What is the rationale for the choices of the location and the leader at CT India? Case 6.1 Globalizing corporate R&D at Siemens22 Founded in Berlin in 1847, Siemens has grown from a small telegraph workshop to one of the largest electrical engineering and electronics companies in the world. Focusing on the businesses of Automation and Control, Power, Transportation, Medical, Information and Communications, and Lighting, Siemens has 475,000 employees in over 190 countries. In fiscal year 2006, Siemens had sales of more than 87 billion euros with a net income of more than 3 billion euros. Research and development has always been important at Siemens.

Innovation is one of the five core targets at Siemens, the other ones being taking responsibility, a focus on customers, a focus on people and a focus on value. As Siemens puts it on its website, ‘Innovation is our lifeblood, around the globe and around the clock.’ In 2005, 47,200 employees were employed in R&D. In the 2004/05 fiscal year, Siemens spent 5.2 billion euros on R&D, accounting for 6.8 per cent of its sales. In a ranking by business consultants Booz Allen Hamilton of the 1,000 companies around the world with the highest levels of R&D expenditures in 2005, Siemens ranked number seven, after Microsoft, Pfizer, Ford, DaimlerChrysler, Toyota and General Motors.

Siemens has been decentralizing its R&D activities since the 1980s. The lion’s share of its expenditures has gone to the business units and most R&D occurs within the business units, with Information and Communications (I&C)

receiving 30% of the total R&D expenditures in 2005, Transportation 21%, Automation and Control (A&C) 19%, Medical 14%, Power 9% and Lighting 4%.

Only the remainder, less than 5% of Siemens’ total R&D expenditures, went to Corporate Technology (CT), with about two thirds of CT’s R&D budget related to projects commissioned by the business units.

Siemens increasingly performs research activities abroad; R&D is now conducted in 38 countries. Of the 47,200 employees engaged in R&D, only about half (47.2%) are employed in Germany. Other major R&D locations include the US (14.7%), Austria (6.6%), India (4.2%), France (4.0%), China (2.7%), Switzerland (2.4%), Great Britain (2.4%) and Italy (2.3%).