Factors influencing the attraction of rd related fdi of japanese mncs to vietnam

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY HOANG THI HONG HANH FACTORS INFLUENCING THE ATTRACTION OF R&D-RELATED FDI OF JAPANESE MNCS TO VIETNAM MASTER’S THESIS BUSINESS ADMINISTRATION Hanoi, 2018 VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY HOANG THI HONG HANH FACTORS INFLUENCING THE ATTRACTION OF R&D-RELATED FDI OF JAPANESE MNCs TO VIETNAM MAJOR: BUSINESS ADMINISTRATION CODE: 60340102 RESEARCH SUPERVISORS: ASSOC PROF DR VU ANH DUNG PROF DR YOSHIKI MATSUI Hanoi, 2018 ACKNOWLEDGEMENT After nine months of conducting my thesis, I would first like give the sincerest thanks to my two supervisors also the two lecturers, Associate Professor Vu Anh Dung and Professor Yoshiki Matsui Beside making the lectures of International Business and Operation Management too interesting that make students not be able to get distracted, their guidance and support have made my thesis possble To Dung Sensei, thank you for being patient to give me several comments and explanation of the issues in this thesis, and for your support in contacting with Japanese companies and spending time to interview CEOs with me on the data collection process To Matsui sensei – our lovely grandpa, thank you for your support me all the time in Japan, both in academic and daily life routine I received a lot your critical comments and your care, and I have learnt a lot only the knowledge in supply chain, but also the Japanese cultures and other countries through your stories Secondly, I would like to thank Yokozawa sensei for your enthusiasm for teaching me qualitative research method with case study, your suggestion are extremely valuable for my thesis I also would like to express my gratitude to Hino Sensei for supporting me to successfully contact to one of two Japanese MNCs, as well as telling me a lot interesting stories I would like to thank warmed Lien sensei, and Hanh sensei with full of enthusiasm for giving me many of meaningful information through daily conversations To Huong san and Nagano san, thank you for your caring to the detail I am also very grateful people helping me in data collection process being extremely challenge Finally, I would like to say thank to my family, friends and all of whom supported me and encourage me to finish the writing when I felt so struggling with the thesis, especially the VJU, JICA, University of Yokohama ABSTRACT In recent decades, a rapid growth in international R&D investment of MNCs is witnessed in non-traditional host countries (Hurtado-Torres, Aragón-Correa, & Ortiz-de-Mandojana, 2018), which are developing countries with a huge of advantages in the cost and human resources, and Japanese MNCs are not exception Japanese MNCs are increasingly investing in ASEAN (Tejima, 2002), and Japanese FDI in Vietnam is always in the top position compared to FDI from other countries Therefore, with the expectation of attracting FDI projects related to R&D to bring Vietnam not only to become a major outsourcing hub in the world, but also a place for new scientific inventions, it is necessary for Vietnam to study the factors influencing the attraction of R&D FDI from Japanese MNCs to Vietnam to compete with other countries in the region While the previous studies have focused on identifying and listing the factors influencing R&D dispersion of MNCs in general, this thesis has systemized the factors influencing R&D dispersion of Japanese MNCs to Vietnam and explored how these factors influence based on the qualitative research, including case studies, in-depth interviews, combined with secondary sources From that, the author proposes a conceptual model of factors influencing the R&Drelated FDI of Japanese MNCs to Vietnam, including the groups of the factors from Vietnamese side: national innovation capability, socio-economy, institutional framework, incentives; the groups of the factors from Japanese MNCs: ability to recruit, capacity of Vietnamese subsidiary, characteristic of R&D project This model will be the foundation for further quantitative assessment of the factors influencing the attraction of R&D- related FDI of Japanese MNCs to Vietnam, as well as being the basis for proposing policy implications in this area TABLE OF CONTENTS LIST OF FIGURES i LIST OF TABLES i LIST OF ABBREVIATIONS iii CHAPTER 1: INTRODUCTION 1.1 Necessity of the thesis 1.2 Research objectives 1.3 Research questions 1.4 Research scope 1.5 Structure of the research CHAPTER 2: LITERATURE REVIEW 2.1 Overview of R&D 2.1.1 R&D definition 2.1.2 R&D Classification 2.1.3 The role of R&D for the economy 2.2 R&D-related FDI 2.2.1 Definition 2.2.2 R&D-related FDI classification 2.2.3 R&D and global value chain (GVC) 12 2.3 Theories related to location decision on international investment 14 2.3.1 Market Imperfections Theory of Hymer 14 2.3.2 Product Cycle Theory of Vernon 15 2.3.3 Eclectic Paradigm or “OLI” framework of Dunning 15 2.4 Factors influencing the decision of R&D dispersion of MNCs 16 2.5 Factors influencing the location decision of R&D dispersion of Japanese MNCs 18 2.6 Research gap 29 CHAPTER 3: RESEARCH METHODOLOGY AND DESIGN 31 3.1 Research framework 31 3.2 Research approach 38 3.3 Rationale of qualitative method 39 3.4 Data collection 40 3.4.1 Case study 40 3.4.2 Experts interview 43 3.4.3 Secondary sources 43 3.5 Data analysis 44 CHAPTER 4: DATA PRESENTATION AND FINDINGS 45 4.1 Data presentation 45 4.2 Toward a Conceptual Model of factors influencing the attraction of R&Drelated FDI from Japanese MNCs to Vietnam 53 CHAPTER 5: DISCUSSION AND CONCLUSION 56 5.1 Contribution of the thesis 56 5.2 Discussion and implications 56 5.3 Limitations and future research 59 REFERENCES 61 APPENDIXES 66 LIST OF FIGURES Figure 2.1 How information flows between home-base site and foreign R&D site Figure 2.2 Porter’s Generic Value Chain (Porter, 1985) 12 Figure 2.3 Value chain model – redrafted by Kenichi Ohno (Ohno, 2009) 13 Figure 3.1 Research approach 38 Figure 3.2 Qualitative data analysis (Glaser and Strass, 1967) 44 Figure 4.1 Top 10 countries with the most graduates in Engineering 46 Figure 4.2 The level of English in Asia 47 LIST OF TABLES Table 3.1 Factors influencing the location decision of R&D dispersion of Japanese MNCs 33 Table 5.1 Conceptual model of The factors influencing the attraction of R&D related FDI of Japanese MNCs to Vietnam 55 i LIST OF ABBREVIATIONS CAE Computer Aided Engineering CEO Chief executive officer FDI Foreign Direct Investment GDP Gross domestic product ICT Information and communication technology IPA Investment promotional agency IPR Intellectual property regime IT Information technology GDP Gross domestic product MNC Multinational corporation NIS National innovation system OECD The Organisation for Economic Co-operation and Development UNCTAD The United Nations Conference on Trade and Development ii CHAPTER 1: INTRODUCTION 1.1 Necessity of the thesis Over the last few decades, globalization, localization, and the technological progress with the objectives of reducing costs, optimizing labor cost, creating highvalue products with the lower cost, become central components in global economic development; its impact is increasingly difficult to be ignored In this trend, MNCs being the subject of FDI with the vital role in the economy, have a change on the strategies of distribution of the activities in their organizational system of the parent company and their subsidiaries Nowadays, instead of focusing core activities with the high content of technology in the home country, MNCs have a trend to disperse these activities to host countries, through technological transfer, knowledge transfer, or manufacturing network (Monteiro, Arvidsson, & Birkinshaw, 2008), and therein R&D activity is not an exception R&D activities, despite the significant costs and time, consisting a huge of creating value Hence, it is being prioritized in the context of intense competition in the knowledge economy, requiring the products to have high technological content in order to have a foothold in the market In order to become more competitive, MNCs are increasingly setting up R&D units abroad (Kafouros et al., 2018) Actually, the globalization of R&D is not new, however, the speed and the trend of spillover of R&D abroad have just increased for recent years, aimed at taking advantages of resources, talent workforce, and competitive advantages of host countries (Dunning & Lundan, 2009) A recent study argued that 94% of the world’s 1000 largest MNCs conduct R&D activities abroad (Jaruzalski, Schwartz, & Staack, 2015) It is the true that Japanese MNCs is in the process of moving R&D to the foreign countries, because of the limitation of location and the changes of the factors involving in nature (the disasters such as earthquake, tsunami), politic (firm rules in business environment), economy (the increase in the price of Yen, high labor cost, deflation), and society (aging population) These changes can damage to the Japanese economy, causing many factories to shut down, production stagnation, not only affecting the Japanese economy but also leading to the risk of global supply chain disruption This situation is the main reason why more and more Japanese companies are turning activities creating high value to the foreign country rather than maintaining the unique strategy of the majority of Japanese MNCs that have traditionally kept core activities in the home country The proportions of R&D spent outside the home country by Japanese MNCs increased from to 11 percent, and the rate is comparing between R&D expense inside or outside Japan increased from 0.7 percent to 3.1 percent from 1989 to 2014 (Hall, 2010) Recently, due to the economic growth of developing countries, companies operating in many countries have a trend to choose these countries as destinations to disperse R&D, instead of only focusing on developed countries like before (Hall, 2010) Together with this trend, ASEAN is especially concentrated as a potential destination, because this is a strategic location on the investment of Japanese companies, proven by the data on sharp increase of FDI flows from Japan to ASEAN countries Via FDI, Japanese MNCs shifted production to other ASEAN economies following the 60% appreciation of the yen that started in 1985 (Salike, 2013) Some studies also point to the fact that ASEAN countries have an advantage in attracting R&D activities of Japanese corporations (Tejima, 2002) Vietnam, in recent years, becomes a destination receiving investment from many large corporations, nevertheless, most of them focus on outsourcing with the low value Therefore, the objective and mission of Vietnam are attracting in-depth investment, with the higher value and high level of technology As a result, FDI attraction associated with R&D is the issue getting attention The increasing presence of R&D-related FDI will help Vietnam move faster from a manufacturing economy with low added values to a manufacturing economy with high added values Japan always stands at the first or second position out of the top of countries conducting FDI in Vietnam In the context that ASEAN is trying to attract Japanese Appendix Request letter for the interview the CEOs of MNCs To: Alpha (Beta) Date: April 13rd, 2018 Subject: Request for an interview Dear Mr X(Y), First of all, I would like to send you our warmly greeting I am MBA student from Vietnam Japan University (VJU), which is a new university, envisaged to become an internationally recognized university, and a symbol of the close and fruitful cooperation between Vietnam and Japan For my master thesis, I am conducting a research on “the factors influencing the attraction of R&D- related FDI of Japanese MNCs in Vietnam” This study aims to find out, systematize, and evaluate the importance of the factors those influences the decision of Japanese enterprises to choose Vietnam as a destination of R&D dispersal The study then proposes implications for the government of Vietnam to improve the investment environment to attract R&D- related FDI of Japanese enterprises in the near future The results of the study also help Vietnamese companies promote their potential cooperation with Japanese companies in R&D related investment For the reason above, I have decided to contact you because I have known that Alpha has invested in R&D in Vietnam I want to understand the factors impacting on your decision of selecting Vietnam as a destination of your R&D dispersion May I propose a date follow your available time for an interview? On this date, I could come to see you with Associate Professor D.A VU (PhD Cantab)Standing Vice President of VJU We would like to interview you for approximately hour Your answers will greatly contribute to promote the flow of investment, as well as the efficiency of investing in high quality capital flows of Japanese enterprises into Vietnam Please find more detailed information about my research on the questionnaire attached I look forward to hearing from you soon Yours sincerely, Hoang Thi Hong Hanh, hanhhh2706@gmail.com 70 Appendix Interview guideline “FACTORS INFLUENCING THE ATTRACTION OF R&D-RELATED FDI FROM JAPANESE MNCs TO VIETNAM” Dear Sir or Madam, Vietnam-Japan University is known as a symbol of cooperation in education and research between the Governments of Vietnam and Japan The establishment of the university is expected to create new motivation in the socio-economic development of Vietnam, contribute to increasing the investment value of Japanese MNCs in Vietnam, through high-quality human resource training Vietnam-Japan University is conducting research on “the factors influencing the attraction of R&D- related FDI from Japanese MNCs in Vietnam.” This study aims to find out, systematize, and evaluate the importance of the factors those influences the decision of Japanese MNCs to choose Vietnam as a destination of R&D dispersion The study then proposes implications for the government of Vietnam to improve the investment environment to attract R&D- related FDI of Japanese MNCs in the near future The results of the study also help Vietnamese companies promote their potential cooperation with Japanese companies in R&D related investment Your answers will greatly contribute to promoting the flow of investment, as well as the efficiency of investing in high-quality capital flows of Japanese MNCs into Vietnam Sincerely thank! 71 I GENERAL INFORMATION Date: Company: Address: II QUESTIONS For multiple-choice questions, you can select more than one answers from the list Which countries have your company invested R&D-related FDI in? Does your company tend to continue to disperse R&D in developing countries?  Yes  No When did your company invest in Vietnam? Has your company dispersed R&D activities in Vietnam?  (a) Already  (b) Not yet, and intend to invest  (c) Not yet, and not intend to invest Select (a), please continue to answer from question No Select (b) or (c), please answer the question No 8, 10, 13 When have your company started to conduct R&D activities in Vietnam? What are your company purposes when dispersing R&D activities in Vietnam?  Develop product suitable for the local market  Develop process suitable for local manufacturing  Conducting basic research  Conducting applied research  Other purposes (Please indicate) 72 Please describe the role of R&D activities in Vietnamese subsidiary in the activities of your parent company? For the factors influencing the attraction of R&D-related FDI of Japanese MNCs to Vietnam, please tick to appropriate scale give below 1: No impact; 2: Weak impact; 3: Impact; 4: Strong impact Seq I Factors NATIONAL INNOVATION CAPABILITY (of Vietnam) Capacity for creation of technology (The number of patents and scientific articles) Technological infrastructure Infrastructure for research (National innovation system –NIS) (“Knowledge and diffusing” organizations: universities, research centers, science parks…) Infrastructure for telecommunication (Good transportation and communications systems, assured power supply) Interaction and collaboration between research organizations and firms Capability for the development of human skills Quality of R&D human resource (Engineering enrollments, mean year of schooling, literacy rates) English skills The return of talent people from foreign countries (Bring advantages via technological transfer, the manner to manage and organize R&D activies, even connecting local manufacturer with the oppotunities of the market and network of advance economy) 73 II Economy & Society Size of market Available of labor and cost of labor Cultural and institutional similarity III Intellectual Property Regime (Protection of property being creations of the mind, encompassing copyrights, patents, trademarks, proprietary designs, trade secrets) IV V Institutional Framework Openness of trade regime (The degree of restrictive trade regime) Political stability Administrative procedures (Procedures for land, approval of investment licenses, project evaluation procedures, and patents) Official references Public manual of host country for MNCs tend to invest in R&D FDI Investment promotional agency (Organization with two functions including trading, seeking investment opportunities and advising on policy through building the image of the country as an R&D location provide R&D-specific pre-investment and implementation services, emphasizing after-care services, and policy advocacy) Incentives Fiscal incentives Accelerated depreciation (Method by which a company reduces an asset’s value in its accounts by more in the early years of its life than in later years, as a result, allowing a business to claim tax deductions on an asset now rather than later) Tax credit (Amount of money that taxpayers are permitted to subtract from taxes owed to their government) Tax holiday 74 (A period which companies are allowed pay no tax or less tax than usual) Import tariff exemptions (Apply “zero tariffs” on imported equipment and inputs) VI VII Financial incentives (Funding to R&D projects provided directly by government, through grants or subsidies, preferential loans or equity stakes) Parent company strategies Technology seeking Home-base exploiting (Enterprise aims at adapt to local market with developing product suitable for local market and developing process suitable for local manufacturing) Home-base augmenting (Enterprise focuses on tap into the knowledge from host country, and then promotes the process of basic and applied research) Market seeking Capabilities of subsidiaries Management capacity of subsidiaries Ability of the transfer of knowledge and practices among different contexts and different subsidiaries Absorptive capacity (Ability to achieve and exploit knowledge from parent company or countries outside) VIII Competitors Presence of competitors in the same industry in host country Competitor’s engineering and styling activities IX Characteristics of R&D project Routineness (Routine tasks of R&D can be conducted by following the set of rules, knowledge in routine tasks is clear, it is easier to 75 transfer and spillover than complex tasks) Interaction (Misunderstanding can lead to costly to the MNCs, therefore, speaking the same language and having the same business culture will promote the success of R&D project) Innovativeness (Projects with high level of innovation, such as basic and applied research) Completion speed (Any delays of the development process can lead to incurred cost or the loss of sale opportunities) Quality of completed project (Assigned greater importance when have to compete to competitors) Project classification Core activities (Activities that a firm performs better than other) Essential activities (Activities that a firm need to sustain profit-making operation; if not performed well, can place it at competitive disadvantage or risk) Non-core activities (Activities which provide no competitive advantage, easy to offshore, in short term) In addition to these factors, in your opinion, what other factors influence on the decision of Japanese MNCs on choosing Vietnam as a destination to disperse R&D? 10 Which factors impacts have the greatest influence on the decision of choosing R&D location in Vietnam of your company? 11 What challenges does your company have in the process of conducting R&D activities in Vietnam? 76 12 Could you please give implications to the Vietnamese government in attracting R&D-related FDI of Japanese MNCs? 13 In this study, factors influencing the attraction of R&D-related FDI from Japanese MNCs to Vietnam are divided into two main groups, including factors from Vietnam, and factors from Japanese enterprise Factors from Vietnam: (I) National innovation capability, (II) Economy & Society, (III) Intellectual Property Regime, (IV) Institutional Framework, (V) Incentives Factors from Japanese enterprise: (VI) Parent company strategy, (VII) Capabilities of subsidiaries, (VIII) Competitors, (IX) Characteristics of R&D project These nine groups of factors consist of particular elements listed in the table above In your opinion, grouping the factors influencing the decision to choose Vietnam as a location to disperse R&D is reasonable or not? If it is not reasonable, would you suggest that grouping is considered reasonable? Sincerely thank you for answering these questions, Should you interest on the result of this interview, please acknowledge for reverting results  Yes  No 77 Appendix Case summary Case study Alpha Alpha is a Japanese Motor Group companies, which are being developed throughout the world In 2001, Alpha established a subsidiary in Vietnam, as the first overseas base of the parent company, playing the central role through a wide variety of R&D capabilities It is responsible for research and development of almost all of the parts and components that an automobile is composed of, conducted through main businesses, including vehicle planning, body design, interior and exterior design, chassis design, electronic design, powertrain design, virtual engineering, digital design, vehicle CAE, and physical or technical investigation Until now, in Vietnam, Alpha has approximately 2100 employees, therein the number of engineers is about 2100 people, including 60 engineers are Japanese people, the rest is Vietnamese, and the company mostly recruits bachelors Two years after the establishment of the subsidiary in Vietnam, in 2003, this subsidiary started the business with R&D activities, with the roles are workload balance and R&D expense contribution for the parent company These activities are mainly allocated business from headquarter in Japan Japanese side sends orders to Vietnamese side, Vietnamese side sends products from R&D, and receives money to get profit In the past, Japanese side was responsible for overall design and the whole structure, while Vietnamese side was allocated to develop partially Nevertheless, recently, because of the expansion of quantity and quality of engineers in Vietnam year by year, Vietnamese side can directly conduct a high level of difficult technology as Japanese side Regarding the proposition of R&D contribution in the whole group, it depends on each type of product or process, for CAE, almost 80 percent of R&D contributions is from Vietnamese side The major driven of Alpha for selecting Vietnam as a destination to disperse R&D is the capability for the development of human skills The CEO at the subsidiary of Alpha in Vietnam said: "The Vietnamese engineers have the significant strength in two areas, including electronic control system and 78 information technological (IT) software Regarding these abilities, not only Alpha but also a lot of other companies want to recruit Vietnamese engineers" While other parts of R&D activities such as R&D in body and big part of the cars are well done by other countries, Alpha need to engineers in these two areas, and the jobs related to two areas above are new and suitable for Vietnam Besides, the CEO also argued that it is not difficult to find people being good at English or Japanese of both these languages in Vietnam Regarding the ability to use a foreign language, Alpha prefer Japanese to be easier for technological transfer and it is difficult for employees to move to other companies which not use Japanese To stress the essential of capabilities of labors in R&D dispersion in Vietnam, the CEO compared this factor with labor cost, usually mentioned as a key factor on the attraction of investment in developing country: "Labor cost is important, but it is not the major factor to conduct R&D in Vietnam If we concern about labor cost, we selected Myanmar or Pakistan to disperse R&D, not choose Vietnam." Together with human capability, recruiting talented people is a significant factor for Alpha to conduct R&D activities in Vietnam Firstly, the CEO pointed out that in Vietnam, Alpha can recruit talent from top-level university related to electric and IT They can access the human resource via internship program with five top universities involving in technology, or via the staffs, who introduce their talent friends for the company Secondly, because R&D activity of other automobile companies is not many, Alpha can be easy to recruit talented people without serious competitions Except for Vietnam, Alpha dispersed R&D activities to US, EU, India, Thailand, and China However, the subsidiary in Vietnam is the biggest subsidiaries being responsible for R&D in the region, and the number of engineers in Vietnam is also highest globally Alpha conducts R&D activities in Vietnam with the high scale, and they are going to expanding Vietnamese R&D subsidiary in the future, not in other countries In the 2000s, Alpha aimed at focusing R&D in China After that, because of the problem of the relationship between Japan and China, risks were estimated, leading to the dispersion of R&D in another country in the region Thailand is the important choice at that time due to the cost and availability 79 of labor Nonetheless, because there are many companies in automobile industry conducting R&D activities in this country, it is difficult for Alpha to recruit the talented engineers Comparing to the case of China, the CEO also pointed out that besides the recruitment of talent people, the familiarity with Japanese people is also a factor in choosing Vietnam as a location for R&D dispersion Besides factors related to talent people, technological infrastructure for research, especially universities specializing on electric and IT, where educate engineers; as well as infrastructure for telecommunication, which enhances the effectiveness of control and transfer knowledge is dramatically concerned Factors related to the institution are also considered Political stability is essential, especially for R&D, when Alpha has to spend a considerable amount of money to set up R&D facilities, thus, they need to a stable political environment to operate for a long time Vietnam is an ideal place for this factor However, regulations and administrative procedures in Vietnam is a restriction which they need to consider The CEO said: "Regulations in Vietnam are not clear, and difficult to understand Functions of related ministries are not linked together Administrative procedures are complex and waste time." Hence, the company wants to be guided and consulted by official references and IPA Tax incentives from Vietnamese government including the tax credit, tax holiday and import tariff exemptions for R&D activities are factors promoting Alpha to conduct R&D However, Alpha has little confused related to the importexport issue According to the regulations, income tax will be refunded when enterprises export, however, many enterprises claimed that they are not refunded Despite many complications and not transparency in regulations and incentives, these factors not affect so much for Alpha to selecting Vietnam as a destination of R&D activities The factors influencing R&D dispersion in Vietnam above related to conditions of Vietnam Besides, several factors related to Alpha are also considered Firstly, Alpha concerned about capabilities of the subsidiary in Vietnam in two criteria, including the ability of the transfer of knowledge and practices among 80 different contexts and different subsidiaries; and absorptive capacity Capabilities of the subsidiary in Vietnam is highly rated by Alpha, due to its talented people and the training of personnel that Vietnamese systematically support individual growth through fulfilling training programs with a comprehensive combination of knowledge, language proficiency, experiences This helps Vietnamese subsidiary can achieve and exploit knowledge from parent company or countries outside, as well as transfer knowledge and practices to different subsidiaries R&D activities in Vietnam are allocated by Alpha based on some characteristics of R&D projects The projects concern about interaction, completion speed, quality of completed project will be dispersed to Vietnam Firstly, due to the ability of well using Japanese and English of Vietnamese engineers, as well as the quite same culture between Vietnam and Japan, Vietnamese side can meet the projects requiring high interaction Second, "thanks to a large number of talented engineers, with great creativeness, Vietnam is the first selection for projects requiring completion speed and quality of completed project", according to the CEO of Vietnamese subsidiary The quality of R&D project is checked every year by Japanese side, and the results are quality of projects completed in Vietnam improve year by year To be comfortable for Alpha choose a location to disperse R&D, the company also classify the R&D activities based on the importance of these activities to the performance of R&D in general Thereby, core activities and essential activities will be dispersed to Vietnam From the analyses of the Alpha interview, factors influencing the attraction of R&D FDI of Alpha to Vietnam is presented in the following table: 81 Categories Vietnam Factors Capability Sub factors for the Talented engineers development of people skills National innovation capability Rank Japanese skill English skill Technological infrastructure TI for research (TI) TI for telecommunication Institutiona Political stability l Administrative procedures Framework Official references Promotional agency Incentives Fiscal incentives Tax credit Tax holiday Import tariff exemptions Financial incentive Alpha Ability to Presence of competitors in recruit the same industry Capacity of Ability of the transfer of Vietnames knowledge and e among contexts and different subsidiary subsidiaries practices Absorptive capacity Interaction Characters of R&D project Completion speed Quality of completed project Project classification Core activities Essential activities 82 Case study Beta Beta is a large Japanese telecommunications company Since 1998, Beta has conducted a project in Vietnam, building up and developing the telecom system in Hanoi with 250-kilometer fiber optic cable 15 years later, after the success of this first activity, Beta located the office of Beta Vietnam in Hanoi Currently, Beta Vietnam and a large telecommunication company in Vietnam have cooperated in two projects, including ICT education project and the smart city project, which applied in Japan Education project provides both software, hardware and the contents of lessons in the schools This project is trialed at a primary school in Hanoi, and intended to continue to expand to rural areas The smart city project is a system of education, medical, tourism, etc., which will be conducted in Binh Duong province for 15 years In both projects, after conducting R&D and applying in Japan, Beta transferred to the Vietnamese market and continue to trial, research and to customize and modify, aimed at adapting to Vietnamese market Until now, Beta has not established an R&D center in Vietnam yet because of the cost of setting up R&D facilities; it has just modified and developed product suitable for local market Nevertheless, the CEO of Beta Vietnam said: "Beta is going to dispersing R&D activities in Vietnam Currently, Beta usually also send experts from Japan to Vietnam to support two projects cooperating with the telecommunication company of Vietnam mentioned above; and a lot of the staffs of this company are also sent to Japan for training” When considering whether conducting R&D activities in Vietnam or not, besides the limitation of R&D cost for Beta, it concerns about many other factors Firstly, the company stressed the capability for the development of human skills in Vietnam For Beta, the quality of R&D human resource and English skills are extremely important to conduct R&D activities However, the high quality of IT engineers in Vietnam is an issue leading to the difficulty in setting up an R&D center of telecommunication field in Vietnam 83 Categories VIETNAM National innovation capability Factors Sub factors Capability for the development of people skills Technological infrastructure (TI) Talented engineers Japanese skill English skill TI for research TI telecommunication Size of market SocioAvailable and cost of labor economy Cultural and institutional similarity Political stability Institutional Administrative procedures Framework Official references Promotional agency Fiscal incentives Incentives BETA Parent company strategies Rank for Tax credit Tax holiday Import tariff exemptions Financial incentive Home-base exploiting 1 2 Ability of the transfer of Capacity of knowledge and practices Vietnamese among contexts and subsidiary different subsidiaries Absorptive capacity Interaction Characters Completion speed of R&D Quality of completed project project Project classification 84 2 1 Core activities Essential activities 3 ... of this study is to shed light on factors influencing the attraction of R&D-related FDI of Japanese MNCs to Vietnam, as well as the way and degree of the impact of these factors 1.2 Research... hypotheses of factors that have the influence on the attraction of R&D-related FDI of Japanese MNCs to Vietnam from the perspectives of Japanese companies and the experts in this field Besides, the. .. listing the factors influencing R&D dispersion of MNCs in general, this thesis has systemized the factors influencing R&D dispersion of Japanese MNCs to Vietnam and explored how these factors influence