What is becoming more apparent in the chemical industry is the rapid rise of R&D horsepower in countries that had only recently been known for low cost manufacturing. Previously, the universe of nations known for their R&D engines was limited to the familiar players- USA, Japan, EU, and to a lesser extent Russia (or FSU). These countries have extensive institutional and university infrastructure that can be applied one way or another to manufacturing output. 

Today, India, China, Taiwan, and South Korea in particular have begun to apply considerable traction with their R&D engines. Really, anyone who reads C&EN, Chemical Week, or CMR knows this. 

But reading about it is just an abstraction. It is quite another thing to witness it face to face. It is especially obvious at chemical trade shows like Informex, ChemSpec, or CPhI. Large tracts of the exhibition halls are literally crammed with small booths- perhaps 25 % or more filled with representatives of Asian firms bearing exotic names unfamiliar to attendees from the western hemisphere. Many exhibitors have product lists that seem strangely similar: generic API’s, heterocyclic intermediates, natural products, etc. It is all quite bewildering to Americans who still swagger with the attitude of Manifest Destiny.

As everyone knows, there has been a positive trend in outsourcing raw materials and intermediates from outside the USA. Having participated in this myself, I can say that foreign outsourcing allows much US manufacturing to remain competitive in world markets. However, it is one thing to outsource raw materials and quite another to outsource R&D.

While Americans must learn to adapt to the irreversible trend of positive growth in chemical discovery and manufacturing around the world, we should be a bit more circumspect about outsourcing R&D.

I’ve had the occasion to listen to more than a few American business leaders- smart upper level R&D management- crow about the cost savings they are seeing by outsourcing some of their R&D activity. In particular, we are seeing companies outsource custom synthesis of R&D materials or opening off-shore R&D centers. One US contract Pharma R&D firm specializing in API’s has been making hay about their outsurcing capabilities in discovery and process development to highlight their cost effectiveness.

These managers and executives give impressive talks at symposia and conferences. Their PowerPoint skills are impeccable, though no doubt aided by invisible in-house staff who gin up the cool graphics. These folks attend all of the trendy business method classes like Six Sigma and toss around quotes by Jack Welch.  They read all of the right business books found at airport bookshops. The obligatory and right-thinking buzzwords roll off their MBA tongues like melted chocolate, all carefully crafted to reassure stockholders that spending is being contained.

The out-sourcing of R&D doesn’t always begin with the outright execution of contracts to foreign comnpanies. It may begin more modestly, with the outsourcing of R&D custom projects. As relationships build and as project managers cycle through projects, greater and greater comfort with the outsourcing arrangement is felt. Soon, scale-up happens and substantial subunits of molecules are manufactured off-shore. Eventually, US plants are shut down and the equipment shows up on Dovebid for auction.

Yet for all the apparent good economic sense that R&D outsourcing may provide, I find myself uncomfortable with the concept. At one extreme there is the corporate cosmology spoofed in Sidney Lumet’s movie “Network“, where the real nations of the world are the multinational conglomerates who wield major currencies like an occupying army and nationality is an archaic formalism.  R&D is only the wagon that carries the troops for the greater glory and profit of the shareholders.

The other extreme would be the notion that R&D is part of our culture and is something to be guarded as national treasure. It is is an extension of who we are.

It’s obvious that R&D is part of the American economic driver and it should be expoited to bring prosperity to our nation. But that is not to say that US companies should provide companies in competing nations with a critical skill set in exchange for short term gain. Irrespective of non-compete agreements and secrecy arrangements, the fact is that once valuable technology is divulged you can depend on ambitious players to learn from it and accelerate their growth.  While apparently sensible in the short term, exporting your magic is ultimately foolish.

This essay may be a bit parannoid and provincial, but the USA is rapidly de-industrializing itself under the enchantment of its own intoxicating doctrine of promulgating laissez-faire. Allowing the progress of de-industrialization to occur under the influence of quarterly profit reports is perhaps inevitable under our present political era. 

I would argue that industry and commerce are not just a business math exercise. They are part of the fabric of our culture. Adopting abstract economic formalisms and dressing them up as social policy is to neglect why we start businesses at all. If the acquisition of money were the only goal, then we’d all go into finance. We start businesses in areas we prefer in order to make money and to have something constructive to do. It stimulates our brains and drives progress. It contributes to the common good. Work and industry are part of anthropology, not just economics.