Microsoft is weighing setting up an R&D facility in India to develop new software applications. Should it staff the new facility with Microsoft employees? Indian employees? Or should it subcontract with an Indian firm? Explain your answer and some of the potential challenges in implementing it.

This would be a good option considering the fact that this would be a new market environment they've not operated in before. By staffing the new facility with natives of the country who understand the Indian business environment better, such as

the ideal management style
unique business communication style
the unique challenges to overcome.

Additionally, Microsoft Corporation would be better positioned to carry out the needed research and development activities if conducts periodic training programs using expatriates.