional, industry and firm control inputs, can be interpreted as evidence for the similarity of behavior of multinational corporations rather than as evidence for difference among these corporations. Furthermore, the results indicate that firms establish HBE laboratories later in their international expansion. Firms seem to first exploit their home base location before investing in HBA locations. FDI in R&D is actually as much a regional phenomenon as it is a national phenomenon. Also, the average size of HBA and HBE laboratories did not differ much. This gives the reason to believe that HBA and HBE FDI in R&D require similar resource commitments, at least as far as laboratory sites as units of analysis are concerned. In the survey’s it became evident that FDI in R&D is essentially a phenomenon taking place among the most advanced economies in the world. Laboratories outside these countries represent exceptions. The research shows how Japanese firms are similar to Western firms in terms of actual investment decisions made.

V CONCLUSION

Based on recent work about the organization of multinational enterprise, this study started with the assumption that there might be a separated set of motives for the global dispersion of R&D. When testing this framework, the study found that a firm’s propensity to invest in HBA R&D activities abroad rises with the relative commitment to R&D of private and public entities in the target country, as well as with the quality of the human resource pool and with the level of scientific achievement in relevant sciences. The propensity to invest in HBE activities increases with the relative attractiveness of the target country’s market. The analysis also revealed that firms from different home countries differ little in their propensity to invest in either type of R&D activity abroad. Finally, there was only weak evidence for differences in firm behavior across countries.

1 Kuemmerle 1998

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While these results were quite robust in sensitivity analysis, they should nevertheless be regarded with some caution. However, considering the large number of factors other than those accounted for in this analysis, the explanatory power of the model seems to be quite high. The findings suggest that when investing in R&D abroad, firms seek different types of spillovers from the national and local environment in which they invest. Assuming that foreign firms investing in local R&D are not free riders, foreign firms also create spillovers for the local environment because R&D sites provide employment and learning opportunities for local researchers. While this argument might apply more strongly to foreign firms’ HBA R&D sites, it also applies to HBE sites.

THE CASE

The case company of our choosing was Nokia. This multinational has research centers and operations all around the world. We felt it would suit our purposes to contrast the article and the company and reflect on the similarities or differences framed by the article above. The layout of the case presentation goes as follows: First section will give a brief company introduction, followed by research and development facts and figures, information on research centers, alliance networks, ventures, patents and intellectual property rights (IPR), R&D strategy, and finally ending the section with the determinants of R&D localization.

INTRODUCTION TO NOKIA

Although most consumers probably know Nokia by its mobile phones, the company actually has four key business areas. After the reorganization that happened in the beginning of 2004, Nokia’s second biggest business group, Networks, was the only group that stayed intact. Nokia Mobile Phones group was effectively split into three parts. The new Mobile Phones group focused on actual telephone devices. Nokia Enterprise Solutions focuses on developing wireless mobility solutions to enterprises and Nokia Multimedia was set up to develop mobile phone solutions that enable rich content “in the form of images, games, music and a range of other attractive content” as well as other smartphone solutions. Nokia Mobile Phones is the biggest business group of the company, accounting for 60% of net sales in 2006. Multimedia and Networks divisions accounted for about 19% each. Enterprise Solutions were fourth with 2% of net sales.

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Recently the Nokia’s CEO, Mr. Kallasvulo, announced the biggest change in the company since the late 1990s. He announced that the company is moving into providing internet services for mobile phones.1 This change might hurt their position as a number one phone producer but they still go for it, because the profit margins and growth in the mobile phones market are going down constantly. In the short‐term, Mr. Kallasvuo says that Nokia’s internet services should “support” its average selling price, and therefore also help its operating margin but in the long run it should provide “billions of Euros”.

R&D FACTS AND FIGURES

Nokia’s investments in R&D activities are in line with most of the major technological innovators: in 2005, Nokia spent 11.2% of its net sales on R&D. As much as 39% of Nokia’s employees work in Research and Development. The four major business groups contribute for the €3,825 million (in 2005) R&D expenditure: Mobile Phones (€1,245 million), Multimedia (€860 million), Enterprise Solution (€329 million) and Networks (€1170 million). Nokia’s R&D activities are broken into two broad categories: short and medium term, and long‐term. The short and medium term activities include developing products to master certain key technologies rather than creating new technologies. Long‐term activities include generating new and innovative technologies and products in the market. This is where new products emerge, current markets are disrupted and directions changed. Long‐term activities also include changing the way that the company runs by innovating new methods of running the organization. This enables Nokia to adapt to current and future trends of the industry and market, and even to change the company’s core businesses.2 In general, Nokia manages its R&D activities by interacting with universities, research institutes, standards bodies and other companies worldwide. In addition to research and development, Nokia plays a strong role in monitoring and influencing the open standards used in their products, for example the NMT, GSM networks and the 3G Technology.

RESEARCH CENTERS

Nokia’s research centers are widely dispersed worldwide. The main role of the research centers is to manage and coordinate the company’s relationships with external bodies. The

1 Parker, Andrew. “Nokia Changes Its Tune on Mobile Strategy”. Financial Times. December 5, 2007 2 About Nokia. http://www.nokia.com/nokia/0,8764,72,00.html

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relationships include cooperation in R&D and standardization. Standards are critical in the telecommunications industry as interoperation between different systems is essential to increasing the size of markets and opening new ones. Nokia has research centers dealing with a number of production areas: o Software & Application Technologies Laboratory develops and builds new applications and software as well as prototypes. More importantly, Nokia’s software platforms are researched here, to make third party application development as easy as possible. o Multimedia Technologies Laboratory integrates audio, video, human interfaces, games and multimedia into mobile devices and other products. The short term strategy of this laboratory is to improve current products and prototypes to enable end‐users to maximize their device’s ability. The long term goal is to look into new, unexplored technologies. o Computing Architectures Laboratory researches into new hardware and software platforms that can enable more functionality, performance and productivity in a device. This can include devices for commercial, enterprise, multimedia and even gaming industries. o Networking Technologies Laboratory comes up with new ideas and improvements to existing networking protocols, technology and standards to improve end‐to‐end connectivity. It develops networking and service concepts to complement Nokia’s current product line. o Radio Technologies Laboratory develops and designs new radio and wireless technologies. Examples of research are antennas and electromagnetics.

The above laboratory areas overlap functionally. Nokia have three categories that all projects tend to fall in: Mobile Applications, Multimedia Devices and Wireless Access. Since most projects require skills in many areas, it is efficient to gather teams of diverse skills to work in those categories. This has proven to work well, as the research centers produce half of the patents that Nokia holds.1 Nokia Research Centre has a two‐fold approach to achieving its mandate of leading Nokia into the future. The work for core technology breakthroughs supporting Nokia's existing businesses takes place in the Core Technology Centres, the CTCs, located in Finland: Computation Structures CTC, Interaction CTC, Internet CTC, and Wireless Systems & Services Laboratory. More visionary, exploratory systems research that goes well beyond any current business model is conducted at

1 About Nokia, http://www.nokia.com/nokia/0,8764,72,00.html

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the many System Research Centres, the SRC's, located in Beijing, Bochum, Cambridge UK, Cambridge US, Helsinki, Tokyo, Budapest and Palo Alto US. 1

ALLIANCE NETWORK

Another major source of knowledge for Nokia is its huge alliance network. Its size is increasing exponentially and you can see each dot from the graphs below as a potential source of knowledge and innovation. Those alliances can be for a specific product or technology and don’t necessarily mean any equity sharing between the companies. Just to confirm that this trend continues today, six months ago STMicroelectronics and Nokia, announced that they join forces in a 3G Technology research.2

Figure 1: Nokia’s Alliance Network

* Source: Dietrich, Koen.2004. “Nokia’s strategic change by means of alliance networks. A case of adopting the open innovation paradigm?”

Nokia also has a strong involvement in creating standards and specifications in the telecommunications industry. New solutions, technologies and products are developed during the process of drawing up standards and conforming to them. Different companies and institutions can access these standards and specifications to develop new products into the market. Examples of Nokia’s involvement in standards and specifications include the Symbian operating system, the GSM protocol and the 3G Internet Technology.

1 Nokia Research Center, http://research.nokia.com/ 2 “Nokia and STMicroelectronics Plan Deeper Ties in 3G Technology Development”. PR Newswire. 08.08.2007.

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VENTURING

Nokia wants to give an image of being open to new ventures and invention proposals. To this end, it has expressed its willingness to review business proposals submitted via an online application form. Many competitors have followed this trend to extend the research and development process to external bodies through proposals and venturing. The research projects accomplished in cooperation with universities, for example, range from minor studies to large scale projects. Sometimes the projects are part of a university initiative that Nokia can benefit from. When venturing with other companies, Nokia tends to share the risk, cost and resources. Rather than building and innovating current markets and core businesses, the venturing process attempts to identify new businesses that may one day be incorporated into Nokia’s core business, a culture that may have characterized Nokia’s growth since the beginning. The venturing process is handled by the Nokia Venturing Organization (NVO). Nokia has internal programmes, such as the annual “Venturing Challenge”, which are open to all employees to promote the culture of innovation. There are three phases to the venturing process: Research, Analysis and Validation, and Funding:1 o Research: During the research phase, NVO shares its breadth of knowledge and resources to identify the validity of the business proposal. In cases where the technology does not exist, NVO will commission the research. o Analysis and Validation: NVO attempts to look for market and returns opportunity for the venture. The proposal’s business and marketing model will be reviewed thoroughly. This phase is to identify potential pitfalls in the proposal and find solutions to overcome them. o Funding: Most funding for venturing proposals comes from Nokia Venturing Partners (NVP), a venture capital firm and investor. Nokia invests in NVP for profit and market feedback for new and upcoming technologies.2

One of the programmes that help Nokia get the most out of its diverse venturing projects is Innovent, which helps entrepreneurs convert their ideas into commercial businesses. The Innovent team’s main focus is to help entrepreneurs tap into Nokia’s knowledge about various markets, technologies and business models. Innovent provides resources to entrepreneurs in the form of finances, research support and Nokia’s strong networking within the industry. Examples of Nokia’s

1 About Nokia, http://www.nokia.com/nokia/0,8764,72,00.html 2 Nokia Venture Partners, http://www.nokiaventurepartners.com/

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recent ventures include the Nokia Fitness Monitor and Nokia One connectivity service for enterprises.

PATENTS AND IPR

As of February 26, 2008 the worldwide esp@cenet patent database reports 53,401 patents for Nokia as an applicant.1 The United States Patent and Trademark Office (USPTO) reports 6,091 patents assigned to Nokia in the United States. Clearly, the company tries aggressively to protect its intellectual property. As an example of Nokia’s eagerness to patent even small innovations, USPTO patent 5,241,583 describes the now ubiquitous ‘Menu‐*’ keypad combination for locking the keypad.2 Nokia has also been active in trying to push strong IP laws in Europe.3 In early November 2004 Nokia took legal action against Sagem, a French handset manufacturer, for copying its designs, and Vitelcom of Spain for violating its technical patents. 4 Although Nokia protects its intellectual property against unauthorized use, it also licenses some of its technologies to competitors. A notable example is the Series 60 Platform, a user interface for the Symbian OS which is an operating system for smartphones. The Series 80 Platform is licensed to a number of mobile phone manufacturers including Samsung, Panasonic, Siemens and LG. Nokia currently owns more than 47.9% of Symbian.5

R&D STRATEGY

Nokia is considered one of the most innovative companies in the world and its R&D takes a very important role in the company’s corporate strategy. The company’s research vision for the coming years’ states: “Become a global leader of open innovation for human mobility systems of the fused physical and digital world, giving birth to the growth of businesses for Nokia.”6 The key words here are “open innovation” (see Figure2 below). This means that Nokia is aiming to improve

1 Europe’s Network of Patent Database Esp@cenet, http://www.espacenet.com/ 2 United States Patent and Trademark Office Home Page, http://www.uspto.gov/ 3 Nokia and Software Patents, http://swpat.ffii.org/players/nokia/index.en.html 4 ‘Nokia Challenges Sagem, Vitecom on Patents’, 4 Nov 2004, http://www.reuters.co.uk/newsArticle.jhtml?type=technologyNews&storyID=6713922§ion=news 5 Symbian OS – The Mobile Operating System, http://www.symbian.com/ 6 Bob Ianucci, “Nokia Research – Yesterday – Today – Tomorrow”, http://www.nokia.com/NOKIA_COM_1/Press/Press_Events/Nokia_Technology_Media_Briefing/Bob_Iannucci_03- 10-2006.pdf

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the R&D cooperation, extend its innovation pool and welcome the outside influence (MIT, Chinese universities, EU, Open Source Community, Texas Instruments, etc.) Beyond allying with other companies, Nokia aims to join forces with universities, international organizations and venture capitalist companies. An example for this open innovation approach is the joint laboratory of Nokia with the Massachusetts Institute of Technology (MIT). In this laboratory there are forty researchers from the MIT and twenty from Nokia, who have a fresh approach to the research collaboration – each project depends on both MIT and Nokia people. Most of the work is done in an open environment, which is essential for a university, and the joint team develops and exploits technologies beyond the commercial horizon. 1 Nokia Research Center also represents Nokia in many standardization bodies and large international cooperation projects, such as the European Union Framework programs and EUREKA clusters ITEA (embedded systems) and CELTIC (telecommunications). Nokia Research center representative also currently chairs WWRF (Wireless World Research Forum), a forum formulating visions on research strategies in the communications industry. In the European 6th Framework Program, Nokia leads the MobiLife research program on user driven communications solutions for the future. MobiLife is part of the Wireless World Initiative, group of projects, involving about 100 organizations and being born from WWRF.2 Nokia believes that excellence is achievable through R&D cooperation, which allows to: challenge current Nokia thinking; explore and understand trends; create new opportunities; improve efficiency; share risk, cost and resources; promote complementary research; develop internal and external knowledge and property rights. Nokia has all the characteristics of an offensive innovator. It is a market leader; its R&D spending was 11.2% of net sales in 2005; it funds new research projects and companies; and it has created a large patent portfolio. From a development point of view, mobile phones have two distinct parts. As Jeffrey L. Funk explains, “mobile phone firms typically define product families in terms of different analog and digital air‐interface standards; these standards define the interface between the phone and base station. Within a specific standard, different models are developed for different users and user needs.”3 Nokia has been influential in designing many of the network standards. The network technologies themselves are standardized, so variations in the actual air‐

1 Uuistalo, Mikko. Presentation on ‘Open Innovation Strategy, Challenge or Opportunity for European / global ICT companies’ 2 Nokia Research Center Press Backgrounder, http://www.nokia.es/NOKIA_COM_1/Press/Press_Events/Nokia_Technology_Media_Briefing/NRC_Backgrounder_O ct_2006.pdf 3 Funk, J. L., “The Product Life Cycle Theory and Product Line Management: The Case of Mobile Phones”, IEEE Transactions on Engineering Management “. May 2004.

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interface are not possible. Technical innovation comes from developing products that are smaller, more integrated and consuming less power than previously. New handsets, notably the new smartphones, also add features to the standard mobile. Because of the need to develop products for different standards and keep a wide selection of models in the market, competitive manufacturing is vital, too. The innovation process (For example see “Figure 2: Open Innovation” below) in mobile phones is a chain‐linked one, with many parties involved. First of all, products have to be manufactured by specifications set in the standards. This is the first requirement and the basis for any design. Second, development in manufacturing, component and battery technology enables manufacturers to add new features and improve designs, for example by improving battery life or adding color screens. Customer demand plays an important role, too. For example, when the GSM standard was developed, text messaging was envisaged as a feature not dissimilar to what pagers were used for. The first GSM handsets could only send predetermined messages such as “I am busy right now” or “I’ll be late”. Text messages proved to be a success, though, and so new products were built with that in mind. This led to the development of features such as predictive text input, to make it easier to type with the small keypad.

Figure 2: Open Innovation Strategy of Nokia

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ARTICLE ARGUMENTS FOR COMPARISON

For the comparison of the two articles, eight most obvious arguments made in the assigned article were picked out. The arguments are the following: i. As local demand grows increasingly sophisticated, local R&D facilities are useful in helping a firm to adapt existing products better to local needs. ii. Specific nations and specific regions within them might be particularly advantageous locations for R&D facilities because of potential spillovers from existing and productive R&D organizations. iii. Additional externalities that make a country attractive for FDI in R&D are created by supporting industries offering these inputs, such as firms that provide laboratory equipment, maintenance firms or specialized laboratory testing services. iv. Differences in the character and size of national innovations systems (higher education, public funding, intellectual property laws, and venture capital structures) shape the nature of externalities within a cluster. As a result, nations differ in their attractiveness for FDI in R&D. v. A firm’s geographical expansion of R&D sites generally originates from a base location in which product strategies and core technologies are developed and updated. This central R&D location is generally close to the firm’s headquarters, divisional headquarters, or “home base”. vi. Home‐base‐exploiting (HBE) laboratories will be more probable if a foreign country which offers important market opportunities that the foreign firm seeks to convert into high profits. vii. Home‐base‐augmenting (HBA) laboratories, however, will be more probable if the size of a country’s knowledge base is large and the quality of this knowledge base is high. Firms who seek to augment their home base are looking for a large pool of qualified engineers and scientists from which they can select the most suited to the firm’s needs. At the same time, firms seek to tap into knowledge pools of very high quality, since the ideas that the firm hopes to generate and capture through HBA investments are intended to provide the foundation for the long‐term future profitability of the whole firm. viii. For both types of R&D activities to be carried out in geographically separate overseas locations, one of two conditions must hold. Either scope diseconomies exist between the two types of laboratories, or the two types of laboratories are subject to strongly different locational pulls.

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COMPARISON OF ARGUMENTS

In this section of the report the points of argument of the article are compared to the R&D evolution of Nokia and the results screened out. Each of the individual arguments will be discussed below individually.

i. INCREASINGLY SOPHISTICATED DEMAND

In the case of Nokia, they had to open R&D facilities in Asia and US in order to have access to their network standards – NMT, GSM 900/1800/1900. By doing this, the company was able to become a global leader and have brand awareness on all the major markets. Motorola, for example, failed to do so because they focused their R&D only in US and therefore lagged on the GSM phones development. Also, the R&D site in Tokyo helped the company to launch smaller phone, which were popular in Japan in the 90s. Today phones become smaller and smaller and this gave Nokia another competitive edge. In addition, the R&D sites acted as “sensors” and they were able to sense that in California and Japan phones were becoming a fashion accessory, and the company set‐up a design pipeline that released a new model every couple of months.

ii. SPILLOVERS IN CONGLOMERATION AND CLUSTERING

In the case of Nokia, such locations are the ones in Palo Alto (Silicon Valley), Tokyo, Finland and Germany. At these R&D sites Nokia benefits from the technological clustering: Finland as the telecommunications and information technology forefront; such as in California by networking with all the major computer and mobile phone producers; Tokyo as another main source of alternative technologies; and Central European industrial and technology integrator.

iii. ADDITIONAL EXTERNALITIES

An example here is the R&D site in Bochum, Germany. The Ruhr metropolitan area provides the highest concentration of universities and research institutes in Europe (Appendix II), which not only provides better inputs for Nokia R&D (laboratories) but also gives the opportunity for Nokia to “buy” external knowledge, through venturing, for example.

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iv. EXTERNALITY INFRASTRUCTURE

Europe (Germany, UK), United States (Palo Alto, Boston), and Japan (Tokyo) are all located in a highly industrialized metropolitan areas with developed telecommunications infrastructure, high technology clustering and human resources providing external resources for Nokia R&D.

v. EXISTENCE OF CORE R&D NEAR HQ

All the Core Technology Centers of Nokia are located in Finland and they develop technologies related to the existing businesses, while the System Research Centers abroad serve more visionary and exploratory systems. This proves that Nokia keeps the core R&D near its headquarters.

vi. HBE’S AND/OR HBA’S

We believe that initially the R&D centers in Beijing, Tokyo and US were established for HBE purposes (exploiting the different markets network standards) and later on in their evolutionary development became both HBA and HBE sites which benefited the location better ‐ e.g. using the small phone knowledge and user friendly interface (e.g. in Japan) worldwide. vii. REASONS FOR DISTANCE

This article argument also holds for the Nokia R&D. As described, both the Asian and the US sites are HBA and HBE, and it is highly likely that these were formed to research the geographical and cultural differences and preferences of the different customers in these continents, later on becoming the actual sources of new technologies.

CONCLUSION

In broad comparison with the study by Kuemmerle (1999), it was found that a firm’s propensity to invest in HBA R&D activities abroad rises with the relative commitment to R&D of private and public entities in the target country, as well as with the quality of the human resource pool and with the level of scientific achievement in relevant sciences. Not surprisingly all Nokia’s R&D sites are located in countries with high IT readiness and highly educated population. (Appendix III). Furthermore, the propensity to invest in HBE activities increases with the relative attractiveness of the target country’s market and Nokia’s choice to spread its R&D in Japan, China, US and Central Europe confirms it. In comparison to the research base of Nokia discussed above, this chicken and an egg‐ argument would seem to hold true. In further emphasis, the comparison of Nokia research sites

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and the national centers of technological and industrial zones give a nice picture of comparison which would seem to correlate (Appendix I: “Table 1: Nokia Research Centers versus National Technology Districts”) and support this argument – in other words, chickens make more eggs, and eggs make more chickens no matter where they are or where they’re from.

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SOURCES

Nokia Finland. “About Nokia” (Fin). [last referred 1/3/2008]. http://www.nokia.fi/A4314004

Nokia Research. “Centers”. [last referred 1/3/2008]. http://research.nokia.com/

Encyclopedia Britannica. [last referred 1/3/2008]. http://www.britannica.com/

Hong Kong University of Science and Technology Library. “High‐Tech Industrial Zones”. Guides to Resources. [last referred 1/3/2008]. http://library.ust.hk/guides/high‐tech/hightech.html

Finnish Science Park Association (Tekel). “Network of Science parks”. [last referred 1/3/2008]. http://www.tekel.fi/english/

Organisation for Economic Co‐operation and Development (OECD) Factbook. 2007. Economic, Environmental and Social Statistics:. “Tertiary Attainment for age group 25‐64”. [last referred 1/3/2008]. http://oberon.sourceoecd.org/vl=2346899/cl=11/nw=1/rpsv/factbook/

Kuemmerle Walter. 1999. “The Drivers of Foreign Direct Investment into Research and Development: An Empirical Investigation”. Journal of International Business Studies. 30(1). 1st Quarter. pg. 1‐24

World Economic Forum. 2008a. “The Global Competitiveness Report 2007‐2008“. [last referred 2/3/2008]. http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/index.htm

World Economic Forum. 2008b. “IT Readiness Report”. [last referred 2/3/2008]. http://www.weforum.org/en/initiatives/gcp/Global%20Information%20Technology%20Report/in dex.htm

Funk, J. L., “The Product Life Cycle Theory and Product Line Management: The Case of Mobile Phones”, IEEE Transactions on Engineering Management “. May 2004.

Ianucci, Bob. “Nokia Research – Yesterday – Today – Tomorrow”. Presentation. http://www.nokia.com/NOKIA_COM_1/Press/Press_Events/Nokia_Technology_Media_Briefing/B ob_Iannucci_03‐10‐2006.pdf

Uusitalo, Mikko. “Open Innovation Strategy, Challenge or Opportunity for European / global ICT companies”. Presentation. http://goingglobal2006.vtt.fi/pdf/mikko_uusitalo.pdf

Nokia Research Center Press Backgrounder, http://www.nokia.es/NOKIA_COM_1/Press/Press_Events/Nokia_Technology_Media_Briefing/NRC _Backgrounder_Oct_2006.pdf

Nokia Venture Partners, [last referred 1/3/2008] http://www.nokiaventurepartners.com/

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Europe’s Network of Patent Database Esp@cenet, [last referred 29/2/2008] http://www.espacenet.com/

United States Patent and Trademark Office Home Page, [last referred 29/2/2008] http://www.uspto.gov/

Nokia and Software Patents, [last referred 29/2/2008] http://swpat.ffii.org/players/nokia/index.en.html

Reuters, “Nokia Challenges Sagem, Vitecom on Patents”, 4 Nov 2004, http://www.reuters.co.uk/newsArticle.jhtml?type=technologyNews&storyID=6713922§ion=n ews

Symbian OS – The Mobile Operating System, [last referred 29/2/2008] http://www.symbian.com/

PR Newswire. “Nokia and STMicroelectronics Plan Deeper Ties in 3G Technology Development”. 08.08.2007

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APPENDICES

APPENDIX I: NOKIA RESEARCH CENTERS

This appendix includes the locations and information about the most important research centers of Nokia.

LOCATIONS AND RESEARCH ORGANIZATION

Nokia Research Center (NRC) has a two-fold approach to achieving its mandate of leading Nokia into the future. The work for core technology breakthroughs supporting Nokia's existing businesses takes place in the Core Technology Centers (CTC's). More visionary, exploratory systems research that goes well beyond any current business model is conducted at the many System Research Centers (SRC's).

Nokia Research areas are the following: Access and connectivity, data and content technologies, device architectures, digital services, human interaction, physical touch digital match, and the other research programs carried out by the research centers around the world.

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Table 1: Nokia Research Centers versus National Technology Districts

NATIONAL INDUSTRIAL AND/OR SYSTEMS RESEARCH CENTERS CORE TECHNOLOGY CENTERS TECHNOLOGY DISTRICTS

FINLAND FINLAND o Espoo Helsinki and Toijala o Computation Structures CTC o Hämeenlinna o Connectivity Applications SRC o Interaction CTC (Helsinki and o Helsinki o Toijala SRC Tampere) o Hyvinkää o Nano Systems o Internet CTC o Joensuu o Wireless Systems & Services o Jokioinen Laboratory (Helsinki and Tampere) o Jyväskylä o Kajaani o Kokkola o Kuopio o Lahti o Lappeenranta o Mikkeli o Oulu o Pori o Raahe o Seinäjoki o Tampere o Turku o Vaasa o Vuokatti

GERMANY o Baden-Württemberg Bochum o Bayern o Bochum SRC o Berlin o Brandenburg o Bremen o Hessen o Mecklenburg-Vorpommern o Munich o Niedersachsen o Nordrhein-Westfalen33 o Rheinland-Pfalz o Saarland o Sachsen o Sachsen-Anhalt o Schleswig-Holstein o Thüringen

UNITED KINGDOM Cambridge o England (Many, but most in Cambridge o Nano Sciences SRC - Silicon Fen) o Scotland (Silicon Glen)

UNITED STATES o California (Silicon Valley, Palo Alto) Cambridge and Palo Alto o Maryland o Cambridge US SRC o Massachusetts (Boston, Cambridge) o Palo Alto SRC o New Mexico o New York o North Carolina o Northern Virginia o Texas o Washington State

33 Bochum is located within this industrial and technology zone in Germany

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CHINA Beijing o Beijing o Beijing SRC o Chongdu o Chongqing o Guangzhou o Hanghai o Harbin o Kunming o Shanghai o Shenzhen o Suzhou o Wuhan o Xi’an

JAPAN o Tokyo-Yokohama Region Tokyo o Tokyo SRC

Sources: Nokia, Encyclopedia Britannica, Tekes, Hong Kong University of Science and Technology Library

In comparison to the Nokia sites versus National centers of technological and industrial excellence seems to correlate

NOKIA CORE TECHNOLOGY CENTERS

This section has the information about the core technology centers of Nokia. There was no information available on Computation Structure or Internet CTC’s.

Interaction CTC

NRC's Interaction Core Technology Center performs strategic and long-term research on usability and user interfaces, new human practices and design, multimedia and personal content technologies, immersive communication, collaboration and community technologies. Interaction CTC teams are located in Helsinki and Tampere, Finland.

Mission

To create enjoyable and effective innovations for interaction with the physical and digital world through understanding human practices and behaviours.

Research Teams

o Communities & Collaboration. Develop rich interactive and collaborative technologies with intuitive services to meet professional and social desires of being connected to groups and communities.

o Human Practices and Design We explore societal and cultural trends as well as human practices and behaviors. Based on the knowledge gained in the exploratory social scientific research we design and demonstrate attractive and acceptable interactive application, service and product concepts. Our work focuses on content-centric communities, citizen journalism and mobile games.

o Immersive Communication We research the essentials of a rich communication experience. We identify the user perception corner stones when providing technologies to experiencing presence and closeness in communication. We develop mobile technologies to enable the experience of being together and the feeling of 'being there' whether in a remote location or a virtual environment.

o Interacting in Smart Environments

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We create multimodal and multi-device UI paradigms and technology enablers for effortless human interaction with heterogeneous environments and device systems. Our ambition is to make it possible for everybody to understand and interact with all relevant aspects of environments and devices. All modalities and interaction technologies will be considered, special attention being paid to voice and language UI technologies.

o Media Content Representation Carry out world-class research in content representation and innovative E2E mobile multimedia technologies, applications and services to master multimedia value chains.

o Personal Content and Media Provide unparalleled technology enablers and application concepts for making Nokia devices the number one choice for digital content and media experience.

Wireless Systems & Services Laboratory

NRC's Wireless Systems & Services Laboratory performs strategic and long-term research and creates IPR on antennas and electromagnetics, cognitive radio, wireless access systems, wireless local connectivity, local positioning, software defined radio platforms, and wireless sensing. Wireless Systems & Services teams are located in Helsinki and Tampere, Finland.

Mission

Innovate the wireless future through world class research to provide technology leadership and new opportunities for Nokia.

Research Teams

o Antennas and Electromagnetics The Antennas and Electromagnetics Team develops innovative small mobile terminal antennas and provides solutions to challenging electromagnetic design and modeling problems in mobile communications.

o Cognitive Radio Cognitive radio team creates a system concept and technology enablers for cognitive, frequency agile radio systems.

o Wireless Access Systems WAS team carries out research targeting to future mobile wireless systems covering 3GPP-LTE and its evolution towards IMT-Advanced; leading to advanced concepts and innovative technological solutions.

o Wireless Local Connectivity WLC team creates and develops wireless local connectivity technologies as well as services based on short-range radios; resulting in innovative solutions adding value to the end-user.

o Local Positioning LP team innovates and develops algorithms, software, and hardware for using local wireless systems for positioning and navigation. Examples of applications: indoor positioning, direction-finding, ranging, user interaction by pointing.

o Software Defined Radio SDR team renews and innovates a portable radio modem platform with an ultimately modular legacy free architecture governing SW, HW and control aspects.

o Wireless Sensing

Nokia Systems Research Centers

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Nokia has systems research centers in multiple locations counting eight in total. They are 1. Connectivity Applications SRC in Helsinki and 2. Toijala SRC in Toijala both in Finland, 3. Bochum SRC in Bochum Germany, 4. Nano Sciences SRC in Cambridge United Kingdom, 5. Palo Alto SRC and 6. Cambridge US SRC in such named locations in the United States, 7. Beijing SRC in Beijing China, and finally 8. Tokyo SRC in Tokyo Japan. We will now take a brief look to each research center more specifically.

1. Connectivity Applications SRC

Mission

To develop and apply different wireless concepts and seek new business opportunities. Boost renewal through internet and new service concepts.

Research Teams

Internet of Things. To drive item level identification technologies forward and leverage on the emerging business opportunities that item level identification and low cost (phone/multimedia computer) integrated technologies will enable. In long term, to pave the way towards the "Internet-of-Things" where items have communication, storage and computing capabilities.

Wellness And Healthcare. To create and demonstrate disruptive mobile concepts and services that bring clear added value for the end users. To gain insight of requirements and user acceptance mobile centric eHealth solutions through various pilots. To guarantee interoperability of Nokia device as part of larger multi vendor device ecosystems and to promote Nokia as preferred partner and credible solutions provider. To Study of opportunities of mobile tools in the health care domain and connectivity to hospital information systems.

Self Provisioned Services. Customer driven research in a market place to innovate digital services with a scalable architecture and distribution model for field force of virtual organisations.

Internet And Innovation. Boost the innovation process inside Nokia to create the background for a dynamic new Internet Company. Exploiting the mobile aspect of consumer services and applications while mining social network and community behaviours to improve user satisfaction.

2. Toijala SRC

NRC Toijala supports talented youth personal growth through the participation in research projects, relevant training and mentoring.

3. Bochum SRC

NRC Bochum was founded in 1996 and has since then successfully completed numerous projects with research and industry partners. Their mission is to renew Nokia by leveraging the unique and dense German R&D ecosystem - high-profile research institutes, key universities and industry leaders.

The Physical Mobility Applications team explores new business opportunities by modelling environmental domains and developing interactions with the virtual world. The Automotive System Solutions team develops solutions in the area of automotive and transportation systems and performs research for automatically generated maps and points-of-interest. The Intuitive Mobile Multimedia Systems team creates disruptive systems and services for e-publishing, content management and distributed rendering of multimedia information. The Logistics Contributing Solutions team exploits opportunities of mobile networking, smart terminals and intelligent object identification for advanced mobile logistics solutions. The Incubation team consists of experienced senior researchers and actively defines the NRC Bochum research strategy.

It constantly seeks for new business concepts as well as research and industry partners. The incubators provide technical guidance across team boundaries and work closely with the research team leaders.

4. Nano Sciences SRC

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NanoSciences develops nanotechnologies for mobile communication and ambient intelligence.

Studying physical, chemical and biological phenomena and manipulation of matter at the nanoscale enables generation of knowledge for enhancing human capabilities.

Scope of Nokia nanoscience and nanotechnology research.

Development of nanotechnologies creates a new basis for solutions and systems in sensing & actuation, memory, information, signal processing and communication. Creating miniaturized, power efficient technologies for the future mobile multimedia computers also enables intelligent systems that can be embedded into human environments, in clothes, and in fashionable accessories. Nanotechnologies provide a new generation of added value products and services with superior performances across a range of applications.

Nano Sciences Cambridge

The research collaboration between Nokia Research Center and the University of Cambridge focuses on the nanoscience and its applications in the solutions for sensing, energy sources, computing, communication technologies, for the structural materials for future ambient intelligence and wearable devices.

Research topics: o Stretchable electronic skin: Technology of thin film electronic devices on elastomeric substrates enables integration on fully elastic transducing circuits robust to multi-directional stretching. Novel applications are in the area of Multi-Plane/Multi-Touch user interfaces for handsets, wearable, health and wellness portable devices, advanced robotic and possible electronic skin implants (functional tattoo/plaster). o Complex functional architectures: Integrated discrete nanoscale elements into circuits with an adaptive architecture. Research is done in collaboration with Helsinki University of Technology. o Synthesis and characterisation of biological composite materials and systems: Researchers at University of Cambridge have recently shown that peptides and proteins can be assembled into generic fibrillar structures which exploit the natural self assembly of simple building blocks into complex structures that have the potential to be functionalised to tune their mechanical and optical properties. They also possess robust material properties, while being bio-degradable. o Enhanced energy and power capacity in mobile devices: The University of Cambridge has background on novel nanomaterial synthesis, polymer CNT composites with controlled conduction, nanotube enhanced capacitors, and nanocomposite solar cells.

Nano Systems Helsinki

The objective is to develop methods for power efficient high-speed signal processing with components based on nano size elements. We also develop advanced materials and methods to design and control material properties to achieve high strength, tailored electrical/thermal conductivity, and specific optical or RF properties. By characterizing and further developing the unique properties of nanomaterials for nanocomputing we simultaneously create a basis for future adaptive, ubiquitous and wearable devices.

The research is multidisciplinary and requires linking of different physical scales. We range from atomic level to full scale products using multi-scale computational physics. We study the interfaces between both atom to meso- scale and meso to continuum scale.

Research topics:

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New signal processing methods and devices: A top down approach to signal processing and information storage with nano components.

In order to build nanotechnology based devices we study different architectures for systems of nanocomponents, interfaces between different scales, as well as noise effects. An example of carbon nanobuds [A.G. Nasibulin et al., "A novel hybrid carbon material", Nature Nanotech. 2, 156 (2007)]

Functional materials: We aim to create totally novel (multi)functional materials and specific structures with unique properties as enablers for future ubiquitous devices. Researchers at TKK (Helsinki University of Technology) have already been able to build a variety of specific supramolecular structures utilizing self- organization and biomimetic approach to combine different molecular scale building blocks. Our ultimate targets are externally controllable functional materials which can specifically change their properties on command.

Carbon based material: Carbon nanotubes (CNT), graphene, and combinations of CNTs with fullerens, known as Carbon Nanobuds (CNB) are developed as enablers for sensing, interconnections, printable electronics and other solutions for our future concepts.

5. Palo Alto US SRC

NRC Palo Alto is Nokia's newest research facility housing a growing team of researchers’ intent on taking advantage of the Silicon Valley ecosystem to pursuing a wide range of experimental systems research projects.

Palo Alto SRC is focusing on the theme of 'collaborative experiences and collective intelligence enabled by the emerging ubiquitous wireless Internet'. NRC Palo Alto employs the open innovation model and intends to develop collaborative relationships with universities and industry partners. Initial Research Projects will include

Context, Content and Community: focusing on large-scale systems leveraging mobility context, metadata, social networks, and deep personalization to provide dramatic improvements in the relevancy of search, advertising, and recommendation engines.

Wireless Grids and Collaborative Services: delving into ubiquitous communication systems which go beyond a value proposition based on pure connectivity to capture value in a world consisting of a large number of diverse, wirelessly-enabled, collaborating devices.

Visual Computing and User Interfaces: leveraging the graphics, imaging, and computational capabilities of Nokia multi-media computers to facilitate Mobile Augmented Reality, Computational Photography, and Visually-based User Interfaces. Innovation Radio and Wireless Sensors: experimenting with novel applications and hardware platforms for emerging short range radio technologies.

Location Based Services (LBS): starting a new research investigation into next generation location-based services, the team will be focusing on the challenge of how to architect a balance between useful services and a strong requirement for privacy and security. Team

6. Cambridge US SRC

NRCC (Nokia Research Center Cambridge) is a cross-disciplinary research organization whose charter is to bring new ideas into Nokia products. NRCC consists of approximately 20 Nokia researchers, investigating all aspects of mobile phones, from computer and network architecture to user interfaces.

The primary activity of Nokia Research Center Cambridge is the Nokia-MIT Collaboration. The Nokia-MIT Collaboration builds on past cooperation with MIT, including W3C, Project Oxygen, Things That Think, and the Communications Futures Program. One of the goals of the collaboration is to increase the level of interaction

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between Nokia and MIT researchers compared to previous initiatives. For this reason, NRCC has been situated close to MIT CSAIL with spare offices for external researchers.

NRC Cambridge has been established with a unique purpose for Nokia Research Center. The collaborative work of NRC Cambridge will center on a view of the future where small handheld devices such as mobile phones will become part of an "ecosystem" of information, services, peripherals, sensors, and other devices. Research here will address new user interfaces that incorporate speech and other modalities, new mobile computing platforms - including low power hardware platforms and wireless communication - and new software architectures. As well, researchers will consider new ways to manage information, using technologies such as Semantic Web - an extension of the current Web, developed in part at CSAIL and at the Nokia Research Center - which will enable devices to more intuitively and automatically understand interconnected terms, information and services.

7. Beijing SRC

NRC Beijing was established in 1998 and located in the capital city of China. With this location, we intend to take advantage of: China's fast growing economy, China's mobile market (the world's largest), China's dynamism, and of course, the region's top-level universities.

NRCB's work targets the creation of new business opportunities for emerging markets through open innovation and leading edge research. NRC Beijing employs the open innovation model and intends to develop close and large collaborative partnership with the top universities.

Initial Research Projects: o Interaction Solutions for Asia: Create user interaction solutions for emerging markets through leading research on interaction technologies. o Mobile Services for Asia: Create new business opportunities by productizing innovative applications and services developed together with external partners. o Adaptive Terminals: Introduce and enable miniaturized, proactive and comfortable terminal concepts. o Visual Interaction Systems: Provide delighted UI experience in mobile devices for emerging market with innovative technological solutions. o Wireless Systems for Asia: Focus on future mobile wireless systems covering 3GPP-LTE/TDD and its adapting to local needs and regulatory aspects.

8. Tokyo SRC

Nokia Research Center (NRC), Tokyo was established in October 1997. It is situated in Meguro, an area in the central part of Tokyo which is one of the most technologically advanced cities in the world.

We pursue our mission to spearhead human-centric systems research utilizing unique cultural aspects of Japan, such as Japanese craftsmanship, natural synergy in society, and the fusion of technologies generated in the advanced technopolis environment. NRC Tokyo continues to develop collaborative research relationships with universities and industry players in Japan and intends to further employ the open innovation model to actualize the vision.

Tokyo SRC is focusing on "Beyond mobile computer for truly human-centric communication".

Our intentions are: o To redesign our physical world which currently relies on legacy mobile computers connected to the digital world to realize truly human-centric "augmented human life". o To realize paradigm change by connecting human sensory functions to the digital world for natural communication in the fused physical and digital world.

Initial Research Projects include: o Cyber Intelligent Systems: focusing on realizing intelligent systems which will be truly trusted human partners, co-exist in our society, and bridge the physical world and the digital world. o Evocative "Kansei" Systems: focusing on realizing personal devices which you wish "to be with" rather than wish "to use".

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o Megalopolis Communication Systems: focusing on realizing innovative communication systems utilizing the highly densely populated environment which has been at a disadvantage in wireless communication systems. o Future Wireless Systems: focusing on 3GPP-LTE standardization by contributing to 3GPP LTE Rel.8 and further.

NOKIA BETA LABS

Nokia built this webportal to share some of the exciting new ideas that they are working on. Be prepared for some rough edges, occasional service breaks, and even scrapped projects, but most importantly, its important seeing your suggestions come to life. As these are experimental projects, Nokia can't make any guarantees or provide additional help. Feedback is shared directly with the developers. The best contributors win prizes and public praise from the Nokia Beta Labs team.

NOKIA INNOVATION CENTER TAMPERE

Nokia Innovation Center Tampere is an open innovation network, where information flows freely between collaborators and joint teams regularly work together to achieve world-class scientific research results. The first and central collaborator in the center is Tampere University of Technology (TUT). The center was officially opened in September 2007, and about 80 researchers are currently involved in its activities.

Part of the research will be funded by Tekes, the Finnish Funding Agency for Technology. It is envisaged that other research institutions, as well as complementary commercial companies, in the Tampere area may eventually also participate in the work of the center. Nokia Innovation Center has its facilities in the Hermia Science Park, Tampere, Finland, within walking distance from both Nokia Research Center and Tampere University of Technology. Employees work for their respective organizations.

Nokia Innovation Center Tampere focuses, initially and among other topics, on research in o content and media ecosystems (future digital media; maintaining and sharing personal content between various devices), o smart UI solutions (camera-end image processing; visual user interfaces for the next generation experience) o printed electronics (miniaturization and electronics integration) o modular system architectures (advanced computer architectures and devices).

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APPENDIX II: NATIONAL TECHNOLOGICAL AND INDUSTRIAL ZONES IN GERMANY, CHINA, AND FINLAND

GUIDES TO RESOURCES - THE HONG KONG UNIVERSITY OF SCIENCE AND TECHNOLOGY LIBRARY Website: http://library.ust.hk/guides/high-tech/hightech.html

HIGH TECH INDUSTRIAL ZONES IN GERMANY

Source: http://www.adt-online.de/standorte.html

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INDUSTRIAL AND TECHNOLOGY ZONES IN CHINA

Source: http://www.kaesung.co.kr/china/sub7.asp

SCIENCE PARKS IN FINLAND

Source : http://www.tekel.fi/english/

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APPENDIX III: STATISTICAL DATA

TERTIARY ATTAINMENT FOR AGE GROUP 25-64 As a percentage of the population of that age group, 2004 or latest available year

Source : OECD Factbook 2007 – Economic, Environmental and Social Statistics: http://oberon.sourceoecd.org/vl=2346899/cl=11/nw=1/rpsv/factbook/09-01-02-g01.htm

GLOBAL COMPETITIVENESS AND IT READINESS INDEX

Global IT Report: Networked Readiness Index Global Competitiveness Report: Rankings 2007-2008

1. Denmark 1. US 2. Sweden 2. Switzerland 3. Singapore 3. Denmark 4. Finland 4. Sweden 5. Switzerland 5. Germany 6. Netherlands 6. Finland 7. US 7. Singapore 8. Iceland 8. Japan 9. UK 9. UK 10. Norway 10. Netherlands 11. Canada 12. Hong Kong SAR >>Rankings in full Rank 13. Taiwan, China 14. Japan 15. Australia

>>Rankings in full

Sources: The Global Competitiveness Report 2007-2008: http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/index.htm and the IT Report: http://www.weforum.org/en/initiatives/gcp/Global%20Information%20Technology%20Report/index.htm

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